Ontario court narrows lien priority over construction mortgages
The answer, the three-judge panel unanimously held, is the unpaid invoices — at least where no subcontractor lien claims are in the picture at the time of the priority dispute.
What the holdback is — and why it matters
Under Ontario’s Construction Act, any party paying for construction work must retain 10% of the invoiced price as a holdback until lien claims expire or are resolved. That reserve exists so subcontractors and suppliers have a fund to draw against if they go unpaid.
When a project falls into insolvency, construction liens can outrank a building mortgage, but only to the extent of any shortfall in the holdbacks that should have been set aside.
The Barrie, Ontario townhouse development at the centre of the dispute went into default on its senior loan from KingSett Mortgage Corporation, with the Ontario Superior Court appointing a receiver on March 21, 2024. The project was later sold to homebuilder Dunsire Homes Inc.
By that point, the two suppliers — Alpa Stairs and Railings Inc. and Newmar Window Manufacturing Inc. — had been paid in full on their earlier invoices but were still owed roughly $195,600 and $445,800 respectively on later ones.
