Construction Lien Act: Proposed change highlights
The Ministry of the Attorney General recently released a report reviewing Ontario’s Construction Lien Act.
While the Ministry supports maintaining the current lien/holdback regime, it also recommends establishing a new statute to address additional matters relating to security of payment and efficient dispute resolution in the construction industry.
The recommendations will – if adopted – affect most participants in the construction industry, particularly owners, lenders and their legal advisors.
- Preservation and perfection of liens would be extended 45 to 60 days in the case of preservation and from 45 to 90 days from the last day upon which the lien could have been preserved;
- Common elements in a condominium would have one PIN to which all liens could attach and which would affect the interest of all unit owners. At the same time, unit owners could post security proportionate to their share of a lien in order to vacate same;
- The quantum of security required to vacate a lien would be increased to the total of the full amount claimed in the lien together with the lesser of 25% or $250,000 for costs;
- Where a landlord funds a leasehold improvement, liens would attach to the interest of both the tenant and landlord. The landlord’s liability in such circumstances is limited to any deficiency in the holdback;
- When a lender loans for both the purchase of land and construction thereon, the mortgage itself must indicate the amount intended for acquisition versus the amount of the improvement
- A summary procedure for all lien actions would be instituted whereby all matters would be case managed with no requirement for leave to bring motions, conduct oral or documentary discovery or commence third and subsequent party claims. In addition, lien and trust claims could be brought in the same action;
- In addition to the summary procedure, all parties to construction contracts/subcontracts would have binding dispute resolution available through a process whereby the parties deliver a requisite notice of adjudication and agree upon an adjudicator, failing which one will be appointed. Thereafter, the adjudicator would establish a timetable/schedule for the necessary steps for the adjudication;
- A prompt payment schedule will be implemented which will require that an owner pay a contractor within 28 days of receipt of the contractor’s invoice with subcontractors to be paid within 7 days of the contractor receiving payment from the owner; and
- Subject to preserved liens and set-off claims relating to the specific contract at issue, the release of the holdback is mandatory.