How do I protect myself from a construction lien?

In Ottawa, the best protection against construction liens is following Ontario's Construction Act requirements: hold back 10% of each payment until 60 days after substantial completion, and ensure all contractors and suppliers are paid in full.

Construction liens are a serious concern for Ottawa homeowners because they give contractors and suppliers a legal claim against your property if they're not paid - even if you've already paid your general contractor. Here's how to protect yourself under Ontario law:

Understanding the 10% Holdback Rule

Ontario's Construction Act requires you to hold back 10% of the value of work completed from every payment you make to your contractor. This money sits in trust and can only be released 60 days after "substantial completion" of the project. This holdback period allows time for any unpaid subcontractors or suppliers to file liens if your general contractor hasn't paid them.

For example, if your bathroom renovation contract is $30,000, you'd hold back $3,000 total across all your payments. After the work is substantially complete and 60 days pass with no liens filed, you release this holdback to your contractor.

Get Proper Documentation

Before making final payment, require your contractor to provide a statutory declaration stating that all subcontractors, suppliers, and workers have been paid in full. This document, sworn under oath, gives you legal protection if liens are filed later. Many Ottawa contractors are familiar with this requirement, but don't assume - ask for it specifically.

Also request lien waivers from major subcontractors (electrical, plumbing, HVAC) and suppliers, especially for larger renovations. These documents confirm they've been paid and waive their right to file liens.

Verify Your Contractor's Financial Standing

Check that your contractor has WSIB clearance through wsib.ca/clearances. A contractor without proper WSIB coverage might have financial issues that increase lien risk. Also verify their business registration through ontario.ca/business-registry to ensure they're operating legally.

For electrical work, confirm your contractor's ESA license at esasafe.com/contractor-locator. For gas work, verify TSSA certification at tssa.org. Licensed contractors are generally more established and less likely to have payment disputes with suppliers.

Monitor Your Project Actively

Stay aware of who's working on your property and what materials are being delivered. If subcontractors approach you directly about payment issues, this is a major red flag. While you're not responsible for paying them directly, their concerns might indicate your general contractor is having cash flow problems.

What to Do If a Lien Is Filed

If you receive a lien notice (which must be filed within 60 days of substantial completion), don't panic but act quickly. Contact a construction lawyer immediately, as you have limited time to respond. You may be able to have the lien removed by paying the disputed amount into court while the matter is resolved.

Remember that in Ottawa, construction liens must be registered against your property title at the Land Registry Office. You can search your property title through ontario.ca/page/land-registry-services to check for any liens filed.

Additional Protection Steps

Consider requiring your contractor to provide a performance bond or labor and material payment bond for larger projects over $50,000. These bonds, available through insurance companies, protect you if the contractor defaults or fails to pay subcontractors.

For major renovations, some Ottawa homeowners use a lawyer to hold funds in trust and make payments according to a predetermined schedule tied to completion milestones.

The key is following the statutory holdback requirements religiously and ensuring proper documentation before releasing final payment. When in doubt, consult with a construction lawyer familiar with Ontario's Construction Act - the cost of an hour's consultation is minimal compared to dealing with a lien on your home.