Part 1: The Construction Act – Proposed Changes to the Construction Lien Act Part 1: The Construction Act – Proposed Changes to the Construction Lien Act This is Part 1 of a continuing blog series on the proposed changes to the Construction Lien Act and generally, the enactment of Ontario’s new Construction Act. Background The Construction Lien Act (“CLA”), introduced in 1983, grants special protections to people involved in the construction industry. The CLA recognizes the special nature of the construction business. This year, the Construction Act will come into force, ushering in a new era for the construction industry in Ontario with new rules and processes that the industry will have to get used to. The New Rules and the Proposed Changes Bill 142 was introduced in order to improve efficiency and competitiveness for construction businesses. Below is a discussion of a few of the key amendments that have been proposed. 1) Prompt Payment A prompt payment regime has been proposed. Several jurisdictions throughout the world have enacted similar initiatives. The prompt payment provisions have prescribed timelines for payment to contractors and subcontractors. The proposed amendment is intended to speed up the payment process. 2) Special Adjudication Currently, the only recourse that contractors and subcontractors have relating to improvements is with the courts. Bill 142 has introduced an interim, binding dispute resolution system, whereby any party can refer a dispute to a registered adjudicator during the course of a project. The proposed interim dispute resolution process provides quick decisions relating to disputes, which will minimize disruptions to projects. 3) Timelines Related to Liens Bill 142 proposes extended preservation and perfection periods. Currently, a lien is only preserved if it is registered within 45 days. The amendments seek to extend the preservation period to 60 days. Under the present CLA, a lien claimant has 45 days to perfect the lien. Bill 142 seeks to extend the perfection period to 90 days from the last day on which the lien could have been preserved. The Potential Effects The prompt payment regime and new interim adjudication system will likely reduce time and money spent on litigation in the construction industry. This will hopefully translate to fewer disruptions in the course of a project. Devry Smith Frank LLP is a full service law firm located in Don Mills. If you require representation or have any questions, please contact Devry Smith Frank LLP today. You may contact one of the many experienced lawyers on our website or call us directly at 416-449-1400. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Construction LawMay 9, 2018June 16, 2020
Construction Trust Claims: How to Protect Yourself Caught up in the moment of construction work chaos and scrambling to complete jobs, it is all too easy for invoices to accrue and accounts to build up. While construction liens provide one way to secure payment due to contractors and subcontractors, preventing one’s lien rights from expiring requires meeting strict deadlines, which are often missed. Construction Trusts The Construction Lien Act creates a scheme for statutory trusts which exist for the benefit of contractors and subcontractors. All amounts received by an owner, other than the Crown or a municipality, that is to be used in financing a project constitute a trust fund for the benefit of contractors. Similarly, all amounts owing to a contractor or subcontractor, whether or not due or payable, or received by a contractor or subcontractor, on account of the contract or subcontract price of improvement, constitute a trust fund for the benefit of the subcontractors and other persons who have supplied services or materials to the improvement who are owed amounts by the contractor or subcontractor. Owners and contractors who hold funds in the trust can only apply those funds for purposes consistent with the trust. Otherwise, the corporation or person who is the trustee along with the officers and directors of a corporate trustee, and any person “who has effective control of a corporation or its relevant activities” which could include employees or agents of the corporation, may be held personally liable. This can often make a difference from a recovery perspective, especially if the payer is a corporation, and the corporation is insolvent. According to St. Mary’s Cement Corp. v Construc Ltd., the following elements must be proven to establish the existence of a trust: The plaintiff who is owed did supply services or materials: This can be established by oral testimony or substantiated through documentation including invoices, communication confirming services and materials provided (ie. By e-mail, text, etc), account statements, etc. The project is considered an “improvement” pursuant to the Construction Lien Act: According to section 1(1) of the Act, an “improvement” means, in respect of any land (a) any alteration, addition or repair to the land, (b) any construction, erection or installation on the land, including the installation of industrial, mechanical, electrical or other equipment on the land or on any building, structure or works on the land that is essential to the normal or intended use of the land, building, structure or works, or (c) the complete or partial demolition or removal of any building, structure or works on the land The contractor would have to describe its role in the project, the work it was hired to complete, the work that was in fact completed, and how it fits under one of the three categories above. The plaintiff is owed monies on the project The defendant(s) received money for the improvement: The plaintiff would need to demonstrate that the defendant(s) – be it the owner of the property, the general contractor, or a higher-up sub-contractor – has received funds for work completed. This information may be obtained by way of a request for information under section 39 of the Act. While construction trust claims may be a useful tool for contractors and subcontractors who are seeking to collect on unpaid accounts, the flipside of this is that owners, contractors, and sub-contractors who are trustees need to be cautious in order to avoid exposure. In addition to keeping proper records, trustees should keep trust funds separate from their general accounts. When trust funds for the project are mixed with other funding and expenses in one general bank account, it is much more difficult for a trustee to account for the trust funds and as a result, the trustee is more likely to become exposed. For more information or any other questions regarding construction trusts, please contact our construction law team of lawyers. “This article is intended to inform and entertain. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Construction LawMay 12, 2017June 23, 2020