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CSA & Lien Rights Lost

If you work in the construction industry, chances are you have at least some familiarity with the Construction Lien Act. If money is owing to you, you may be able to register a lien against title to the property for the project. The lien acts as security for the amounts owing until a proper determination can be made of the outstanding accounts.

Whether you retain the right to lien depends on a number of factors—it’s not always as easy as counting 45 days after the last date of supply. Knowledgeable legal counsel can certainly help you in figuring this out.

But what if your lien rights have expired? Or what if a lien isn’t the right way to go in your case? The Construction Lien Act may still assist.

Under the Construction Lien Act, financing for the project is seen as flowing down from the owner to the contractor to the subcontractors and suppliers. Imagine a pyramid with the owner at the top, the contractor one level down, and the many subcontractors and suppliers at the bottom. Basically, the monies used to finance the project are paid to the owner, which then pays the contractor. The contractor then uses part of those monies to pay out the subcontractors and suppliers.

If funds are not paid out as required, there may be a basis to sue for breach of trust. Simply, an action for breach of trust may exist when the project financing does not flow down the pyramid and contractors, subcontractors and suppliers are left unpaid. The owner responsible for paying the contractor may be said to be holding funds “in trust” for the contractor—the owner may be the trustee for the beneficiary contractor. The same relationship can extend to contractors and subcontractors.

The Construction Lien Act recognizes that it is the individuals in charge of the trust who decide what to do with trust funds. As such, the directors, officers and employees of a trustee—the people with authority or control over the company—could be sued in their own name.

While a breach of trust may seem straightforward, it is not simple. If, for example, all the project funds are paid out down the construction pyramid but there are insufficient funds to pay out all the subcontractors and suppliers, there is no breach of trust.

The purpose of the Construction Lien Act is to protect the smaller players in the construction industry from larger and more powerful owners and contractors. The remedies allowed are extraordinary; as such, they are particular. If you think you may have a claim and you wish to canvas your options, you will want to consult with a lawyer with specific knowledge and experience as to how the Construction Lien Act can work for you.

If you have any questions relating to any of the above, please do not hesitate to contact Ann Hatsios  at ahatsios@kmblaw.com or 905.276.0420.

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This article is provided for general information purposes and should not be considered a legal opinion. Clients are advised to obtain legal advice on their specific situations.

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