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October 2016

Expert Review of Ontario's Construction Lien Act


Eric Turkienicz
Eric Turkienicz,

By Eric Turkienicz

On April 30, 2016, an expert review of Ontario's Construction Lien Act was submitted to the Ministry of the Attorney General and the Ministry of Economic Development, Employment, and Infrastructure. This review, which was just released to the public, contains recommendations which will be considered in drafting legislation to be presented in Spring 2017. If the recommendations are implemented, even in part, it would form a sea of change in construction law and the most significant reform to this area of law in 33 years.

While the review recommends a reform to virtually every aspect of the Construction Lien Act, some of the most remarkable recommendations are as follows:

Substantive Changes

  • A change in the time periods required to preserve and perfect construction liens from a total of 90 days to a total of 150 days (60 days to preserve and 90 additional days to perfect the lien).

  • A far more flexible holdback regime allowing for ‘carve-out' holdbacks, a notice of set-off in relation to the holdback amount, and partial release of holdbacks on phased/annual bases.
  • A ‘prompt payment' regime (also known as "pay now, argue later") should be established in order to reduce the need for potential lien claimants to resort to the courts. This system would specify that:
    • a payor must dispute an invoice rendered to it within 28 days of receiving it from the payee (or 7 additional days if the payor is not an owner);
    • in the event of non-payment, a payor must deliver a notice of intention to withhold payment within 7 days of receipt of the invoice;
    • a payor's claim for set-off can only be made in relation to the contract the payment is demanded under, and not other contracts between the parties;
    • in the event of withheld payment, a mandatory non-waivable interest should be applied to late payments, and a right of suspension may arise following adjudication by a payment adjudicator

Procedural Changes

  • The imposition of mandatory case management into all construction lien claims to better streamline procedural issues and avoid delay

  • Elimination of many of the leave requirements, such as leave to bring motions, conduct discoveries, and commence a Third Party Claim

  • Permitting trust claims and lien claims to be heard together

  • The stratifying of different "sized" lien claims so that claims which would otherwise fall into the small claims or simplified procedure jurisdictions have applicable procedures proportionate to the relative size of the claim (i.e. A $5,000 lien should be dealt with via a small claims process, not a process identical to a $500,000 lien).

These recommendations are just a small sample of some of the large amendments being proposed to the Act. Of course, the extent to which these recommendations will be incorporated in any legislation remains an open question. Nonetheless, it is evident that the thrust of these reforms is to create a more practical and efficient means of resolving construction disputes and, if even a fraction of these changes are incorporated, many of the most frustrating and impractical aspects of the Construction Lien Act may soon be a thing of the past.

As this is an area of law that is currently in flux, please do not hesitate to contact us if you have any questions or concerns about the possible changes to the Act coming in the near future.

See June 2017 Update.


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