This is the part of construction law homeowners least expect and least understand, and the consequence of getting it wrong is paying for the same work twice.
Here is the situation it protects against. You hire a builder. The builder hires a framer. You pay the builder in full. The builder does not pay the framer. The framer registers a lien against your title. You have done nothing wrong and you may still have to deal with it — because the lien attaches to the land that was improved, not to the party who failed to pay.
What a lien is
Construction lien legislation gives contractors, subcontractors, suppliers and workers a right to claim against the improved property for the value of work or materials supplied. The claim is registered on title. Once there, it interferes with financing, refinancing and sale until it is discharged.
- It arises by statute, not by contract. A subtrade you never met and never agreed with can register one.
- It attaches to your property, not to your builder’s business.
- Paying your builder in full does not, by itself, extinguish it.
- Every province has its own act, its own deadlines and its own procedure. The principle is shared; the specifics are not.
The holdback is the answer
Lien legislation requires the owner to hold back a percentage of each payment for a defined period. That retained fund is what unpaid subtrades can claim against, and — this is the part that matters to you — an owner who has properly retained the holdback generally limits their exposure to that amount rather than to the full value of the unpaid claims.
The corollary is uncomfortable and is the reason this guide exists: an owner who releases the holdback early, as a favour or under pressure, can lose that protection. "The builder asked nicely and the work looked finished" is not a defence.
Holdback percentages, lien registration deadlines and the point at which the period starts all differ by province, and several have been amended in recent years by prompt-payment reforms. We deliberately do not print a number here, because a stale figure quoted with confidence is worse than no figure. Get the current percentage and deadline for your province and your contract from a construction lawyer before your first draw — not at your last.
What to do
- Have a construction lawyer confirm the holdback percentage and the lien period that apply to your contract and jurisdiction, before construction starts.
- Retain the holdback from every payment. Put it somewhere separate so it is not accidentally spent.
- Require statutory declarations from your builder at each draw, confirming subtrades and suppliers have been paid to date. This is standard practice and a builder who resists it is telling you something.
- Consider requiring lien waivers or releases from major subtrades on larger projects.
- Do a title search before releasing the holdback. Registered liens are visible, and finding one before you release is a completely different position from finding one after.
- Release only when the lien period has expired and title is clear — confirmed by your lawyer, not by your builder’s assurance.
Prompt payment regimes
Several provinces have introduced prompt-payment legislation alongside their lien regimes, setting timelines for payment down the contractual chain and adding adjudication processes for disputes. Alberta’s Prompt Payment and Construction Lien Act and Ontario’s Construction Act are the clearest examples.
For a homeowner the practical effect is that payment timelines and dispute procedures are more prescribed than they used to be, and that some of the informality that used to characterise residential draws has gone. That is broadly good for you, and it is another reason to have the mechanics confirmed rather than assumed.
If a lien is registered against your property
- Do not ignore it and do not pay the claimant directly without advice — paying the wrong party can leave you exposed to the right one.
- Tell your builder immediately and in writing, and ask them to resolve it.
- Tell your lender. A registered lien will affect further advances.
- Get a construction lawyer involved straight away. There are procedures for discharging liens, and they run on deadlines.
- Do not release any further payment, including the holdback, until you have advice.