Offices in Ottawa and Perth
(613) 722-1500

CONTACT US (613) 722-1500

Share on twitter
Share on facebook
Share on linkedin

Gimme Shelter – Lien Sheltering under Ontario’s Construction Act

Share on twitter
Share on facebook
Share on linkedin
Share on email

Gimme Shelter – Lien Sheltering under Ontario’s Construction Act

By:

Posted October 29, 2021

In a previous blog post, we reviewed the steps that a contractor or supplier must take in order to first “preserve” and then “perfect” a construction lien under Ontario’s Construction Act – that is, to prevent it from expiring. Preservation occurs by registering a lien with the Land Registry Office. Perfection then requires a lien claimant to commence a court action to enforce the lien, and to file a corresponding Certificate of Action with the Land Registry Office.

However, section 36(4) of the Construction Act creates an alternate method for perfecting a construction lien, called “sheltering”. Sheltering allows a contractor’s or supplier’s lien (once it has been registered/preserved) to be perfected by another lienholder commencing a court action to perfect their own lien. In other words, a claim advanced by one contractor can automatically perfect liens held by other contractors working on the same project.

To qualify for sheltering, the rules set out in s. 36(4) are as follows:

  • The “sheltered” lien must have first been preserved;
  • The “sheltering” lien must have been perfected within the time limit for the sheltered lien to be perfected; and
  • The sheltered lien will only be perfected “as to the defendants and the nature of the relief claimed in the statement of claim under which it is sheltered”.

The rules also state that a sheltered lien, once perfected via sheltering, will not become invalid as a result of the sheltering lien later being shown to have been invalid. Finally, a defendant facing a sheltered lien claim is entitled to request and receive particulars of the claim of the sheltered claimant (since that claimant will not themselves have filed a claim containing particulars).

The case law surrounding sheltering has tended to focus on the question of how closely related the sheltered lien relates to the sheltering lien. For example: can a contractor have its lien perfected even if the work it did was entirely unrelated to the work performed by the other, sheltering, contractor? Can sheltering occur even if the sheltering party is a subcontractor who worked under the sheltered contractor?

The courts have firmly stated that the sheltering provisions are to be interpreted broadly and generously. As long as the sheltered contractor was doing work on the same project as the sheltering contractor, the sheltering will be valid. It is not necessary that the sheltered contractor’s work be a direct component of the sheltering contractor’s work. The courts have called this “vertical sheltering”, but have stated that the Construction Act provisions should instead allow for “horizontal sheltering”. Thus, instead of being overly rigorous and narrow in determining how the sheltering and sheltered liens are related, courts should be permissive in allowing lien claims on a project to be perfected even amongst unrelated subcontractors. It is even possible for a subcontractor’s claim to perfect the lien of a contractor higher up in the construction pyramid.

Despite the courts’ permissive approach to the law of sheltering, any contractor seeking to perfect a lien should be wary of depending on the actions of another party. Coordinating with other claimants can provide economies of scale in litigation, but it will always be safer and more certain for a lien claimant to retain control by perfecting their own lien. Any contractors considering advancing a claim should obtain legal advice as early as possible in the process to avoid falling afoul of the Construction Act’s strict deadlines.

This blog post was written by Brett Hodgins, a member of the Commercial Litigation team.  He can be reached at 613-369-0379 or at brett.hodgins@mannlawyers.com.

More Resources

Blog |
Personal Injury

By: 

Posted December 2, 2021

The Supreme Court of Canada (SCC)’s recent decision in Nelson (City) v Marchi has created waves across the country on the issue of municipal snow[...]
Blog |
Environmental Law

By: 

Posted November 30, 2021

Although it may not be apparent in our urban Ottawa environment, Ontario has a potential pig problem and the provincial government has recently introduced a[...]
Blog |
Estate Administration, Estate Litigation

By: 

Posted November 29, 2021

A recent decision by Justice Corthorn provides a detailed and useful overview of the case law regarding the removal of Trustees.  In the decision of[...]
Blog |
Real Estate

By: 

Posted November 26, 2021

You’ve found yourself in a very unfortunate situation – the buyer of your house has decided to back out of the transaction and has left[...]
Blog |
Business Law

By: 

Posted November 25, 2021

Now that the new Ontario Not-for-Profit Corporations Act is in force, you should (1) register for the new Ontario Business Registry, (2) determine whether ONCA[...]
Blog |
Family Law, Wills, Trusts and Estates

By: 

Posted November 22, 2021

Family Law Separation Agreements usually include a variety of release clauses; for example, there may be releases of spousal support and of a right to[...]

Subscribe to Our Newsletter

Name*
Consent*
This field is for validation purposes and should be left unchanged.