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So you hired a general contractor to do a renovation. You’re satisfied with the completed work and you pay the final invoice. Have you fulfilled your financial commitments? If the general contractor fails to pay a subcontractor can a subcontractor put a lien on your property even if you had no direct dealings? The answer in Ontario is “YES”.
According to the Construction Lien Act the subcontractor has 45 days from the date of last supply and or substantial completion to register a lien at the Land Titles Office. So how do you protect yourself? You may be surprised to learn that taking a hold-back of 10 percent of the price of services and materials is actually a requirement under the Construction Lien Act. In holding back 10 percent you are creating a fund for potential lien claimants. If you follow regulations your maximum liability is generally the hold-back amount. So before you make your final payment to the General Contractor wait until all liens have expired, been satisfied, or discharged.
You may find some general contractors will not want to work with you over a 10 percent hold-back, for substantial renovations I would simply find another contractor. To make the hold-back more amenable to the contractor make the final payment in trust to your lawyer at the time the work is completed (for which proof will be provided). Your lawyer would then ensure hold-back requirements are satisfied and title is clear before issuing payment to the general contractor or the general contractor’s lawyer. This should cost you in the hundreds of dollars, but well worth it you’re doing a renovation in the hundreds of thousands. For more information regarding liens for your project consult with a lawyer specialized in construction law.
Below are a few useful links: