Old Debts, New Contracts: Defining the Boundaries of Lienable Work in Ontario

A recent Ontario decision represents a problematic and significant departure from wellestablished principles under the Construction Act (the “Act”). The purpose of a lien as stated in the Act is to secure payment for services and materials that directly improve a property – full stop. This decision endorses the notion that a contractor can include in its lien a debt entirely divorced from the services supplied to a particular property. In our view, the court was wrong. 

At the heart of Trillium Masonry Group Inc. v Marydel Homes (Beaverton) (“Trillium”) was a key question: Can a contractor lien for a contract “price” that includes an old, unrelated debt? In this case, Trillium Masonry was allegedly owed over $193,000 for work on a subdivision, but its lien rights for that work had expired. When Marydel Homes contracted Trillium to perform new work on the final lot, Trillium drafted and executed a new contract that included a clause stating the old debt “shall be forwarded to the final lot and shall form part of the contract price.” Trillium subsequently liened the final lot for the value of the new work plus the old independent debt of $193,000. The court upheld the lien for the full amount. The crux of its decision was that the parties were at liberty to set a price for work, despite the evidence clearly showing that the agreed-upon price included work that had nothing to do with the improvement.  

Why is the Trillium decision so controversial? The Act indicates that a lien is meant to secure payment for services and materials that directly contribute to an “improvement” to a property. Courts have consistently drawn a hard line between what is lienable, costs directly tied to the physical improvement of the property, and what is simply the cost of doing business, such as general overhead, administrative, and other off-site expenses.  

The Court’s conclusion that the unrelated work was lienable simply because it was subsumed in the price, potentially invites parties to intentionally circumvent clear requirements of the Act. Statutory deadlines for lien preservation, the clear distinction between what is or is not lienable, for example, are now arguably malleable.  

Still, Trillium is likely the exception, not the rule, and would only apply in the rare case that an owner and general contractor agree to revive and attach an old, unsecured, and otherwise non-lienable debt to a new project. Commercially, seldom would a payor ever agree to revive an otherwise-expired lien by intentionally including the unpaid debt in the price of an unrelated project.

The Trillium decision should not be viewed as an open-ended invitation for contractors to “bake-in” non-lienable expenditures into their lien claims. A construction lien should be an honest and precise accounting of the value you’ve provided to an improvement: no more, no less. While courts may correct minor, unintentional errors, exaggerated claims can be reduced, and willful inflation may result in cost penalties, personal liability, or even full discharge of the lien in serious cases. 

The ruling in Trillium prioritizes freedom of contract at the expense of one the fundamental principles of the Act. It also creates a contractual mechanism to circumvent the basic requirements of the Act. It should not be understood as providing carte blanche to contractors to include otherwise non-lienable items in their lien claim. Contractors who understand the boundaries of lienable work and respect the limits imposed by the Act are far more likely to succeed in securing rightful payment without triggering costly legal consequences.