Changes to the Construction Lien Act
Soon it is going to be far easier to enforce rights and obligations of both homeowners and contractors involved in construction projects. Bill 142 received Royal Assent, the Construction Lien Amendment Act includes significant changes to the current Construction Lien Act.
Changes to the Act
July 1, 2018 - Implemented and In Force
1. Lien rights and holdback of payments;
2. Updated Definitions to the Act, including the term Improvement and price.
3. Substantial Performance
4. Increased Lien rights - timelines have been extended: there is no an increase from 45 days to 60 days and the 45 day deadline for perfecting a lien has been extended to a 90 day period from the last day on which the lien could have been preserved. In total, there is a 150 day period of time from which the last action on site will start to run the clock for preserving a lien.
5. A new regime for vacating a lien via payments into court - an increase from $50,000 to $250,000.00.
There are other significant changes to the Act that have been implemented as well, including landlord liabilities for any liens, holdbacks and what documents will suffice, trust accounting, and in some cases, mandatory surety bonds being required for a public contract.
Changes coming into force in October 2019
By far one of the most significant additions to the Act is the section on Prompt Payments, Adjudication between the parties, and opportunities for a contractor to enforce the Act against a delinquent client to receive payment.
Prompt Payment refers to the scheme the Act introduced with the concept of the "Prompt Invoice". If a proper invoice has been submitted, the Act requires that a payment deadline be imposed and enforced. The Act stipulates that if a proper invoice is rendered, the client has to pay it within 28 days; however, payment schedules may be adjusted according to the parties' wishes and consent. Furthermore, if the client chooses not to pay the proper invoice, the client must produce a notice of non-payment within fourteen days, stipulating the reasons for non payment of the invoice. The parties may then adjudicate informally, through alternate dispute resolution, and if no solution is reached using this method, the contractor may begin the process of registering a lien.
Will these Changes Structurally Secure Parties' Interests?
One of the biggest problems that leads to litigation is the non payment for services received, even if the homoewner was happy with the work. It has become very common that homeowners simply do not want to pay after they have agreed to a contract price. The changes in the legislation will allow contractors to feel more secure about enforcing their rights using the Act, prior to being immediately forced to litigate. The new provisions allow the parties to attempt to reach a settlement, and create a paper trail where no party can make the claim at the eleventh hour that they did not make a payment because the work was deficient. Giving proper notice of the reasons for non-payment and allowing a contractor to rectify the concerns, so long as they are reasonable and legitimate, will simplify the process of settling, and litigation should it be necessary.
How it all ends up working out remains to be seen next year.