Ontario may have had good intentions when it suspended limitation periods and timelines related to lien rights under its Emergency Management and Civil Protection Act effective March 24. However, it certainly sowed confusion and debate concerning two specific consequences — lien timelines and the potential interruption of the flow of funds for construction projects.
“The previous Order [March 16] was made to help those having difficulty meeting limitation periods and procedural time periods as a result of the COVID-19 outbreak,” says Anna Esposito of Pallett Valo LLP. “However, the impact of the pandemic never created an inability to take all steps required to preserve or perfect liens in Ontario in accordance with the Construction Act.”
In response to representations made to the government by industry and legal groups, amendments to the Act effective April 16 lift the suspension limitation periods and procedural time periods, says Esposito. “Attorney General Doug Downey clarified that once the suspension is lifted, ‘parties will have the same amount of time to meet a deadline that had been remaining before the suspension began on March 16, 2020.’ ”
The flow of funds due to the March 16 Order’s potential impact on holdbacks was also a major concern. “If the Order were to apply to construction lien expiry timeframes, holdback funds would have to be retained from contractors and sub trades for the duration of the emergency, and beyond,” says Robert Kennaley of Kennaley Construction Law. “As the holdback may (and at times must) be released once all liens that could be preserved against it have either expired or been discharged or vacated under the Act, any delay in the release of holdback due to the Order suspending limitation periods will now be limited to no more than 31 days (the number of days between March 16 and April 16).”
Esposito explains that “this amendment to the previous Order will allow for the release of holdback payments to contractors and subcontractors in the normal course, helping to resolve a potentially significant cash flow problem as a result of the Order.” The bottom line, according to Esposito, is that “after April 16, 2020, it will be ‘business as usual’ under the Construction Act.”
Business as usual means that “all of the Construction Act’s ‘procedural timeframes will apply unchecked by the Order suspending limitation periods, at least as at April 16, 2020,” says Kennaley. “All parties in the construction ladder will accordingly need to be ready to meet these, notwithstanding COVID-19.”
Kennaley lists several timeframes involved:
- Registration of notice of intention to register lands as a condominium;
- The seven-days’ notice upon which a cross-examination on a claim for lien can be scheduled;
- The time within which a landlord must respond to a contractor’s written notice that the landlord will be subject to liens as would an Owner;
- The time to give a “notice of non-payment of holdback” and “notice of termination of contract”;
- The mandatory prompt payment timelines applicable for notices of non-payment and for payments to be made as well as the mandatory adjudication timelines for the appointment of an adjudicator, the giving of adjudication materials and the time within which an adjudicator must make a determination, and;
- All of the procedural timelines applicable in a lien action.
Kennaley believes that the failure to meet these timelines would not necessarily be as fatal as would be the failure to meet a lien-expiry deadline. However, he suggests that “caution dictates that such timeframes be met to avoid the time, risk and expense of addressing a failure caution.” It would therefore be advisable to make best efforts to meet the timelines prescribed, just as if the Order effective March 16 had never been issued.
Furthermore, Kennaley warns of possible insolvencies or bankruptcies resulting from prolonged construction closures or slowdowns. He advises, “Lien claimants should take care wherever there is a realistic concern about non-payment to preserve their liens in a timely fashion.”
John Bleasby is a Coldwater, Ont. based freelance writer. Send comments and Legal Notes column ideas to firstname.lastname@example.org.