One of my clients called last week in a panic. The electrician who had done a large job re-wiring a new kitchen and bathroom had shown up at his door and stated he had not been paid by the contractor that was overseeing the project. He stated if he was not paid immediately, he was going to put a construction lien on the property. What was my client supposed to do?
I don’t claim to be a construction lien expert but there are a few basic guidelines any home renovator should know.
Anyone who works on your home, whether they are a contractor or a subcontractor, has the right to lien your property within 45 days of the completion of their job (completion is, of course, open to interpretation). Therefore, it is extremely important you choose a reputable contractor who pays their sub-trades regularly and on time.
During the lien rights 45-day period, you should hold back 10 per cent of the total contract price in order to satisfy lien claimants if they do appear.
Once a lien is placed on a property, the tradesperson has a further 45 days to “perfect” his lien by filing a Statement of Claim. If they do not take this further step, it is a relatively simple matter to have your lawyer remove the lien from title. If, however, they go the length of perfecting the lien, you could be in for a real battle.
If you have a lien placed on your property, you are precluded from transferring or possibly even mortgaging the property unless you pay up. The white- knuckle scenario of a contractor that isn’t answering your phone calls and tradespeople showing up at your doorstep demanding payment is much more common than you might think.
Using reputable contractors and knowing your rights with respect to construction liens will take you further toward financial success when it comes to renovating your home.
Jeffrey D. Cowan is the principal of Cowan & Taylor, Barristers & Solicitors that practice in the areas of business and real estate law. Email [email protected]. The information contained in this article should not be relied upon as legal advice.