What is the Ontario Construction Lien Act and how does it protect me?

The Ontario Construction Lien Act protects Ottawa homeowners by requiring a 10% holdback on all construction payments and giving contractors legal recourse if they're not paid - which ultimately protects you from having unpaid subcontractors place liens on your property.

How the Lien Act Protects You in Ottawa

The Construction Act (formerly the Construction Lien Act) creates a mandatory holdback system that protects homeowners from one of the worst-case scenarios: having a lien placed on your home because your contractor didn't pay their subcontractors or suppliers, even though you paid the contractor in full.

Here's how it works: You must hold back 10% of the value of each progress payment until 60 days after substantial completion of the work. This holdback money sits in trust and can only be released after the lien period expires. If any subcontractors or suppliers weren't paid by your general contractor, they have 60 days to register a lien against your property. If no liens are registered during this period, you can safely release the holdback.

The 60-Day Protection Period

In Ottawa, once your project reaches substantial completion (meaning it's essentially finished and usable), the 60-day clock starts ticking. During this period, any unpaid parties can file a lien with the Land Registry Office. After 60 days with no liens filed, you're protected from future lien claims related to that project.

This system prevents the nightmare scenario where you pay your contractor in full, but they don't pay their electrical subcontractor, and suddenly you have a $15,000 lien on your Ottawa home that you have to resolve before you can sell or refinance.

Practical Application for Ottawa Homeowners

Let's say you're doing a $50,000 kitchen renovation in Kanata. Your payment schedule might look like this:

• 10% down payment: $5,000


• First progress payment (30% complete): $15,000 minus 10% holdback = $13,500 paid, $1,500 held back


• Second progress payment (70% complete): $20,000 minus 10% holdback = $18,000 paid, $2,000 held back


• Final payment: $10,000 minus 10% holdback = $9,000 paid, $1,000 held back


• Total holdback: $4,500 held until 60 days after completion

What to Watch For

Some contractors in Ottawa try to avoid the holdback requirement by structuring payments differently or pressuring homeowners to release holdbacks early. Don't do it. The holdback is your legal protection, and any reputable contractor understands this requirement.

Red flags include contractors who:

• Refuse to acknowledge the holdback requirement


• Demand 100% payment upon completion


• Pressure you to release holdbacks before the 60-day period


• Don't understand lien law basics

Getting Lien Searches and Clearances

Before releasing your final holdback in Ottawa, you can order a lien search through Teranet Ontario to confirm no liens have been registered against your property. This costs around $20 and gives you peace of mind. You can also request lien waivers from major subcontractors and suppliers as an extra layer of protection.

Official Resources

For complete details on the Construction Act, visit ontario.ca and search for "Construction Act." The Act applies to all construction projects in Ottawa and throughout Ontario, regardless of size. If you're facing a lien situation, contact Legal Aid Ontario at 1-800-668-8258 or consult with a construction lawyer who understands Ottawa real estate law.

The holdback requirement isn't just bureaucracy - it's your financial protection against contractor payment disputes that could otherwise become your expensive problem.