Can Landlord be Exposed to Construction Lien?

Disclaimer: This is not legal advice. It’s merely my own interpretation of what was read from articles on different websites. If you need legal advises, please consult with your legal counsel. The author or anyone else connected with this website, in any way whatsoever, can be responsible for your use of the information contained in or linked from these web pages.

A construction lien can be registered against your property if a contractor or subcontractor who worked on your property is not paid for their services. The lien allows them to seek court approval to sell the property in order to collect the debt owed to them. It is important to understand who can register a lien against your property.

Construction Lien

Contractor did work on your property
They didn’t get paid
They can register a construction lien against your property
If they are not paid for their work, the lien claimants can seek for court approval to sell the property to collect the debt.

A construction lien is to protect contractors if they did work and didn’t get paid. They have a way to collect the payment by registering a lien. But who may be able to register a lien against your property?

Scenario 1: Subcontractor

This is an excerpt from https://buildersontario.com/construction-lien-in-ontario

“The foundation contractor subs out the excavation of’ the foundation. The excavation contractor hires a couple of labourers to do some hand shoveling and other work. After the first day, the workers get fired for loafing on the job, and the contractor does not pay them. It’s not a problem for either the foundation or excavation contractors.

The problem is the homeowners because the laborers can place a lien for payment against the property. The same holds true for the plumber that didn’t pay for the material supplied to do the rough-in. The supplier can place a lien against your property for money owed by the plumber.”

Meaning

If you hire a contractor who hires a subcontractor, you pay the contractor but the contractor didn’t pay the subcontractor
The subcontractor can register a construction lien on your property’s title

Scenario 2: Tenants

This is an excerpt from https://www.mondaq.com/canada/landlord-tenant–leases/788610/landlord-lien-exposure-under-the-new-construction-act

“if payment for tenant improvements are accounted for under the lease or any other agreement between tenant and landlord, the landlord’s freehold interest in the property is subject to a lien in the amount of 10% of the value of the payment or funding as per the lease. It appears that “payment” will likely include any tenant inducement.

In response to this, a landlord may believe they can escape lien exposure by eliminating any tenant improvement allowances contained in the lease. While this will help manage their exposure, the Act has also included a new section confirming that landlords may be treated as traditional owners if they meet the definition of Owner as defined in the Act. Specifically, if an improvement to the premises is done at the request of the landlord, or with the consent of the landlord, and to the benefit of the landlord, a landlord will be considered an Owner and therefore face lien exposure for the full amount of the improvement.”

Meaning

If the tenant wants to paint the house, the landlord agrees to it, and the landlord supplies payment for the paint as part of a separate agreement to the job. Tenant agrees to pay the contractor while the landlord supplies the paint.

The tenant hires a contractor to do the work, the tenant didn’t pay the contractor. The landlord could be considered as an “owner”. Landlord could be exposed for the construction lien.

What should Landlord do?