On January 11, 2016, the Ontario Ministry of Government and Consumer Services introduced changes to the electronic land registration system in an attempt to simplify the process for removing a lien from title. Previously, “Discharge of Construction Lien” or “Application to Amend Based on Court Order” forms could be used when a construction lien was to be deleted, which led to some confusion when the lien was being released or vacated instead of being discharged. The Ministry created a new document titled “Application to Delete Construction Lien” in Teraview, which when registered advises that a construction lien has been deleted from the property and the reason for its deletion (e.g. discharged, vacated or released). If the party registering the “Application to Delete Construction Lien” is not the lien claimant, the Application must be accompanied by a court order vacating or discharging the lien and other statements from lawyers, including a confirmation that there is no sheltering lien.
Despite the direction by the Ministry to employ the “Application to Delete Construction Lien”, it appears that in certain circumstances, parties can also delete liens within a shorter timeframe and with less cost by registering an “Application General”. For example, when a lien has expired pursuant to section 36 of the Construction Lien Act, parties can simply register an “Application General” without obtaining a court order if the following four conditions are met:
- Lawyers registering the “Application General” must represent a registered owner of a property (note that where there are multiple registered owners, the Ministry of Government and Consumer Services and the Toronto Land Registry Office have advised that they do not require all registered owners be listed as the Applicant on the “Application General”);
- There is no certificate of action registered within the prescribed time under the Construction Lien Act;
- There are no other liens on title under which the expired lien could be sheltering; and
- The expired lien is not that of a contractor or subcontractor whose work is still on-going or the improvement is not still underway, which could give rise to an argument that the periods for preservation and perfection have not yet expired.
Where all four conditions are met, a party can state in the “Statements” section of the “Application General” that pursuant to section 75 of the Land Titles Act, the register should be amended by deleting the lien, referring to the instrument number, as no certificate of action has been registered within the time prescribed by the Construction Lien Act and the lien has expired. A similar statement must also be made by the party’s lawyer, as it is this lawyer’s statement that the Land Registry Office will rely upon to delete the subject lien. No court order is required.
The Ministry of Government and Consumer Services and the Toronto Land Registry Office have also advised that lawyers may employ the “Application General” form to delete a lien if an action has not been set down for trial within the second anniversary of the commencement of the lien action in accordance with section 37 of the Construction Lien Act. The thrust of their advice appears to be that as long as there is a lawyer’s statement that the lien has expired and the lawyer has referred to relevant sections of legislation, the Land Registry Office will rely entirely on the lawyer’s statement and delete the lien.
It is not difficult to imagine how such weight given to a lawyer’s statement could lead to significant risk that a lien will be erroneously or mistakenly deleted where a thorough investigation of title and the project status was not completed by the lawyer before the registration of an “Application General”.
While the registration of an “Application General” may be a quicker and more cost effective way to delete liens from title than the “Application to Delete Construction Lien”, lawyers must be certain that the four conditions set out above have been met before doing so. Lawyers should always be extremely cautious and only register an “Application General” to delete a lien when it is abundantly clear that there is no potential for a lien claimant to argue that it could have been sheltering under another lien, or that its contract or the improvement was on-going and therefore the lien had not expired.