Amendments to the Construction Lien Act
In 2015 the Ontario Government launched an independent expert review of our province’s construction laws. The review and report resulted in legislation aimed at modernizing the construction lien and holdback rules, helping to ensure that workers and businesses get paid on time for their work and ensuring that payment disputes are addressed quickly and painlessly.
The first round of successive amendments to the Construction Lien Act came into effect on July 1, 2018. The name of the Act has been changed to the Construction Act.
The deadline to “preserve” a lien under the Act has been extended from 45 days to 60 days from the applicable triggering event. The triggering event depends on the circumstances and may be completion, abandonment, or termination of the contract or subcontract, or the date of last supply of services or materials to the improvement. The deadline to “perfect” a lien has also been extended, from 45 days to 90 days after the last date that the lien could be preserved.
Parties can now contract to allow the holdback to be maintained in the form of a letter of credit or demand-worded payment bond instead of the holdback being held as funds.
Owners, contractors and subcontractors are now required to keep more detailed accounting records for projects. Owners, contractors and subcontractors must deposit funds owing to a contractor or subcontractor into a bank account in their own names and maintain written records setting out the amount received into and paid out of the account. A single account may be maintained for multiple projects but the written records must detail the amounts received and paid out on account of each project.
The transitional provisions in the Act provide that the amendments will not apply to projects where:
- the contract between the owner and contractor for the improvement was entered into before July 1, 2018;
- the procurement process for the project started before July 1, 2018; or
- the lands are subject to a leasehold interest and the lease was first entered into before July 1, 2018.
There are additional changes which have also taken effect as of July 1, 2018 and more changes came into force on October 1, 2019, including a prompt payment scheme and the creation of a mandatory system for certain disputes.
If you have any questions about how these changes might affect your business, please contact Waterous Holden Amey Hitchon.
Communications on this website are intended for information purposes only and do not constitute legal advice or an opinion on any issue. Readers are cautioned against making any decisions based on this material alone. The lawyers of Waterous Holden Amey Hitchon LLP would be pleased to provide additional details or advice about specific situations.