Updates and Improvements:
In addition to the newly introduced enhancements of prompt payment and fast tracked adjudication, the Construction Act of Ontario improves and updates several of the woefully out of date provisions of the old Construction Lien Act; most of which had remained unchanged since 1983. Probably the most notable of these improvements are found in the new Act’s treatment of construction liens, holdbacks and trust funds.
The new lien provisions are found in Part III of Bill 142 which now increases the deadline for preservation of liens to 60 days from the applicable date (from the current 45 days). The perfection of liens must be completed within 90 days of the last possible date on which the lien could have been preserved, extended from 45 days under the current law. These longer timelines are intended to provide additional breathing room for parties to resolve issues before proceeding with a lien, and encourage settlement, as opposed to litigation. They’re also intended to accommodate the adjudication process so that the two features can dovetail in their operation.
The Act also provides additional certainty around holdback payments which may now be made on an annual basis, or through an agreed-upon set of phases or portions, to reflect the long-term nature of many modern construction projects. More importantly, the former act did not mandate that the holdback be paid when all liens that could be claimed against it expired, were discharged or satisfied. The Act now requires payment of the basic and finishing holdback, unless a notice of non-payment is delivered setting out the reason for non-payment, and the issue is referred to adjudication.
From a surety perspective, it’s noteworthy that the holdback will no longer need to be retained in cash, but can be maintained through other security, including a prescribed Holdback Repayment Bond (Form 5) which can be accessed by CLICKING HERE (revised May 2019).
Finally, 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 and any 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.