Construction liens often have to come off title quickly, to close deals or get money flowing. Accordingly, when someone refuses to act because a document which removes a lien from title has not yet been “certified” as registered by the land registrar under Ontario’s Land Titles Act,[1] it creates a problem.
There are two ways a lien can be removed from title in Ontario. We will review these below. In the end, the option you choose can be important.
First, a lien can be deleted “by the registration of a discharge of lien” against title under sections 41(1) or 42 of the Construction Act. (When a discharge occurs, the lien is irrevocably expunged and ceases to exist, as per s.48). Second, a Court Order which “discharges” or “vacates” the lien can be obtained.[2] (When a lien is “vacated”, it no longer attaches to the lands or the holdbacks: unless it is also discharged, the lien continues to exist).
Notably, and unlike a discharge, a lien cannot be vacated through the voluntary registration of a document on title. Rather, a Court Order is required. Under section 44(1) of the Construction Act, anyone can move without notice (or ex parte) for an order to vacate, so long as security in the amount of the lien plus a set amount for costs is paid into court. Under section 44(2), a lien can be vacated through the posting of security in a lesser, reasonable amount (although that motion will have to be brought on notice to the lien claimant). Under section 45, the Court shall order that a lien be vacated where it has expired and under s.47, it may order that a lien be discharged or vacated “on any proper ground”.
It is where the Construction Act and the Land Titles Act intersect that problems arise. Parties sometimes argue that the registration of a discharge or Order on title will not be effective until the registration is formally “certified” by the land titles registrar, under the Land Titles Act. The problem can be serious, because certification can take weeks to occur while the flow of funds, land transfers and/or financings hang in the balance.
Refusals to pay or close a deal until certification occurs are based on subsections 78(2) and 78(3) of the Land Titles Act, which clearly provide: (i) that a registration is not effective until it is certified; and (ii) that prior to certification, the registration can either be rejected by the land registrar or withdrawn by the person who submitted it. We fully understand why, on a reading of these sections, owners, banks, mortgagees and others might refuse to act, out of caution, until certification occurs: if the document is not effective, payers might have to pay twice, purchasers might end up with encumbered lands and mortgagees might lose priority to advances made “in the face of a claim for lien” under s.78(4) of the Construction Act.
Such refusals, however, can be managed. Under the Construction Act (and with one recent and minor exception), the registration of a Court Order discharging and/or vacating a lien on title is not actually required to make the Order effective. Accordingly, where there is a concern about delays pending certification, the voluntary registration of a discharge should be avoided. Rather, a Court Order should be obtained.
The registration of Orders discharging and/or vacating was first made optional more than 40 years ago. Prior to 1983, the Mechanic’s Act, RSO 1980, c 261, section 29(7) provided that an order discharging or vacating a lien “shall be registered”. In 1983, however, section 29(7) of the Mechanics Lien Act became section 49 the Construction Lien Act. The new section 49 is still in force today. It merely provides that such orders “may be registered”:
“49 Where the lien attaches to the premises, an order declaring that a lien has expired, or discharging a lien, or vacating the registration of a claim for lien or a certificate of action, may be registered by registering on the title to the premises a certified copy of the order that includes a description of the premises sufficient for registration under the Registry Act or the Land Titles Act, as the case may be.”
Accordingly, an Order which discharges or vacates is effective when it is made (ie. “issued and entered” with the Court). Anyone who obtains such an Order can, of course, register it on title. Also, our Courts generally direct that such orders be registered. However, registration is not a prerequisite to the Order’s being effective.
Section 49 is consistent with the sections of the Construction Act which govern the discharge and vacating of liens by way of Court Order. Section 44(6) makes it clear that “where and order is made” to vacate a lien upon the posting of security into Court, the lien “ceases to attach to the premises” and “becomes instead a charge upon the amount paid into court or security posted and the owner or payer shall … be in the same position it was in had the lien not been preserved or written notice of the lien had not been given”. Similarly, section 46(1) provides that where a perfected lien which attaches to the premises expires, “the court, upon the motion of any person, shall declare that the lien has expired and shall make an order dismissing the action to enforce that lien … ”. Further, the Court has discretion under 47(1) to discharge a lien and vacate liens and certificates. In each case, there is no requirement that the Orders be registered.
The above is consistent with case law. In RSG Mechanical Inc. v. 1398796 Ontario Inc., 2015 ONSC 2070 (CanLII) at para. 86, a panel of the Divisional Court confirmed Justice Myer’s analysis where a lawyer had misunderstood the need for registration:
“Counsel for the appellant understood that the order did not take effect until it was registered. Mr. Justice Myers pointed out that subsection 44(6) of the Construction Lien Act provides that it is the making of the order and not its registration that causes liens to be vacated and become a charge on the proceeds in court. Accepting that the advance was made on January 2, 2005, by the time it was made, the liens ceased to attach to the premises and holdbacks.”
Over the years, we have generally been successful in explaining the above to those anyone who, out of an abundance of caution, elected to wait for certification before acting on a discharging or vacating Order to releasing funds or close a deal. Although we have at times had to draft motion materials, we have never had to actually argue a motion in that regard. It is important to note, however, that in each case we were relying on an Order. The situation, however, is very different when the discharge of a lien has been voluntarily submitted for registration. In that case, as above and under 78(2) and 78(3) of the Land Titles Act:
a) there is no Order and, accordingly, no ability to say the ‘Order is effective without registration’;
b) the registration will not be effective until it is certified;
c) prior to certification, the registration can either be rejected by the land registrar or withdrawn by the person that registered it; and
d) it is quite understandable why parties might to refuse to act on the registration before it is certified.
The above is perhaps best illustrated by the Ontario Superior Court decision in Gay Company Limited v. 962332 Ontario Inc., 2023 ONSC 6023 (CanLII). There, Justice Sutherland ruled that where the discharge of a claim for lien which had been voluntarily registered was withdrawn before it was certified, the discharge was not effective. There is, on our view, no question that Justice Sutherland was correct. Unlike the situation in relation to Court Orders, there is nothing in the Construction Act which suggests that a registration is effective before certification. We suggest, however, that had Justice Sutherland been dealing with the registration of an Order discharging or vacating a lien, the result would have been different (in keeping with RSG Mechanical Inc. v. 1398796 Ontario Inc., cited above).
We noted above that there is now an exception to the Act’s providing that Orders discharging and/or vacating liens are effective as soon as they are issued and entered with the Court. It arose as part of recent legislative changes which made the payment of holdback mandatory on an annual basis. See our article in relation to those changes, here.
A new section 26(4) now effectively provides (among other things) that if a lien attaches to the premises when the annual release of holdback otherwise becomes payable, the payment is to be made once the appropriate order has been registered under s.49. Curiously (as above), the registration of Orders under s.49 is itself is only optional. Further, the release of any holdback that has not already been paid by way of annual release is not tied to the registration of an Order where liens remain registered against title under the new s.26(8).
It may be that tying the annual release of holdback to the registration of Orders was inadvertent. Regardless, unless and until s.26(4)(a)(ii) is amended, and where liens which attach to the holdback remain on title, payers of annual holdback will be justifiably concerned to not release it until such Orders are certified in accordance with the Land Titles Act. Other than in relation to this recent exception, however, it appears clear that Orders which discharge and/or vacate liens are effective when they are issued and entered.
In terms of best practice, when a lien has to come off title and the option to unilaterally register a discharge is available, a Court Order might be preferred. This, because the Order will (other than in relation to the release of annual holdback) be effective as soon as it is issued and entered, such that any delays in its registration on title will (unless the parties have somehow agreed otherwise) be of no consequence. Such an approach might be particularly attractive if a payment of funds or closing depends on the lien coming off. That having been said, if the cost or time associated with an order is a concern, other options can (in appropriate circumstances) be negotiated. For example, only the party that registers a document can withdraw it. Thus, if the potential for withdrawal is a concern, the party that wants to rely on the discharge can register it. In addition, parties can (and often do) agree to do what is required to obtain certification if the Land Registrar advises that the document needs to be corrected for some reason.
Further as regards best practices, we offer a note of caution.
As above, liens can be deleted without a Court Order “by the registration of a discharge of lien” in accordance with sections 41(1) or 42 of the Act. Such registrations are done (except in very limited circumstances) through the Teraview on-line electronic system. Usually, a person authorized to register a discharge does so with the consent of the lien claimant. Curiously, however, persons authorized in Teraview can register a discharge without the lien claimant’s consent by unilaterally declaring the lien to be expired “since no certificate of action has been registered within the prescribed time under the Construction Act”. Calculating the times for lien expiry can, of course, be complicated and hotly contested. Unilateral deciding to use the option is, accordingly, rife with risk and difficulty.
The use of the option came before Associate Justice Robinson of the Construction Lien Court in Toronto earlier this year, in Terra Bona Developments Ltd. v. Cacoeli Kennedy Steeles LP, 2026 ONSC 585 (CanLII). After a fulsome review of the interplay between the Construction Act and Land Titles Act, A.J. Robinson held that “the Land Titles Act does not permit persons or parties to delete the registration of a claim for lien absent consent of the lien claimant or a court order” and that the deletion “was invalid and ought not to have been certified by the land registrar”. His Honour made these findings, in part, based on the “well-recognized and long-standing principle of legislative interpretation that specific legislation takes precedence over general legislation”. See paragraphs 84-89 in that regard.
By way of best practice then, and while it is somewhat surprising that the Land Titles Act provides the option to unilaterally delete a claim for lien without the lien claimant’s consent, that option should never be utilized. (The issue is moot where the lien needs to be vacated, of course, as this can only be done by way of a Court Order, as above).
Robert Kennaley
Kennaley Construction Law
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[1]R.S.O. 1990, c. L.5.
[2] under s.44(1), 44(2), 45(1) or 47 of the Construction Act