How do I protect myself from a construction lien?

In Ottawa, you protect yourself from construction liens by following Ontario's Construction Lien Act holdback requirements and ensuring all contractors, subcontractors, and suppliers are paid before releasing final payment.

The most critical protection is the 10% holdback rule. Under Ontario's Construction Lien Act, you must hold back 10% of the total contract value for 60 days after substantial completion of the work. This holdback period allows any unpaid subcontractors or suppliers to file a lien claim. Only release this holdback after the 60-day period expires and you've confirmed no liens have been filed.

Key Protection Steps for Ottawa Homeowners:

Get everything in writing before work begins. Your contract should clearly state the total price, payment schedule, and specify that the contractor is responsible for paying all subcontractors and suppliers. Include a clause requiring the contractor to provide lien waivers from major subcontractors and suppliers before final payment.

Verify your contractor's credentials through the City of Ottawa and relevant licensing bodies. For electrical work, confirm they're a Licensed Electrical Contractor through ESA at esasafe.com. For gas work, verify TSSA certification at tssa.org. Check that they have valid WSIB coverage at wsib.ca/clearances and adequate liability insurance.

Payment Schedule Protection:

Never pay large amounts upfront. A legitimate contractor should only request a small deposit (typically 10-15%) to secure materials. Structure payments based on completion milestones, not calendar dates. For example: 25% on material delivery, 25% at rough-in completion, 25% at substantial completion, 15% final payment, and 10% holdback.

Keep detailed records of all payments, including cancelled checks, receipts, and progress photos. If subcontractors or suppliers approach you directly requesting payment, don't pay them - direct them to your contractor and document the interaction.

Warning Signs and Red Flags:

Be cautious if contractors demand full payment upfront, refuse to provide written contracts, or cannot provide proof of licensing and insurance. Door-to-door contractors offering "leftover materials" deals are often scams. Legitimate Ottawa contractors will provide references, proper licensing, and detailed written estimates.

If a Lien is Filed:

Contact a construction lawyer immediately if you receive a lien notice. In Ontario, property owners can be held responsible for unpaid subcontractors even if they paid the general contractor in full. You may need to pay twice if proper holdback procedures weren't followed.

Official Resources:

For questions about lien procedures, contact the Ontario Superior Court of Justice. The City of Ottawa Building Code Services (613-580-2424) can verify permit status and contractor compliance. Consumer Protection Ontario (ontario.ca/consumer) provides additional guidance on contractor disputes.

The Construction Lien Act is complex, but following the 10% holdback rule, verifying contractor credentials, and maintaining proper documentation will protect you from most lien issues. When in doubt, consult with a construction lawyer before releasing final payments on large projects.