November 28, 2018
On July 1st, 2018, the first set of changes to the Ontario Construction Lien Act came into effect, the first being its new name, the Construction Act.
This set of amendments will not apply to any project where:
- the contract for the improvement (the project) was effective before July 1, 2018, even if subcontracts are only effective after July 1, 2018;
- the procurement process for the improvement was commenced by the owner before July 1, 2018; or
- the premises are subject to a leasehold interest and the lease was first entered into before July 1, 2018.
So, the new changes apply to your project. What do you need to know?
As with past provisions of the Construction Lien Act, parties are unable to contract out to the provisions of the legislation and therefore they apply to every new project. Here are the three most noteworthy changes to the current Act.
The most noteworthy change is to the Alternative Financing and Procurement (“AFP”) model projects. The Act will apply, with some modifications, to a project agreement between the Crown, a municipality, or a broader public sector entity with a special purpose entity. It will also apply to agreements between the special purpose entity and the contractor.
This means that the rules under the Act will apply to determine a holdback amount and substantial performance, to calculate the lien period, and to information requests.
The second important change relates to the release of holdbacks. The Act now requires payment of the holdback in prescribed form once all liens that may be claimed against the holdback have expired or been satisfied, discharged or otherwise provided for under the Act. The release must be made within 40 days of the publication of the certificate of substantial performance.
The Act also provides that the holdback may be released on an annual or phased basis if certain conditions are met, including the following:
- the contract provides for such payment;
- the contract price is $10 million or higher; and
- there are no preserved or perfected liens, or all liens have been satisfied, discharged or otherwise provided for under the Act.
The third change extends the lien period from 45 to 60 days and extends the period to perfect a lien from 45 days after the last day to lien (substantial work done) to 90 days.
The two most significant, though somewhat controversial, changes to the Act include a mandatory adjudication system for certain types of disputes and a prompt payment scheme, will not will not take effect until October 1, 2019.
Another post will follow that will provide additional information regarding the 2019 changes and how to prepare.
Please feel free to contact us with your questions related to construction liens. We service clients from Kingston to Toronto and everywhere in between. And Ottawa too! :)
Thank you for reading!