Three years ago, Ontario’s Construction Act underwent significant change. Some of the most important changes affected liens.
The new act increased the lien deadline to 60 days from 45. Lien perfection time was increased to 90 days from 45. However, a period of transition between the old and the new deadlines was included under section 87.3(1)(a) of the new act.
As Sahil Shoor, partner with Gowling WLG explains, everything revolves around the common date of July 1, 2018, the new act’s date of enforcement. He says the former lien deadlines are to remain in place if:
“1. A contract for the improvement was entered into before July 1, 2018;
2. A procurement process for the improvement was commenced before July 1, 2018 by the owner of the premises; and
3. In the case of a premises that is subject to a leasehold interest that was first entered into before July 1, 2018, a contract for the improvement was entered into or a procurement process for the improvement was commenced on or after July 1, 2018, and before the day subsection 19 (1) of Schedule 8 to the Restoring Trust, Transparency and Accountability Act, 2018 came into force.”
The Ontario Supreme Court confirmed the importance of the July 1, 2018 date in its recent ruling in a dispute between Crosslinx Transit Solutions Constructors, builders of the Eglinton Crosstown LRT, and one of their subcontractors, Form & Build Supply (Toronto) Inc. (2021 ONSC 3396).
Form & Build registered two liens against Crosslinx 56 days after the date of last supply under a July 2019 subcontract. This was after the old 45 days deadline for registration but before the expiry of the new 60-day deadline.
Form & Build “argued that the new provisions applied, taking the position that section 87.3(2) of the act should be interpreted as saying that the new Construction Act provisions apply to subcontracts entered into after July 1, 2018,” writes Shoor.
Meanwhile, Crosslinx claimed the original 2015 LRT contract date should mean the old rules were in force, therefore Form & Build’s liens were too late.
The Court agreed with Crosslinx, confirming July 1, 2018 as all-important.
“The court concluded that the ‘contract’ used to determine whether the old Construction Lien Act or the new Construction Act applies under section 87.3(1)(a) is the prime contract between the owner and the contractor,” writes Shoor. “On its grammatical and ordinary sense, that sections 87.3(1)(a) and (c) apply regardless of the date of any subcontract.”
Specifically, the court ruling said, “Section 87.3 provides that a single legislative scheme applies to the entirety of ‘an improvement.’ All rights, obligations and remedies of all persons involved in that improvement are governed commonly and consistently by the same version of the act and regulations. That consistent application of the act and regulations is reasonably achieved by reference to the date of the procurement process for the improvement, where there is one, or a prime contract.”
This ruling helps avoid a number of conflicts and uncertainties arising over multiple subcontracts within a complex infrastructure project, Shoor told the Daily Commercial News. These include matters of holdback liability, payment dates, entitlements, landlord liability, trustee obligations and the substance of information requests.
Not all undertakings are as complex as the Crosslinx project. Furthermore, contracts for new projects will, over time, be issued under the new Construction Act. In the meantime, the overlap transition is an important consideration for contractors and subcontractors involved with work that had contractual origins prior to July 1, 2018.
“The court has clarified that the date of a subcontract is not determinative of which version of Ontario’s construction lien legislation applies, as the date of a subcontract does not factor into the analysis under section 87.3,” concludes Shoor. “Accordingly, attention should be given to the date of the prime contract (or to the other key dates set out in s. 87.3 as applicable) when determining when lien rights expire.”
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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