Lien린 (유치권·담보권)

What is it?

A lien is a legal claim that someone who is owed money places on a property until they are paid. If an owner does not pay a contractor, condo fees, taxes or a court judgment, the person owed can register a lien on title. Ontario simply calls all of these “liens”.

A home with a lien cannot be sold cleanly until the debt is paid or the lien is discharged (removed). Because a lien stays with the property, the buyer’s lawyer checks for liens in a title search, and the seller pays them off from the sale money on closing.

A mortgage is also a charge on a home, but “lien” usually means a claim that arises under a law, not a loan the owner chose to take.

What kinds of liens are there?

The detailed rules for tax arrears and government liens were not verified from source text for this page. Your lawyer confirms them before closing with a tax certificate and an execution search.

How does a construction lien arise?

Under section 14 of the Construction Act, anyone who supplies services or materials to an improvement (work on the home) has a lien on the owner’s interest in the property for the price of that work. This includes not only the contractor but subcontractors, suppliers and architects. Even if the owner paid the contractor in full, an unpaid subcontractor can still lien the home.

The lien survives only if a claim for lien is registered at the land registry office (section 34). If it is not registered, it expires 60 days after the dates set in section 31 (such as the completion or abandonment of the contract).

That is why the law requires the owner (the payer) to keep 10% of the price as a holdback (section 22): any liens are meant to be dealt with out of that 10%. When there has been recent work, a buyer’s lawyer often asks to hold back some money on closing. This is common practice, not a rule in section 22. See “Holdback” for the details.

How does a condo lien arise?

When a condo owner does not pay the common expenses, the corporation has a lien against the unit under section 85 of the Condominium Act. The lien covers not only the unpaid fees but interest, legal costs and collection costs.

The lien expires unless the corporation registers a certificate of lien within three months of the default (section 85(2)). It must give the owner at least 10 days’ written notice before registering (section 85(4)). A registered lien can be enforced in the same way as a mortgage (section 85(6)), so the corporation can even sell the unit by power of sale.

Under section 86, a condo lien ranks ahead of mortgages, even ones registered before it (with exceptions such as government taxes). This is why lenders take unpaid condo fees seriously. But by the day it registers the certificate of lien, the corporation must give written notice to everyone with a registered claim on the unit (an encumbrancer), such as the mortgage lender (section 86(3)). With no notice, the lien loses its priority over that encumbrancer (section 86(5)). With late notice, it ranks ahead only for the arrears that built up in the three months before the notice and after it, plus interest and costs (section 86(6)). Once everything is paid, the corporation must register a discharge and tell the owner (section 85(7)).

The status certificate you get when buying a condo must state the unit’s common expenses and any default in paying them (section 76(1)(a)). If there are arrears, the seller must clear them before closing.

How do liens show up in a title search?

Claims for lien, certificates of lien and tax arrears certificates appear in the property’s parcel register with a registration number. The buyer’s lawyer sees them in the title search. Judgment writs are not in the parcel register but in the index of executions, so the lawyer runs a separate execution search in the seller’s name.

When the lawyer finds a lien, they send the seller’s lawyer a written requisition before the requisition date in the agreement, asking that it be removed before closing. The seller either pays and registers a discharge, or the lawyers agree (by undertaking) that it will be paid from the sale money and discharged on closing.

How liens are cleared on closing

1. The buyer’s lawyer finds any liens through the title search, the execution search and a tax certificate.
2. The lawyer sends a written requisition to the seller’s lawyer before the requisition date.
3. The seller pays. Usually the seller’s lawyer pays the lien out of the sale money on closing day. The condo corporation (for a condo lien) or the lien claimant (for a construction lien) then registers a discharge.
4. If it cannot be resolved in time, the lawyer may propose a holdback on closing or rely on title insurance. For a construction lien there is also a process of paying money into court to have the lien removed from title, which the lawyers handle.
5. After closing, the buyer asks their lawyer to confirm that no lien remains on the parcel register.

What to watch out for

• Buying a home with recent work (within the last few months): a construction lien can still be registered after closing if it is within 60 days of the supply. That is why your lawyer asks when the work was finished and often asks to hold back money. Do not rely only on the seller’s word that everyone was paid.
• Buying a condo: read the arrears section of the status certificate. A lien stays with the unit, so a former owner’s unpaid fees remain on your unit if they are not cleared.
• Selling: tell your lawyer about any lien early. A lien that surfaces on closing day can delay or break the deal.
• As an owner: interest and legal costs keep adding to a lien. A condo lien or a mortgage can lead to a power of sale, so deal with it quickly.
• Title insurance covers some liens missed in the search, but check the exceptions in your policy.

Example