The Fine Print: Form and Sufficiency of Letters of Credit to Vacate Liens

One of the most efficient ways to have the lien removed from title is to “vacate” the lien. However, vacating the lien does not resolve the underlying dispute between the lien claimant and the contracting party.

If a contractor is not paid within a certain amount of time, they may register a construction lien against the property as security for their purported entitlement to payment for improving the property. There are specific requirements under the Ontario Construction Act on when and how this can be done, which are not covered in this article. The property itself is then encumbered with that lien, and third parties will almost always refuse to take conveyances, mortgages, or other dealings with a property subject to a lien. Moreover, a lien on title will often constitute a default under loan agreements and development agreements if the lien is not removed within a certain time period.

This results in liens being a powerful tool, when used correctly, to drive a resolution between contractors and property owners, because owners are strongly incentivized to remove the lien from title. One of the most efficient ways to remove a lien from title is to “vacate” the lien.

Rachel Puma is partner and a commercial real estate lawyer at Robins Appleby LLP, a Toronto-based law firm that specializes in real estate, business law, and litigation.

Read the full article here