Are You Renovating? Then Hold Back 10% of Construction Invoices!


If you are renovating your existing property, it is important to understand your obligations under the Construction Lien Act. This legislation creates a “pyramid”, with the home-owner at the top. The renovator takes the next level, with the sub-contractors and those claiming under them below that.

As soon as a business supplies service, materials, or labour for an improvement project, the business is entitled to a lien on the interest of the home owner for the value of their work and materials. Each level of the pyramid is required to hold back 10% from payment of the level below them, including homeowners.

Many homeowners do not realize this, and fail to hold back the necessary 10% of construction-related invoices. As a result, they expose themselves to a potential lien being placed against their home for the value of any unpaid invoice, no matter where it falls in the pyramid.

A few exceptions to this rule exist. For example, in a kitchen renovation, the homeowner is not required to hold back funds for the value of appliances, such as a refrigerator or stove. These items are not seen as improving the value of the property, and as such, a lien cannot be placed against the property for their value.

To be certain of your holdback obligations, we encourage you to contact us. At Lerners LLP, we can expertly navigate you through your project to ensure the only thing you have to worry about is whether to go with the marble or granite tile.

Topics:  Invoices, Renovations, Subcontractors

Published In: General Business Updates, Construction Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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