Contracts and mechanics' liens in Newfoundland and Labrador

Every electrical job is a contract, whether it is a one-page quote for a heat pump circuit or a hundred-page subcontract for a school. And on most construction work, one statute stands behind the contract to protect people who improve land and do not get paid: the Mechanics' Lien Act, RSNL 1990, chapter M-3. Newfoundland and Labrador still uses the older name; most other provinces now call these builders' liens or construction liens. This lesson covers the contract basics a contractor needs, the holdback the Act requires, how to register and enforce a lien, the short deadlines, and the current status of prompt payment reform in the province.

Lien law is technical and its deadlines are unforgiving. This lesson explains the framework so that a contractor recognizes when to act. It is not legal advice. When a lien is in play, talk to a lawyer early, because a lien that is registered or enforced a day late is simply lost.

Contract basics

A contract does not have to be long to be good. It does need to say clearly what will be done, for what price, by when, and what happens when things change. Leonard's checklist for every contract, from a service call to a commercial subcontract, has six items.

• Scope. What work is included and, just as important, what is excluded: patching and painting, permits, fixtures supplied by the customer, utility charges.
• Price and payment. A fixed price, unit rates or time and materials; the payment schedule; any deposit; and how holdback will be handled.
• Schedule. Start and completion dates, and what happens if the site is not ready.
• Changes. How extra work is requested, priced and approved in writing before it is done.
• Standards. That work will meet the Canadian Electrical Code as adopted and will be done under permit and inspected.
• Warranty and disputes. What the contractor warrants, for how long, and how disagreements will be handled.

Krista builds a one-page standard quote for small residential jobs and a set of standard qualifications she attaches to every commercial bid. The qualifications list her assumptions: the service size, who supplies fixtures, the number of inspections included, and that changes will be priced and approved in writing.

What a lien is

A mechanics' lien gives a contractor, subcontractor, supplier or worker who has done work or supplied materials to improve land a claim against that land for the unpaid amount. It is security: if the lien is properly registered and enforced, the land can be sold by court order to pay it. Because a lien attaches to the owner's land even when the owner has paid the general contractor, the Act also requires the owner to hold back part of every payment, so that money is available for those further down the chain.

The holdback

Section 12(1) of the Act requires the person primarily liable on a contract, usually the owner, to retain 10 in every 100 dollars of the value of the work and materials, for 30 days after the work is completed or abandoned. Payments made in good faith up to the remaining 90 in every 100, before the owner receives written notice of a lien, discharge the lien to that extent (section 12(6)). After the 30-day period, the owner may pay out the holdback unless proceedings to enforce a lien have started (section 12(7)).

For a subcontractor like Walsh Electrical, the holdback means two things. First, cash will arrive later: on a 100,000 dollar subcontract, 10,000 dollars will not be paid until at least 30 days after completion. Second, the holdback is what protects Walsh Electrical's own lien rights if the general contractor fails to pay.

# Holdback on progress payments under the Mechanics' Lien Act (10 in 100).
HOLDBACK = 0.10
progress = [18_000, 32_000, 27_000, 23_000]   # value of work certified each month, illustrative
total_paid = total_held = 0
for month, value in enumerate(progress, 1):
    held = value * HOLDBACK
    total_paid += value - held
    total_held += held
    print(f"month {month}: work {value:7,d}  paid {value - held:9,.0f}  held {held:7,.0f}")
print(f"held back until 30 days after completion: {total_held:,.0f} dollars")

month 1: work  18,000  paid    16,200  held   1,800
month 2: work  32,000  paid    28,800  held   3,200
month 3: work  27,000  paid    24,300  held   2,700
month 4: work  23,000  paid    20,700  held   2,300
held back until 30 days after completion: 10,000 dollars

What completion means

Many deadlines in the Act run from completion. Section 2(1)(a.1) defines completion of the contract as substantial performance, not necessarily total performance. Section 2(2) says a contract is substantially performed when the work, or a substantial part of it, is ready for use or is being used for its intended purpose, and the cost of completing or correcting the remaining work is no more than 3 in 100 of the first 250,000 dollars of the contract price, 2 in 100 of the next 250,000 dollars, and 1 in 100 of the balance.

# Substantial performance threshold under s. 2(2) of the Mechanics' Lien Act.
def threshold(price):
    first = min(price, 250_000) * 0.03
    second = min(max(price - 250_000, 0), 250_000) * 0.02
    rest = max(price - 500_000, 0) * 0.01
    return first + second + rest

for price in (90_000, 300_000, 620_000):
    print(f"contract {price:8,d}: remaining work must cost no more than {threshold(price):9,.0f}")

contract   90,000: remaining work must cost no more than     2,700
contract  300,000: remaining work must cost no more than     8,500
contract  620,000: remaining work must cost no more than    13,700

Registering a lien

Section 22 sets the registration deadlines, and they are short.

• A contractor or subcontractor may register a claim of lien before or during the contract, or within 30 days after the contract is completed or abandoned (section 22(1)).
• A supplier of materials, within 30 days after the last materials are placed or furnished (section 22(2)).
• A person supplying services, within 30 days after the service is completed (section 22(3)).
• A worker claiming wages, within 30 days after the last work was done (section 22(4)).

An unregistered lien ends when the registration period expires (section 23(1)). Thirty days passes quickly, especially when a general contractor is promising that payment is coming next week. Leonard's rule was to diarize the 30-day date for every job on the day of substantial performance and to call a lawyer no later than day 20 if money was still owing.

Enforcing a lien

Registration alone does not keep a lien alive. Section 24(1), read with section 23, provides that a registered lien ceases to exist 90 days after the work is completed or the materials are placed, unless within that time an action is started to enforce it and a certificate of the action is registered. Once an action is started, the statement of claim must be served within 30 days after it is filed (section 30(3)).

# Diarize lien dates from a substantial performance date.
from datetime import date, timedelta

completed = date(2027, 3, 12)    # illustrative
print("holdback period ends:      ", completed + timedelta(days=30))
print("last day to register lien: ", completed + timedelta(days=30))
print("action + certificate by:   ", completed + timedelta(days=90))
print("call the lawyer no later than", completed + timedelta(days=20))

holdback period ends:       2027-04-11
last day to register lien:  2027-04-11
action + certificate by:    2027-06-10
call the lawyer no later than 2027-04-01

Workers' wages

The Act gives workers special protection. Section 16(1) gives a worker's lien for wages priority over other liens arising from the same contractor or subcontractor, up to 30 days' wages, drawn from the holdback. Section 16(2) lets a worker enforce a lien on an incomplete contract by a notice of motion returnable in four days. Section 3 makes agreements that waive the Act's protection for workers void, with limited exceptions. For a contractor, the practical lesson is simple: pay wages on time, every time. A crew that is not paid has strong, fast remedies.

Prompt payment and adjudication

Several provinces, including Ontario, Saskatchewan, Nova Scotia and Manitoba, have passed prompt payment legislation that sets deadlines for paying proper invoices down the construction chain, often with fast-track adjudication of disputes. Newfoundland and Labrador has consulted on prompt payment and on modernizing the Mechanics' Lien Act. A national law firm's September 2025 review reported that the consultation had received extensive industry support, and a What We Heard report on the Act was released in August 2024, but we could not find prompt payment legislation in force in the province when this course was prepared. Watch for changes, because a new statute could change both payment timing and the lien deadlines in this lesson.

Protecting yourself in practice

• Know the owner. Before starting work, find out who owns the land; the lien attaches to the land, not to the general contractor.
• Keep records. Delivery slips, timesheets, daily reports and change orders prove the value and timing of the work.
• Bill on time. Late invoices make it harder to show what was owing when.
• Diarize completion. Note the substantial performance date and the 30-day and 90-day dates for every job.
• Act early. If payment is late, get legal advice well before the 30-day registration deadline.