Construction Liens and Bankruptcy: How Contractors Can Protect Themselves

It is an unfortunate reality in the construction industry that bankruptcies can, and do, occur. An owner, general contractor or subcontractor may become insolvent and be unable to meet its financial obligations. In those circumstances, contractors need to know how you can best protect your rights and minimize potential losses. This article explains some of the rights and remedies available to contractors under insolvency legislation and under the Construction Lien Act of Ontario when you are confronted with the troublesome situation of a bankruptcy of someone in the construction pyramid.

Lien rights as set out in the Construction Lien Act are strictly interpreted and enforced by the courts. Even in the face of an insolvency, you should be aware that the time periods for preserving and perfecting a claim for lien are not suspended, nor are they extended. A contractor should preserve its lien within 45 days of its last supply to the project. Failing to