by Scott Fairley, Partner
In most cases it is necessary to register a construction lien against each individual property to which materials or services were supplied, within 45 days after the date of last supply or completion. A lien will attach to the property or the holdback funds in relation to the supply to each lot. This is not a simple task if a contractor or subcontractor supplies services or materials to multiple lots within a project, as is usually the case in residential subdivision projects. The Construction Lien Act addresses this problem through the concept of a general lien.
A general lien is essentially a blanket lien that covers all the lots in a subdivision to which a contactor or subcontractor supplied, for the entire value of the supply to all lots. Rather than choosing to lien for the value of each supply to each individual lot, within 45 days of the last supply to each lot, a contractor or subcontractor can register a general lien for the total outstanding account. This allows the lien claimant to register within 45 days of the supply to the last lot, without losing the right to lien for the value supplied to lots earlier in the project. If a lot has been transferred to a homebuyer, it can no longer been the subject of a lien, but the amount supplied to that lot can be added to the lien against other lots if a general lien is available. For example, if an unpaid subcontractor supplied $5,000 worth of material to each of lots 1 through 10, and all but Lot 10 are sold to homeowners, the lien must be registered against the remaining lot, being Lot 10. However, the lien against Lot 10 will be for the full $50,000.00, although the actual supply to Lot 10 was only $5,000.00. Of course, there must be sufficient equity in the remaining lot for the lien to have full value.
For a general lien to be available the following conditions must be met:
- All of the premises for which the lien claimant seeks payment must be owned by the same owner;
- All of the work must be performed under a single contract between the owner and the general contractor;
- The contract between the owner and the general contractor must not include a provision that liens will expire on a lot by lot basis.
This last condition can present difficulties for subcontractors. An owner and a general contractor can include in their contract a provision that liens expire on a lot by lot basis, and the general contractor cannot rely on a general lien. Similarly, any subcontractor under that general contract cannot rely on the general lien. The difficulty is that the subcontractor is not a party to the general contract and did not agree that liens will expire on a lot by lot basis. The subcontractor may be considering a general lien but will not know if liens expire on a lot by lot basis, which eliminates the possibility of a general lien. It is advisable for a subcontractor on a subdivision project to find out before the first supply if the contract between the owner and contractor provides that liens expire on a lot by lot basis. If it does, that subcontactor will have to consider its lien rights for each individual lot and lien rights will expire 45 days after the supply to each individual lot.