The 10% Rule Isn’t Always 10%: Construction Mortgage Priority On Default

The General Rule

Section 78 of the Construction Act (Ontario) establishes the priority of construction liens relative to mortgages.

• Construction liens generally have priority over mortgages.
• Where a mortgage was registered before the first lien arose in respect of an improvement, the mortgage generally has priority for advances made before the first lien arose, including the lesser of:
  • the actual value of the premises when the first lien arose; and
  • the total amount advanced by the lender before that time.
• Subsequent advances under the mortgage may also have priority, unless, at the time of the advance, a lien had been preserved or perfected or the mortgagee had received written notice of a lien.