By Raz Toor, Ontario Business and Real Estate Lawyer, Falcon Law PC
A construction lien can create an immediate problem for a property owner even where the owner strongly disputes the amount being claimed.
The property may be under contract for sale. A refinancing may be scheduled to close. A construction lender may refuse to advance additional funds while the lien remains registered. In those situations, waiting months or years for the underlying payment dispute to be resolved may not be commercially realistic.
Ontario’s Construction Act provides a mechanism for dealing with this problem: the lien can, in appropriate circumstances, be vacated from title by posting security in its place.
The important point is that vacating a construction lien is not necessarily the same thing as defeating it. The lien can be removed from the property while the underlying dispute continues.
What Does It Mean to Vacate a Construction Lien?
When a lien is vacated under section 44 of the Construction Act, the lien stops attaching to the property and instead attaches to the money or other security posted with the court.
That distinction is fundamental.
Suppose a contractor registers a $150,000 lien against a commercial property. The owner says only $40,000 is legitimately in dispute, but the property has to be refinanced next week.
The owner does not necessarily have to resolve the entire construction dispute before clearing title. The owner may be able to bring a motion, provide the required security and obtain a court order vacating the lien from the property.
The contractor’s claim has not disappeared. What has changed is the security supporting that claim.
Instead of looking to the property, the lien claimant looks to the security posted with the court while the litigation continues.
Why Would an Owner Vacate a Lien Instead of Fighting It Immediately?
Because the commercial problem and the legal dispute are often happening on completely different timelines.
A dispute over deficiencies, extras, change orders or unpaid invoices may take time to resolve. A property closing does not.
This is something I see frequently in real estate matters generally: when there is an encumbrance on title shortly before closing or refinancing, the client’s immediate concern is often not who will ultimately win the dispute. The immediate concern is whether the transaction can close.
A construction lien is a particularly significant example because it can interfere with a sale, refinancing or ongoing construction financing.
A motion to vacate can separate those two problems. The title issue can be dealt with now while the parties continue fighting about the underlying construction account separately.
How Much Security Has to Be Posted?
Section 44 of Ontario’s Construction Act provides a fairly clear route where the moving party is prepared to secure the full claim.
Under section 44(1), the required security is generally:
- the full amount claimed as owing under the lien; plus
- security for costs equal to the lesser of $250,000 or 25% of the lien amount.
If that security is provided, the court is required to make the applicable vacating order under the section.
For example, if the lien is for $100,000, the statutory amount would generally consist of the $100,000 lien claim plus up to $25,000 for costs.
That does not necessarily mean the moving party must always secure the full face value of the lien.
Section 44(2) also allows the court to vacate a lien where an amount the court considers reasonable in the circumstances has been paid into court or secured.
That can become important where there is a legitimate argument that the lien amount is overstated.
Can You Ask the Court to Reduce the Security?
Potentially, yes, but this is where the motion becomes more substantive.
If an owner posts the full statutory security, the court is not being asked to decide whether the contractor’s $150,000 claim is really worth $150,000. The security simply replaces the property.
If the owner instead argues that only $50,000 should have to be secured, the court needs a basis to reach that conclusion.
For example, there may be amounts in the lien that are clearly unrelated to lienable services or materials, duplicate amounts, payments that were already made, or another identifiable reason why the full amount should not have to be secured.
I would distinguish that from asking the court to conduct a mini-trial of the entire construction dispute on a vacating motion. The purpose of the motion is normally to deal with the security, not finally determine every deficiency, change order or payment issue between the parties.
Vacating a Lien Is Not the Same as Discharging a Lien
This terminology matters.
If a lien is vacated by posting security, the lien claim can continue. Its security has simply moved away from the land.
A discharge is different. A discharged lien is no longer being maintained as a lien claim.
Section 47 of the Construction Act gives the court authority to discharge a lien on the basis that it is frivolous, vexatious or an abuse of process, or on another proper ground.
There are also situations where a lien has expired because the claimant failed to comply with the statutory deadlines for preserving or perfecting it. That raises a different route again.
So if an owner tells me, “This lien is completely invalid and I want it gone,” the first question is not automatically how much security they should post.
We need to determine whether the goal is to vacate the registration so the property can move forward, or whether there is a proper basis to seek to have the lien discharged or declared expired.
Vacating the Lien Does Not Decide Who Is Right
This is worth emphasizing because owners sometimes assume that obtaining the order means the court has accepted their position.
It usually does not.
A section 44 vacating motion changes the security supporting the lien. It does not generally determine whether the contractor performed the work properly, whether deficiencies exist, whether an extra was authorized or whether the owner ultimately owes the amount claimed.
The Ontario Superior Court has described a section 44 motion as essentially changing the security for the lien rather than determining the validity of the claim.
The construction litigation can therefore continue after the lien disappears from the parcel register.
Why This Matters in a Sale or Refinancing
From a real estate perspective, this is often the reason the motion becomes urgent.
A purchaser will generally expect the seller to deliver title subject only to the permitted encumbrances under the agreement of purchase and sale. An unexpected construction lien can therefore become a significant closing issue.
A lender refinancing the property may take a similar position. The lender may not be prepared to advance its mortgage funds while the lien remains registered.
If there is enough time, the parties may be able to negotiate a release or settlement directly with the lien claimant.
If that cannot be achieved and the transaction needs to proceed, posting security and vacating the lien can provide another route.
This is also why construction lien issues often overlap with our Ontario real estate practice. What begins as a construction payment dispute can very quickly become a title and closing problem.
What Kind of Security Can Be Used?
The Act allows money to be paid into court or appropriate security to be posted.
The form of security needs to satisfy the legal requirements and the court. Depending on the circumstances, this can avoid requiring the owner to simply leave a large amount of cash sitting in court for the duration of the dispute.
For example, the Construction Act expressly contemplates qualifying letters of credit as security where the statutory requirements are met.
The appropriate form of security should be dealt with before the motion is brought so that obtaining the court order does not become only the first half of solving the title problem.
Can the Security Be Reduced Later?
Yes, potentially.
Section 44 also allows the court, where appropriate, to later reduce an amount paid into court or reduce security that has been posted.
This can matter where the amount genuinely in dispute decreases as the proceeding develops.
For example, part of the claim may be settled, abandoned or determined not to require continued security.
Again, however, the security does not simply reduce itself. A proper court order may be required.
What About the Lien Claimant?
From the contractor or subcontractor’s perspective, seeing the lien disappear from title can initially look like a loss of leverage.
But properly vacating the lien under section 44 does not simply leave the claimant unsecured.
The lien instead becomes a charge against the security posted with the court.
That is the compromise built into the legislation. The owner can free the property from the lien while the contractor preserves security for its claim.
A lien claimant should still review the proposed order and security carefully, particularly where the owner is asking the court to accept substantially less security than the amount claimed.
Should You Negotiate Before Bringing the Motion?
Often, yes.
Litigation should not become the automatic response merely because a lien has been registered.
In some cases, the claimant may agree to discharge the lien in exchange for acceptable alternative security. In others, the parties may be able to resolve the underlying account quickly enough that a motion is unnecessary.
The commercial context matters.
If the lien is $30,000 and the cost of fighting over security will consume a significant percentage of the dispute, negotiating a practical solution may make more sense.
On the other hand, if a $500,000 lien is preventing a multimillion-dollar refinancing from closing, the economics of moving quickly are very different.
The strategy should reflect what is actually at stake.
Construction Lien Deadlines Still Matter
Vacating a lien from title does not eliminate the broader procedural requirements under the Construction Act.
Construction liens operate under strict statutory deadlines for preservation and perfection. A lien claimant who fails to take the required steps can lose the lien.
Similarly, owners should not assume that a lien is valid simply because it appears on title.
The dates, services supplied, amount claimed, preservation of the lien and any perfection steps should be reviewed before deciding on the appropriate response.
Falcon Law PC assists contractors, subcontractors, suppliers and property owners with the full lifecycle of Ontario construction lien matters, including registration, enforcement, defence and motions to vacate.
What I Would Want to Know Before Bringing a Motion to Vacate
If an owner contacted me about an existing lien, I would first want the parcel register and lien documents, the underlying construction contract, invoices and payment history, and any correspondence explaining the dispute.
I would also want to know why the lien needs to come off title now.
Is there a sale closing? A refinancing? A construction draw? Is the lien preventing another transaction from proceeding? How much is actually being disputed? Is the owner prepared to post the full statutory security, or are we going to ask the court for a lower amount?
Those practical facts often determine the strategy more than the simple fact that a lien exists.
The Goal Is Usually to Separate the Property From the Dispute
For me, that is the easiest way to understand a motion to vacate.
The parties may still have a serious disagreement about whether money is owing.
But if adequate security can stand in place of the land, there may be no commercial reason for the property itself to remain tied up while that disagreement is litigated.
That is exactly what section 44 allows the court to accomplish.
How Falcon Law PC Can Help
Falcon Law PC acts for contractors, subcontractors, suppliers, property owners and businesses in construction lien matters throughout Ontario.
We assist with registering and enforcing liens, reviewing allegedly defective or expired liens, negotiating releases, bringing and responding to motions to vacate and dealing with related real estate and commercial issues.
You can learn more through our Ontario Construction Lien Lawyers page.
Where the lien is interfering with a purchase, sale or refinancing, our construction and real estate work can also be coordinated through Falcon Law PC’s real estate practice.
This article provides general legal information only and does not constitute legal advice. Construction lien matters are highly fact-specific and subject to strict statutory deadlines. The appropriate procedure will depend on the lien, the project, the status of any court proceeding and the reason the lien needs to be removed from title.