In both Canada and the United States, construction lien rights play a crucial role in securing payment for work and materials on commercial and residential projects. Despite jurisdictional differences in statutes, timelines, and procedures, the consequences of missing a lien deadline—or failing to meet documentation standards—are remarkably consistent: the loss of legal leverage and significant financial exposure.

For builders, contractors, suppliers, and owners operating across borders, understanding the nuances of local lien legislation is essential. With Ontario’s Construction Act set to change in 2025, businesses involved in cross-border projects should take this opportunity to review and strengthen their lien compliance protocols.

A Shared Principle, Different Legal Landscapes

Whether you’re filing a construction lien in Toronto or a mechanic’s lien in Texas, the core legal principle remains the same: liens are statutory claims placed on real property to secure unpaid debts related to its improvement. What differs, however, is the timeline for asserting those rights, and the consequences for getting it wrong.

In Ontario, under the Construction Act, liens must be:

• Preserved within 60 days of substantial performance, abandonment, or termination of a contract.
• Perfected within 90 days of preservation by commencing a court action and registering a Certificate of Action on title.

In the United States, timelines vary state to state. For instance:

• In New York, contractors typically have 8 months to file a mechanic’s lien on non-residential property.
• In California, the deadline to file is 90 days after project completion unless a notice of completion is recorded—then it’s reduced to 60 days.
• In Florida, subcontractors must serve a Notice to Owner within 45 days of starting work and then file the lien within 90 days of final furnishing.

While the language differs, the risk remains the same: failure to comply strictly with statutory lien procedures often results in dismissal of the claim, no matter the merits.

The Ontario Outlook: Key Legislative Updates for 2025

Ontario’s upcoming amendments to the Construction Act under Bill 216 (Building Ontario For You Act, 2024) will introduce annual holdback release obligations. This change impacts long-term contracts by requiring owners to:

• Issue a Notice of Annual Holdback Release within 14 days of the contract anniversary.
• Release the holdback within 14 additional days if no lien is preserved within the 60-day period following that notice.

While the intent is to improve payment flow across the construction chain, these changes also compress lien enforcement windows. Contractors and subcontractors will need to closely monitor holdback notices and adjust their internal protocols accordingly.

Similar reforms aimed at improving prompt payment and transparency have been introduced in several U.S. jurisdictions, particularly following the model of federal Prompt Payment Acts and their state equivalents. Stakeholders operating on both sides of the border must stay current with shifting compliance timelines.

Documentation: A Common Lien Killer

Whether filing in Ontario or Oregon, documentation remains a key determinant of lien success. Courts and lien offices expect claimants to provide clear, consistent evidence of their entitlement to payment. Some of the most common pitfalls seen in both Canadian and American construction lien filings include:

• Vague or generalized invoices that don’t specify the nature of the work or materials.
• Unsigned change orders that create ambiguity around contract modifications.
• Failure to document the last date of supply or completion.
• Incorrect property descriptions, including wrong lot numbers or PINs.
• Improper notice procedures, particularly in U.S. states that require pre-lien notices or notices to owner.

In cross-border projects or when working with foreign contractors, discrepancies in documentation standards between provinces or states can also complicate enforcement efforts.

Trust Accounts, Prompt Payment, and Personal Liability

In Canada, statutory trust obligations require that funds received for construction improvements be held in trust for downstream contractors and suppliers. Misuse of these funds—even unintentionally—can trigger personal liability for directors or officers. These rules are strictly enforced and are particularly relevant in insolvency scenarios.

In the U.S., trust obligations exist in certain states (e.g., Minnesota, New York, Texas) under varying statutes. Additionally, federal and state Prompt Payment Acts impose strict deadlines and penalties for late payment. Non-compliance can result in interest accrual, litigation, and—in some jurisdictions—automatic liability for legal fees.

 Cross-border companies should approach these requirements with caution. Directors and officers may be exposed to personal liability if funds are misused or deadlines are missed.

Legal Myths That Create Risk

Despite similarities in purpose, construction lien laws across Canada and the U.S. remain highly technical and often misunderstood. Some of the most persistent—and risky—misconceptions include:

• “We can contract around lien deadlines.” Lien rights are statutory. Contract terms cannot override them.
• “Pay‑when‑paid clauses shield us from liability.” Many jurisdictions prohibit or limit these clauses; others will not enforce them if they delay payment unreasonably.
• “We can inflate the lien to gain leverage.” Excessive or bad-faith lien claims can attract damages under Ontario’s section 35 and similar U.S. provisions for wrongful lien filing.

The consequences of relying on incorrect assumptions about lien law can be severe. Claims may be struck, legal fees may be awarded against the claimant, and reputational damage can affect future bidding opportunities.

Proactive Steps to Reduce Lien Exposure

While the legal frameworks may differ, the best practices for avoiding lien-related disputes remain consistent across jurisdictions. Construction professionals operating in Canada, the U.S., or both should:

• Create project-specific compliance calendars to track lien deadlines and holdback periods.
• Ensure proper contract drafting, including lien waiver language that complies with local law.
• Maintain comprehensive daily logs, supply records, and payment tracking systems.
• Implement a standardized internal process for issuing or responding to notices of non-payment, payment delays, or lien claims.
• Seek legal advice early, especially on cross-border projects or multi-jurisdictional ventures.

By embedding legal strategy into day-to-day operations, contractors and owners can better safeguard their cash flow, protect against enforcement risk, and avoid expensive litigation.

The Advantage of Cross-Border Legal Counsel

Pace Law Firm’s Corporate and Commercial team advises clients in both Canada and the United States on a full range of construction law matters—including contract drafting, lien preservation and perfection, adjudication, and litigation. Our team works with clients to address both provincial and state lien regimes and supports businesses in managing jurisdiction-specific compliance requirements.

Whether you are a general contractor managing projects across Ontario and New York, or a supplier navigating prompt payment laws in Alberta and Florida, our team provides legal support to help you meet your obligations, protect your entitlements, and reduce your legal and financial risk.