Highlights of The Builder's Lien Act
The Old Act:
Under the previous Builder's Lien Act, there was only one holdback of 10% which was held back by the Owner from the General Contractor. It was often possible for the General Contractor to have deductions taken from his balance to pay trades that should have been paid by his subcontractors. In addition, in many cases, the holdback funds were not paid out until 40 days after the completion of the project. When a lien was filed, all claims were made against the General Contractor's holdback, and if the owner wanted to clear a lien, the procedure was very complicated and largely ineffective. Claims had to be filed within 31 days after: (a) the date last worked, or (b) the termination of the contract of the contractor or (c) the completion of the improvement. The time for an owner to retain the holdback was 40 days. There was no definition of Substantial Completion and in many areas the Act deferred to the common law for interpretation.
The Builder's Lien Act:
The present Act provides that owners, contractors and subcontractors will all holdback a percentage of each of the contracts that they have with others below them in the pyramid. The amount of the holdback will be the greater of 10% of the value of the work or material provided to the project or 10% of the payment made for same. Note that there is to be no holdback from either an architect or engineer or from a material supplier or workman, because there is no one below them in the chain who could make a claim. Each entity working on an improvement will fall into a class of possible claimants and will share pro rata within that class in the event that all file claims.
For all private contracts where the aggregate of labour and material supplied exceeds $100,000.00 * the required holdback will be held in an actual trust account established at a savings institution. The fund will be administered by the owner for the general contractor and by the owner and general contractor for the sub contractors and the general contractor, or the owner and the various contractors if the owner acts as its own general contractor.
The funds are impressed with a trust for the benefit of the contractors, workmen and material suppliers, and there are penalties for failure to holdback.
The funds will be released progressively as each sub contract is certified to be complete. An architect, engineer, or the owner and General Contractor may act as a payment certifier for the purpose of paying out the funds on the completed contracts.
When a claim is made it can easily be released by paying the correct amount into Court. (NB: that is what the last act said, but in practice, it was ineffective.)
Time periods are more complicated under the present act because of the introduction of a "Payment Certifier" and a Certificate of Completion. If a Certificate of Completion has been issued with respect to a specific contract or subcontract, the claims of anyone engaged under the contractor named in that contract must be filed within 45 days after the date of the certificate of Completion was issued. In the absence of a certificate of Completion, claims must be filed within 45 days after the head contract has been completed, abandoned or terminated and if there was no head contractor, after the improvement was completed or abandoned.
The time runs from the date last worked for a workman, the date of supply of material for a material supplier and from the date of completion of the contract for a contractor, but the time may begin to run sooner as a result of the issuance of a certificate by the payment certifier. The time for filing all claims is 45 days and the holdback is retained for 55 days.
Under the present act, Architects and engineers are given lien rights recognizing their contribution to an improvement even though all of their work may not be actually done on the construction site. The act also provides a definition of "Substantial Completion" in terms of amount of work left to complete and for contracts under $500,000.00, 97% complete will be considered Substantial Completion. It also defines abandonment of a job, and provides clear guidelines for the distribution of the holdback funds.
Landlords may now file a notice for their property once in the Land Title Office in order to absolve themselves from responsibility for tenants improvements.
*Although the wording of the act is ambiguous and it is uncertain whether the $100,000.00 limit applies to the aggregate value of the whole improvement or only to the aggregate value of labour and material supplied under a specific contract for a portion of the improvement, the consensus is now that it is the value of the contract and not the value of the improvement that is meant. Therefore, the holdback provisions will not apply to contracts where the total aggregate value of the contract is less than $100,000.00. Note that, this only waives the requirement of an actual holdback trust account. The lien rights and holdback for such a contract still remain in place, but physical account for same will not be required.
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