On May 31, 2017, Bill 142 was introduced. It will significantly amend the Construction Lien Act.
First, it will now be called the Construction Act, and as this new name rightly suggests, the Construction Lien Act was never just about a lien.
These amendments will change the way construction projects are administered, will change the rights of the players, and some will affect the way that lawyers practice construction law. Among other changes, the following are some of the major changes to take effect at a date to be determined:
Timelines to Lien
Previously, you had 45 days in which to register a construction lien, and then 45 days thereafter to file your Court Action. Now, you will have 60 days in which to register, and then a further 90 days in which to perfect.
Practically, this makes more sense as you will no longer be stuck to those same strict timelines. It will give the parties more time to sort out their disputes before having no choice but to register your lien.
The new Part I.1 introduces the notion of prompt payment.
When an invoice is delivered to an owner, it must be paid by the owner within 28 days (unless it is disputed). When a contractor receives payment on account of the work of a subcontractor, it must then pay that subcontractor within 7 days. That subcontractor must also pay its own subcontractors within 7 days of receiving payment.
While great in theory, failure to comply doesn’t seem to have any consequences.
Release of Holdback
Previously, holdback could only be released 45 days after publication substantial completion. This meant that if you were an early trade on site (excavation, forming, etc) you had to wait well past. While there is a mechanism to declare a subcontract substantially complete, this was rarely used.
Now, a contract can provide for the annual release of holdback or a phased release of holdback. Certain requirements are needed, but this will allow the parties to pay the holdback when they otherwise would not have.
Furthermore, payment of the holdback will be mandatory once all liens have expired or discharged. If holdback is disputed, then the payer will have to publish a notice setting out the amount of holdback that they are refusing to pay.
Small Claims Court
Previously, you could not enforce a lien in the Small Claims Court. This meant that if you had a lien for $10,000, you were forced to proceed through the Superior Court to litigate. This meant higher costs and longer delays.
You will now be able to enforce the lien in the Small Claims Court, meaning a quicker and more economical way to enforce your lien.
The downside is that you still will have to file your pleadings in the higher Court, and then refer the matter to a Small Claims Court Judge. In cities like Toronto and Ottawa, this may not serve much of a purpose since we have Masters who can be referred construction lien matters.
Leave to Bring Interlocutory Motions
Previously, interlocutory motions required leave, and in some cases, this prevented the bringing of a motion. Now, this will be done away with so that leave is no longer required.
Security for Costs
Previously, you could post security for a lien and have to pay the lesser of 25% of the value of the lien, or $50,000. Now, you will have to post the lesser of 25% or $250,000. When dealing with liens of a high value, this will make a big difference in the value of security that is needed.
Interim Dispute Resolution
A scheme is being created to have a roster of adjudicators that can be chosen from to act as an arbitrator of sorts. Once an adjudicator is chosen, documents are provided by the party requesting the adjudication, and then the adjudicator seems to have the ability to run the adjudication as they see fit.
Once the adjudicator rules, then the parties act on that ruling until such time as a final ruling is obtained by a Court or an Arbitration.
The goal is to have a quick determination of an issue that will allow a project to proceed, but still allow the parties to have their disputes fully considered at a later date. Practically speaking, the parties may be content to accept the ruling and not proceed to litigation.
Requirement for Bonds
There will now be a requirement for all public contracts with a value over a prescribed amount to require a labour and material payment bond and a performance bond for at least 50% of the contract value.
Written Notice of Lien
Prior to registering a lien, it is commonplace to send a written notice of a lien to certain parties. This will continue to be the case (and more common given the extension of the 45 day period) but you will now have to do it in a certain format and you will have to serve it personally.
The complete bill can be found here.
If you have any questions on how these changes may affect you, contact a member of our Construction Law Group.