Construction Liens: Basics and Amendments Explained

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2020

年

5

月

31

日

•

21

年经验包括

20

贝街公司法证券法经验

•

蒋商律业务包括：

•

买卖企业

•

企业投资

•

公司股价结构

•

股东协议

•

上市 

(IPO, RTO, CPC, QT)

•

融资

•

投资基金

•

房地产

3

关于我自己

关于我自己

•

中文名：

中文名：

蒋虹

蒋虹

•

在四川出生长大

在四川出生长大

•

重庆北培西南大学学士学位

重庆北培西南大学学士学位

•

1989 

1989 

年来到加拿大

年来到加拿大

•

获得了加拿大一个学士学位

获得了加拿大一个学士学位

, 

, 

一个法律学位

一个法律学位

, 

, 

和法律硕士学位

和法律硕士学位

•

2000 

2000 

年成为安大略合格律师

年成为安大略合格律师

(21

(21

年经验

年经验

)

)

•

2000-2002

2000-2002

在大型律师事务所办事

在大型律师事务所办事

•

2002

2002

年加入富高乐

年加入富高乐

做

做

证券法和公司法

证券法和公司法

•

2006

2006

年在香港富尔德律师事务所办事

年在香港富尔德律师事务所办事

•

2007-2019

2007-2019

是富高乐证券法小组的合伙人

是富高乐证券法小组的合伙人

•

2019 

2019 

创立蒋商律

创立蒋商律

Construction Act

(formerly Construction Lien Act)

•

On December 12, 2017, Bill 142, Construction Lien

Amendment Act, 2017 received Royal Assent.  The Bill

amends the 

Construction

Lien Act 

(Ontario), and renamed

it the 

Construction Act

.  The substantive amendments

modernizing the new Act also came into force on 

July 1,

2018

.

•

Other amendments including the introduction of prompt

payment, adjudication, regulations and forms came into

force on 

October 1, 2019

.

Which Act Applies to me?

•

The new regime also will not apply to 

prime contracts 

entered

into on or after July 1, 2018 or October 1, 2019, if a 

procurement

process 

for the improvement that is the subject of the contract

was commenced by the owner before that day. This non-

application of this provision holds true 

regardless of when any

subcontracts 

under the prime contract were entered into.

•

Generally speaking, if your prime contract was entered into:

•

before July 1, 2018

, your project is governed by the previous, pre-

amendment version of the 

Act

, being the 

Construction Lien Act

.

•

between July 1, 2018 and September 30, 2019 inclusive

, your project

is governed by the lien modernization provisions of the new

Construction Act

, but not the prompt payment or adjudication of the

new 

Act

.

•

on or after October 1, 2019

, your project is governed by the new

Construction Act

, including the prompt payment and adjudication

provisions

Construction Pyramid

Can include a Landlord

and/or Tenant

Includes Engineer or

Architect having direct

contract with Owner

What is a construction lien?

Section 14(1) of the Act provides that,

•

“a person who supplies 

services or materials

•

to an 

improvement

 for an owner, contractor or

subcontractor,

•

has a 

lien upon the interest 

of the 

owner

in the

premises

 improved

•

for the 

price

 of those services or materials.”

When does a lien arise?

•

The lien creates an 

interest in the land 

in favour of

those who supply materials or services, thereby

creating security. This operates to prevent the owner

from receiving improved land without making payment

for the improvement.

•

If the lien is 

unsatisfied

, you can 

take private owner’s

property

, sell it and payback the lien.

•

This is especially important to subcontractors who have

no direct contract with the owner (and, therefore, no

right to bring an action for payment under a contract).

•

A person’s lien arises and takes effect when the person

first supplies services or materials 

to the improvement.

Who can lien?

Any person who is under a contract and has supplied

services and/or materials to an “

improvement

” has a

right to lien.

Pretty well all persons working on a construction project

will have a right to lien, including suppliers of rental

equipment, architects, and those who provide design

services.

What can you lien?

•

The Act makes reference to an “

improvement

” to set out what type of

property and what type of work can be liened.

•

An improvement includes the 

alteration of and/or the addition to the

property

.  This is a broad definition and encapsulates most

construction activity.

•

It also includes the 

construction and installation 

of industrial,

mechanical, or electrical equipment, when that equipment is essential

to the regular use of that property.

•

Affixed machinery in a plant such as an automotive assembly plant

would fall within the definition of an improvement.

•

It is also possible to lien for work done for a 

capital repair

.  This type of

work is for work done to extend the economic life of a building or

structure.

•

It has to be noted that this does not include just any type of repair, and

does not include preventative maintenance.

What is a Capital Repair?

a 

capital repair 

to land is

•

any repair intended to extend the normal economic life of

the land or of any building, structure or works on the land,

or

•

to improve the value or productivity of the land, building,

structure or works,

•

but does not include maintenance work performed in

order to prevent the normal deterioration of the land,

building, structure or works or to maintain the land,

building, structure or works in a normal, functional state.

What services can you lien for?

Supply of services can include:

•

engineering services

•

and architectural services

•

rental of equipment

•

security services to a construction site

•

services of estimating and job supervision.

What is the value of your lien?

•

The Act gives you the ability to lien for the “

price

” of

services and materials that you provided to the project.

•

“Price” is a defined term and means:

•

the 

amount agreed 

between the parties, or if there

is no agreement on the amount, then the 

market

value 

of the work; AND

•

any 

direct costs 

incurred as a result of a delay not

caused by provider

What does “direct cost” really mean?

“

Direct Costs

” are “reasonable costs” of performing the

contract or subcontract during the extended period of

time, including:

•

Costs related to the additional supply of services or

materials (including equipment rentals);

•

Insurance and surety bond premiums; and

•

Costs resulting from seasonal conditions;

that, but for the extension, would not have been

incurred, but 

do not 

include indirect damages suffered as

a result, such as loss of profit, productivity or

opportunity, or any head office overhead costs.

What is the value of your lien?

•

You are not entitled to lien for 

interest

 on the amount

you are owed, nor can you lien for any 

indirect costs

associated with your claim.

•

You are still at liberty to assert a claim for the amounts

as part of a claim for 

damages

 under regular contract

law.

•

You should never exaggerate the value of your lien.

The Act contains specific provisions about an

“

exaggerated” lien 

and that you could be liable for the

costs that someone incurs as a result of the

exaggerated lien.

Written Notice of a lien

•

The first step which you may wish to consider prior to the

actual registration of a lien is a written notice of lien.

•

Typically this can be used in the event that your lien rights

do not expire for a period of time that will permit the

written notice to have time to be effective.

•

A written notice of a lien is completed by personally 

serving

a prescribed form (Form 1) on the person(s) above you in

the construction pyramid.

•

Upon receipt of a written notice of lien, the payer, i.e. the

person above you in the construction pyramid, must 

retain

the full amount in dispute

.

•

Written notice of lien also affect

s

priority

 of lien against

mortgages.

•

Furthermore, if you are still unpaid after the written notice

of lien is sent, you still need to register your lien on title or

you will lose your lien rights.

How do you register a lien?

•

The act of placing a lien on title is known as

“preserving” your lien.

•

It is the 

registration of your lien on title

.

•

There is a specific form “Form 12-Claim for Lien” that

has to be completed, with information such as: • your

proper legal name; • who you contracted with; • the

name of the owner; • the time in which you supplied

to the project; • your total contract value; • how much

you are owed; • what type of work you supplied;

•

This can be done by visiting the local Land Registry

Office in the county of the project.

•

Lawyers have access to a program called Teraview

which allows them to register your lien electronically.

When can you lien?

•

Once you have supplied materials or services to site,

you have a lien.

•

You can register a lien even though the money is not

yet due and owing and if you have yet to render an

invoice.

•

In theory, you could register a lien every day you are on

site even though you have not invoiced for the work.

In practice, that is a terrible idea.

When can you lien?

•

By when do you have to preserve lien?

•

There are strict timelines that are outlined in the Act.

•

If you miss a deadline, you will lose your right to lien

and may not see any payment.

•

Before you start to count days, you first have to

determine whether you are a “contractor” or a

“subcontractor”.  A “contractor” has a contract directly

with the owner.  A “subcontractor” is anyone with a

contract with the contractor, or with another

subcontractor (i.e. a supplier).

When can you lien?

Contractor

When can you lien?

 Lien of a Contractor

•

Section 31 of the Act has been amended to increase

the deadline to preserve a lien from 45 days to 60 days.

•

Termination of a contract has been added as a trigger

in determining the timeline for preserving a lien.

•

If a contract is terminated, a Notice of Termination

under Subsection 31(6) (Form 8) must be published by

the owner, contractor or a person whose lien is subject

to expiry.

When can you lien?

Subcontractor

When can you lien?

Lien of a Subcontractor

A subcontractor, or any other person, must register its

lien within 60 days of the earlier of:

•

the date upon which the certificate of substantial

performance is published (if there is one);

•

the date that they last supply services or materials to

the project;

•

the date that the contract was completed, abandoned,

or terminated; and

•

the date that the subcontract is certified to be

complete (this rarely occurs).

What if you start an adjudication?

Adjudication and expiry

(10) If the matter that is the 

subject of a lien 

that has not

expired is also a matter that is the subject of an

adjudication under Part II.1, the lien is deemed, for the

purposes of this section only, to have expired on the

later of the date on which the lien would expire 

under

section 31 and the 

conclusion of the 45-day period next

following the receipt by the adjudicator of documents

under section 13.11

.

Perfection of Lien

•

Once the lien is registered, you will have to “perfect”

the lien by starting a court action.

•

This can now be done in Small Claims Court if the value

of the lien is less than the $25,000 limit.

•

The claim is issued in the Superior Court, and it has to

be done within 

90 days of the last day in which you

could have registered your lien

.

•

After the statement of claim is issued, a 

certificate of

action

 also has to be issued, and then 

registered on

title

 of the property.

•

If you fail to commence the court action, or fail to

register the certificate of action, your lien will expire

and it cannot be enforced.

Maintaining the Lien

•

Once the court action is commenced, it proceeds through

the litigation process similar to any other lawsuit.

•

There are some modifications to the process that do differ

from an ordinary lawsuit.

•

There is no automatic disclosure of documents, no right to

examinations for discovery, and no mandatory mediation.

However, it is usually agreed between the parties that these

steps will take place, depending on the nature of the matter.

•

In order to maintain your lien, you will have to take steps to

advance the court action.

•

Within 

two years of starting the claim

, you will have to

ensure that it is set down for trial or that there has been an

Order directing a trial.  If this is not done, your lien will

expire.

Lien Process

By Contractor

Lien Process

From Sub-Contractor

Certificate of Substantial Performance

•

Not all construction projects will carry with them a

requirement for a certificate of substantial

performance (“CSP”).

•

A CSP can be published by a payment certifier (i.e.

architect) if there is one, or by the owner and

contractor.

•

The CSP serves as notice that the project is almost

complete, and acts to cut off a significant portion of

lien rights.

Certificate of Substantial Performance

A CSP can only validly be published when two criteria are

met:

•

The improvement is “ready for use”; AND

•

Where the improvement to be made is capable of

completion, or where there is a known defect,

correction, at a cost of not more than:

•

OLD DEFINITION: 3% of the first $500,000 of the contract

price; 2% of the next $500,000 of the contract price, and 1% of

the balance

•

NEW DEFINITION: 3% of the first  $1 million of the contract

price; 2% of the next $1 million of the contract price, and 1%

of the balance

Completion or Deemed Completion

A contract is deemed completed when the price of

completion is not more than the lesser of:

•

1% of the contract price; and

•

$1,000 (old Act)/$5,000 (new Act)

Termination of Contract

•

In the event that a contract or a subcontract is

terminated, a notice is required to be published.

•

If a contract is terminated, either the owner or the

contractor or other person whose lien is subject to

expiry shall publish a 

notice of the termination 

(Form

8) and, for the purposes of this section, the date on

which the contract is terminated is the termination

date specified in the notice for the contract.

•

Daily Commercial News

Declaration of Last Supply

When there is no certification of substantial performance of

the contract, or for services or materials supplied after the

date of the substantial performance, the 60-day period starts

on,

•

the date on which the person last supplied services or

materials to the improvement,

•

the date the contract is completed, abandoned or

terminated, and

•

the date a subcontract is certified to be completed, where

the services or materials were supplied under or in respect

of that subcontract.

Can you lien a public road or a street?

Yes, although a lien does not “attach” to title in the same

way.

Rather than register a lien on title you preserve it by

providing certain people with the lien (clerk in case of

municipality).

Can you lien government property?

Federal

•

Federal government property cannot have liens

enforced against them.

•

The Federal Government takes the position that the

Act has no application at all to its property.

•

Generally, most Federal projects are protected by

Labour and Material Payment Bonds, which can be

utilized by trades and suppliers to obtain payment.

Can you lien government property?

Provincial

•

Provincial government property is subject to the Act.

•

The lien is preserved by providing the government

body in charge of the project with the claim for lien.

•

The property is never “sold” to enforce the lien, rather

the lien acts as a mechanism to be entitled to share in

the holdback.

Can you lien government property?

Municipal

•

Municipal property is subject to the Act.

•

The lien is preserved by providing the clerk of the

municipality with a copy of the Claim for Lien.

•

Similarly, the property is never “sold” to enforce the

lien, rather the lien acts as a mechanism to be entitled

to share in the holdback.

What about landlords?

Even where the landlord does not meet the definition of

Owner, the Act now provides lien claimants with potential lien

rights against the landlord:

•

if the lease contains a 

leasehold improvement 

clause that

requires the landlord to pay a certain amount towards the

improvement, the 

landlord

 is 

liable to the lien 

claimants for

10% 

of that amount

•

This means if the 

landlord funds an improvement 

through a

tenant improvement allowance

, or 

rent abatement 

or other

tenant inducement

, contractors performing the work will

automatically have a lien right against the landlord for the

10%

•

a s. 39 request is available to determine if there is such a

leasehold improvement clause

What about landlords?

•

The landlord can also be fully liable for the lien amount (ie.

the price of services or materials supplied by the contractor)

if it meets the criteria set out in the definition of "

owner

".

•

The landlord is deemed to be an "owner" under the New

Act if:

•

the landlord has an interest in the improved premises;

•

the landlord requested the improvement; and

•

the improvement was made on the landlord's credit or behalf, or

with the landlord's privity or consent, or for the landlord's direct

benefit.

•

If each of these criteria is met, the 

contractor may seek full

payment from the landlord

 (as "owner") (to the extent that

the contractor is not paid) using a construction lien,

regardless of whether there is a direct contract between the

contractor and landlord.

What about condos?

Liening a Condo Unit

•

Same way as registering a lien on other non-condo

property owners

•

Lien is against the “unit” but not against the “common

elements”.

•

Lien can be against any lands “enjoyed” with the unit.

So if unit owner owns parking and/or locker, can also

lien parking and/or locker.

•

When perfecting the lien, the Statement of Claim will

name only the individual registered owner of the unit

and not the other unit holders or the condominium

corporation

Liening Condo Comment Elements?

•

Unlike a “unit”, the 

common elements 

are not individually owned

and 

do not have a unique PIN 

associated with them.

•

As such, registering a lien against the common elements requires a

lien claimant to list all of the units in the “Properties” section of

the claim for lien—thereby 

liening each unit in the condominium

for its proportionate share in the common elements

.

•

A lien claimant who wants to register a lien relating to an

improvement to the common elements must 

give notice 

of the

lien’s to the condominium corp. and to every unit owner or every

owner of a common elements condominium corporation.

•

When 

perfecting the lien 

by commencing an action, it is not

necessary to name every unit holder as a defendant in the

Statement of Claim.  Under the Condominium Act, it is sufficient

to 

name only the condo corp

.

•

Condominium unit owners can 

remove liens from their unit 

that

are related to improvements to the common elements, by making

a motion to court paying his portion of the lien to court.

Liening Condo Corp before registration?

•

Under the Construction Act, an owner “does not include a

home buyer

”.

•

Thus, if a 

lien is registered

 against the “premises” 

after

 the

condominium declaration and description 

has been

registered

 and title to the “units” and “common elements”

have been transferred from the developer to individual

owners, the 

lien will most certainly be defeated

.

•

The answer: s. 33.1 of the Construction Act which requires

that 

notice be published 

that a project is on the cusp of

being registered as a condominium. Notice is Form 11 and to

be published before condo registration

•

Lien claiments will then make sure they 

register the lien

before the condo registration

.

How do you get a lien off title?

If you are unable to come to a resolution, it may be necessary

to have the lien removed from title.

•

You can bring a motion to court, without telling the lien

claimant, so long as you pay into court cash, a lien bond, or

a letter of credit in the amount of the lien, plus 25% or

$250,000, whichever is less, as security for costs.

•

You will obtain a court order that you register on title of the

property that removes the lien, and the court action

proceeds.  The court action proceeds with money in court

being recoverable by the lien claimant at the end of the day.

•

If a lien is out of time or is otherwise invalid, you can bring a

motion to declare that the lien is invalid.  If you are

successful, the lien is deleted.  However, this does not

prevent a breach of contract claim from continuing.

Can you extend your lien rights?

•

What is your last day on site?

•

Can you attend back on site and hammer a nail in to

extend lien rights?

•

Unless you are returning to the project to complete

some significant contract work, your lien rights will

expire.

•

You cannot return to the site and supply a drywall

screw in the hopes of reviving your lien rights.

•

Furthermore, you cannot claim your last day of supply

was when you returned to complete deficiency work.

What are holdbacks?

A holdback is a requirement that all owners, contractors

and subcontractors 

withhold part of the cost 

of the services

or materials they receive on a project.

Statutory Holdbacks

Basic holdback

22 (1) Each payer upon a contract or subcontract under which a lien

may arise shall retain a holdback equal to 

10 per cent of the price 

of

the services or materials as they are actually supplied under the

contract or subcontract 

until all liens 

that may be claimed against

the holdback have 

expired

 or been 

satisfied, discharged 

or

otherwise provided for under this Act.

Finishing holdback

(2) Where the contract has been certified or declared to be

substantially performed 

but services or materials remain to be

supplied to complete the contract, the payer upon the contract, or a

subcontract, under which a lien may arise shall retain, from the date

certified or declared to be the date of substantial performance of

the contract, a separate holdback equal to 

10 per cent

 of the price of

the remaining services or materials as they are actually supplied

under the contract or subcontract, 

until all liens 

that may be claimed

against the holdback have 

expired

 or been 

satisfied, discharged 

or

otherwise provided for under this Act.

The Notice Holdback

•

In the event of receipt of a written notice of lien or

receipt of a claim for lien, the payer must maintain a

notice holdback, which must be equal to the amount in

dispute.

•

If they do not, then the payer may effectively have to

pay twice for the work.

•

For example, if a subcontractor on a project registers a

lien and provides that lien to the owner of the project,

the owner has to withhold from the general contractor

the amount of that lien.

The Notice Holdback

Payments that may be made

•

24 (1) A payer may, without jeopardy, make payments on a

contract or subcontract up to 90 per cent of the price of the

services or materials that have been supplied under that

contract or subcontract 

unless

, 

prior to making payment

,

the payer has received written notice of a lien

.

•

(2) Where a payer has received written notice of a lien and

has retained, in addition to the holdbacks required by this

Part, 

an amount sufficient to satisfy the lien

, the payer may,

without jeopardy, make payment on a contract or

subcontract up to 90 per cent of the price of the services or

materials that have been supplied under that contract or

subcontract, less the amount retained

Sample of Statutory Holdback and Notice Holdback

•

Owner was installing a hot tub

•

Contract price is $10,000, and tub was installed

•

Owner has to holdback $1,000 (10%) for 60 days: Basic hold back

•

Before end of 60 days, owner receives written notice of a lien

from the manufacturer for $ 6,000 and another lien from the

installer for $1,500

•

So, how much does the owner holdback? The answer is

$ 8,500. The full amount of the written notices (Notice holdbacks

of $7,500) together with the statutory holdback (basic statutory

holdback of $1,000)

•

No finishing holdback in this case.

•

On day 61, if the liens were not registered on title, the liens expire

and Owner can pay entire $10,000 to contractor

•

On day 61, if the liens were registered, Owner pays contractor

$1,500.  Owner pays $8,500 when the liens were dealt with.

Holdbacks for Public Sector Owners?

Public sector owners, such as the Crown, municipalities

and broader public sector organizations, are required to

have a surety bond on public contracts above a

prescribed amount, and alternative financing and

procurement arrangements (AFPs) are subject to a

minimum coverage limit, to protect subcontractors and

workers if the general contractor files for bankruptcy.

Public Contracts?

Part XI.1 has been added to the Act to establish requirements

for a 

contractor

 who enters into a contract with an owner that

is the Crown, a municipality or a broader public sector

organization (a “

public contract

”) to provide the owner with a

labour and material payment bond 

and with a 

performance

bond

, if the contract price is above the amount set out in the

regulations.

•

The general regulation under the Act provides that the contract

price must be $

500,000

 or higher.

The surety bonds must meet the following requirements:

•

Both bonds must be issued by an insurer that is licensed under

the Insurance Act to write surety and fidelity insurance, have a

coverage limit of at 

least 50% of the contract price 

and extend

protection to subcontractors and suppliers.

•

Labour and material payment bonds must extend protection to

subcontractors and persons supplying labour or materials to the

improvement.

Public Contracts?

The surety bond requirements do not apply to:

•

A contractor who is an architect

•

A contractor who is an engineer

Main changes to the holdback rules

Holdbacks

 may now be retained using security:

1.

A 

letter of credit 

in the prescribed form.

2.

A demand-worded 

holdback repayment bond 

in the

prescribed form.

3.

Any other form that may be prescribed.

The new Act makes 

payment of holdback mandatory

after all liens that may be claimed against it have expired

or been satisfied, discharged, or otherwise provided for

under the legislation

Mandatory Release of Holdback

•

Payment of Basic Holdback

Subject to the delivery by the owner of a notice of non-

payment of holdback, each payer (contractor, subcontractor or

owner) is required to 

pay the basic holdback 

to discharge all

claims against the holdback where 

all liens 

that may have

been claimed against the holdback 

have expired 

or been

satisfied, discharged or otherwise provided for under this Act.

•

Payment of Finishing Holdback

Each payer (contractor, subcontractor or owner) is required to

pay the finishing holdback to discharge all claims against the

holdback where 

all liens 

that may have been claimed against

the holdback 

have expired 

or been satisfied, discharged or

otherwise provided for under this Act.

Non-Payment of Holdback

•

An owner can refuse to pay the holdback, or a portion

of it, only if they give notice to the contractor and they

publish a notice.

•

In the event this happens, a contractor can then refuse

to pay the holdback only if they refer the matter to

adjudication and they notify all subcontractors.

•

The process repeats for other payers in the

construction pyramid.

Non-Payment of Holdback

•

Under the new Act (s. 27.1), an owner may refuse to pay some or

all of the holdback amount owner is required to pay to a

contractor if:

•

Within 

40 days 

after the 

publication

 of a certificate or declaration of

substantial performance

, the owner 

publishes

 a notice specifying the

amount of holdback that it refuses to pay in the manner set out in the

regulations; and

•

The owner notifies the contractor of the publication of the notice.

•

Contractors or subcontractors may also refuse to pay some or all

of the holdback amounts owing if the owner or contractor refuses

to pay, the contractor or subcontractor refers the matter to

adjudication, and notice is provided to the parties that are not

being paid of that fact and that the matter is being referred to

adjudication.

•

Take-away, if the owner delivers a notice of non-payment of

holdback, the contractor will have to lien to preserve its lien rights

as against the holdback.

Non-Payment of Holdback

Must 

publish

 a notice of non-payment of hold back

(Form 6):

•

Specifying the amount of the holdback the payer

refuses to pay.

•

No later than 40 days after:

•

publication of the certification or declaration of substantial

performance, or

•

if no certification or declaration of substantial performance is

published, the date on which the contract is completed,

abandoned or terminated.

Publishing to be done in the Daily Commercial News

Release of Holdback-Basic

From Owner to Contractor

Entitlement to Holdback

•

The basic holdback and notice holdback combined not

released by payor will be available to those who prove

valid lien.  You must have a lien to be entitled to

holdback.

•

In the event that there is sufficient holdback to see the

lien claims paid, they may be paid in full.

•

In the event that the holdback is less than the value of

all of the liens, the lien claimants will share pro-rata in

the holdback.

Early Release of Holdback - Annual

The new Act permits holdback to be paid out on an

annual basis for contracts with a completion schedule

that is longer than one year if:

•

The contract provides for it;

•

The contract price is at least $10 million; and

•

There are no preserved or perfected liens in respect of

the contract (or all liens have been satisfied,

discharged, or otherwise provided for under the

legislation)

Early Release of Holdback - Phased

The new Act also permits holdback to be paid out on a

phased basis if:

•

The contract provides for it and identifies each phase;

•

The contract price is at least $10 million (proposed

amount); and

•

There are no preserved or perfected liens in respect of

the contract (or all liens have been satisfied,

discharged, or otherwise provided for under the

legislation)

Early Release of Holdback

– Completion of Design Phase

The new Act permits holdback to be paid out at the

completion of the “design phase” if:

•

The contract provides for it; and

•

There are no preserved or perfected liens in respect of

the contract (or all liens have been satisfied,

discharged, or provided for under the legislation).

Priority of Liens

•

Rules surrounding priorities are complex.

•

There are circumstances where a lien can take priority

over a mortgage, but it is often limited.

•

It will depend on when your lien arose, when the

mortgage was registered, the type of mortgage, and

the date of mortgage advances.

Priority of Liens

BUILDING MORTGAGE

•

Mortgage taken by a mortgagee “with the intention to secure the financing of an

improvement, including refinance

•

Lien claimants have priority over a building mortgage to the extent of any shortfall in the

holdbacks the owner is obliged to retain under Part IV of the Act

PRIOR NON-BUILDING MORTGAGE:

•

Mortgage registered on title prior to the “time when the first lien arose in respect of this

improvement”.

•

Prior advances have priority to lien claims to the extent of the lesser of: (i) the value of

the premises at the time the first lien arose; and (ii) the total advanced before the start

of the project.  Subsequent advances retain priority unless a mortgagee has notice of a

lien.

SUBSEQUENT NON-BUILDING MORTGAGE

•

 Lien claimants will have priority over a subsequent mortgage to the extent of any

deficiency in holdbacks required to be kept by the owner under Part IV.  In addition to

priority over deficiencies in the holdback, lien claimants have priority to all advances

made in the face of notice of a claim for lien

HOME BUYER’S MORTGAGE

•

The priority rules in favour of lien claims do not apply to a home buyer’s mortgage

Section 39 Requests

•

 Section 39 Requests are an important and useful

tool contractors and subcontractors can use to

obtain information about:

•

the status of accounts above you in the pyramid;

•

information about the type of mortgages on title as well

as the amount and timing of advances made under the

mortgage

•

whether a Labour and Material Payment Bond has been

posted

Section 39 Requests

•

 Section 39 Requests are an important and useful

tool contractors and subcontractors can use to

obtain information about:

•

whether a contract has been substantially performed;

•

whether liens arise on a lot-by-lot basis

•

on subdivision or other multi-lot improvements,

subcontractors can (and should) request that the

owner or contractor advise, under s.39, whether or

not the contract provides that liens will arise on a

lot-by-lot basis

Section 39 Requests

•

Under the Construction Act, the scope of the

information that can be requested has been

expanded to include:

•

a much more detailed status of accounts from those

above you in the pyramid;

•

information about the sale of a home (given the

protection home buyers have against liens);

•

information about deemed subcontract completion

•

information on leases and the extent to which a landlord

is paying for the improvement

•

information about the phased release of holdback

Section 39 Requests

•

S. 39 information/documentation must be provided

within 

21 days 

of request

Trust Obligations

•

The Act imposes new duties on contractors and

subcontractors who are 

trustees of trust funds

. Specifically,

trustees are required to deposit funds received on account

of their contract/subcontract price into a 

bank account 

in

the trustee’s name. They must maintain 

written records

which detail the amounts received into and paid out of the

trust funds, any transfer made for the purposes of the trust

and other prescribed information. If more than one trust is

involved, the trust funds may be deposited into a single

account; however, the trustee must maintain 

separate

records for each trust

.

•

Act has limited the trustee’s right to set-off. The Former Act

allowed a trustee to set-off money owed for any

outstanding debt claim or damages whether or not related

to the improvement.  The Act now restricts the right to 

set

off

 to claims or damages 

related to the specific

improvement

.

•

1) lien rights

•

2) holdbacks

Substantive change came into force on July 1, 2018:

•

longer lien timeframes;

•

new contract termination provisions

•

changes in holdback procedures;

•

new publication requirements;

•

an expanded scope of the s.39 request

•

re: the written notice of lien;

•

bonding on “public contracts”;

•

changes to what is lienable;

•

enhanced trust obligations;

•

re: the leasehold lien

Lien Modernization Recap

Can you contract out of the lien or holdback?

•

No, you cannot “contract out” of the Act.

•

The lien and holdback provisions apply to you no

matter what, so you cannot have provisions in a

contract that prevent a person from liening, or that

holdbacks are not required.

•

Even if contract does not say anything, the lien and

hold backs still apply

Business Days or Calendar Days?

Do days include weekends & holidays? Yes, when

counting the relevant days, you must count weekends

and holidays.  However, if your 60th day lands on a

weekend or holiday, then you are permitted to preserve

your lien on the following business day.

Publication Summary

Publication in “construction trade newspaper” –

Daily Commercial News

Provisions relating to publication of the following forms

under the Act:

o

Notice of Non-Payment of Holdback (Form 6)

o

Notice of Termination of Contract (Form 8)

o

Certificate of Substantial Performance (Form 9)

o

Notice of Intention to Register a Condominium in

accordance with the 

Condominium Act, 1998

(Form 11)

Covid 19 and Construction Lien

•

On April 9, 2020, the Attorney General of Ontario amended

the Order in Council made under s. 7.1 of the Emergency

Management and Civil Protection Act (the “EMCPA”) that

had 

suspended statutory limitation periods 

and procedural

timelines effective as of 

March 16, 2020

, such that the

suspension will no longer apply to the Construction Act.

•

The suspension of the limitation period and timelines was

lifted on 

April 16th

, parties will have the same amount of

time to meet a deadline that had been remaining before the

suspension began on March 16, 2020.

•

The limitation period or period of time 

resumes running 

on

the date on which the temporary suspension ends and the

temporary suspension period shall not be counted.

Can you Contract Out of Adjudication?

Adjudication is available as a right. A Party to a construction contract can commence

an adjudication without the other Party’s consent.

Application despite other proceeding

•

13.5(5)  A party may refer a matter to adjudication under this Part even if the matter is

the subject of a court action or of an arbitration under the Arbitration Act, 1991,

unless the action or arbitration has been finally determined.

Adjudication procedures

•

13.6 (1)  An adjudication shall be conducted in accordance with the adjudication

procedures set out in this Part, the regulations, and, subject to subsection (2), any

additional adjudication procedures that may be set out in the contract or subcontract.

•

(2) Adjudication procedures set out in a contract or subcontract apply only to the

extent that they do not conflict with this Part and the regulations, and their

application is subject to the exercise of the adjudicator’s powers under section 13.12.

No waiver of rights

•

4  An agreement by any person who supplies services or materials to an improvement

that this Act does not apply to the person or that the remedies provided by it are not

available for the benefit of the person is void.

Practical Tips

•

Determine which version of the Construction Act applies to each of your

projects;

•

Ensure that accounting systems comply with new trust provisions;

•

Monitor 

lien deadlines 

and develop a 

reminder system

;

•

Familiarize yourself with the 

notice of non-payment 

forms;

•

Monitor 

holdback release dates 

and deadlines for delivery of notices of

nonpayment;

•

Remember that if you receive a notice of non-payment of holdback from the

owner,  you must also serve a notice of 

non-payment of holdback to your

subcontractors 

within 3 days of receipt of the notice of non-payment of

holdback, otherwise you will need to pay the holdback or your

subcontractors;

•

Monitor

 the daily construction trade newspaper; and

•

Keep 

documents organized 

in the event that you receive a notice of

adjudication and have to respond promptly.

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