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    • Category: Construction Law

    gavel in front of hard hat and goggles

    New Construction Law Case Tells Us That We Cannot Combine Breach of Trust Claims with Construction Lien Actions

    Amendments to the Construction Lien Act in 2017, now called the Construction Act (the “Act”), have left construction litigators confused as to whether they could combine breach of trust claims with construction lien actions.

    Recently, the appeal case of Devlan Construction Ltd. v. SRK Woodworking Inc. (“SRK Woodworking”) at the Ontario Superior Court of Justice clarified that breach of trust claims cannot be joined with construction lien actions.[1]

    Section 50(2) of the previous Construction Lien Act expressly provided that “[a] trust claim shall not be joined with a lien claim but may be brought in any court of competent jurisdiction.”[2] In the new Act, however, that section was removed altogether.

    The exclusion of the express provision in the new Act made it unclear whether it became acceptable to join breach of trust claims together with construction lien actions.

    “The issue on appeal, however, is not a question of the wisest policy choice to be made,”[3] said Justice Corbett. “The question is: what do the Act and the Regulations provide?”[4]

    While it may seem convenient and more cost-efficient to combine breach of trust and construction lien claims to be tried in court at the same time, there are long-standing reasons as to why those two claims were traditionally separated and continue to be separated.

    Lien proceedings are meant to be fast; there are consequences to stalling the construction process for a long period of time. Trust proceedings, on the other hand, are longer and more complex by nature and therefore present a problem when combined with construction lien actions.

    In Damasio Drywall v. 2444825 Ontario Limited, Associate Justice Wiebe found that “[i]f the Legislature intended to allow trust claims to be joined with lien claims, it should have stated so explicitly, given this mandate and the nature and complexity of a trust claim. It did not.”[5] The Associate Justice subsequently upheld his finding in the case of 6628842 Canada Inc. v. Topyurek.[6] Before the recent SRK Woodworking appeal, however, Justice Harper disagreed and overruled those two prior decisions altogether.

    Justice Corbett considered a couple of factors to support his decision in SRK Woodworking. One factor is that the Act “neither permits nor prohibits joinder of claims in a construction lien proceeding.”[7] Furthermore, the Act allows a litigant to rely on the Rules of Civil Procedure where it does not address procedural matters.[8]

    Importantly, however, the Rules of Civil Procedure do not apply when deciding which types of claims can be brought together under the Act. Justice Corbett found that when “reading the Act as a whole, one can infer an intention on the part of the legislature to leave the issue of joinder to be addressed in the Regulations.”[9]

    Justice Corbett considered the effect of a new Regulation which became effective under the Act in 2019 which provides that “[a] plaintiff may, in an action, join a lien claim and a claim for breach of a contract or subcontract.”[10] Considering the Regulation specifically provides for the type of joinder that is permitted under the Act, it is implied that other joinder of claims, such as joining a breach of trust claim with a construction lien action, are not permitted.

     

    If you have any questions about construction law in general, please contact Christopher Statham at 416-446-5839 or christopher.statham@devrylaw.ca.

    “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.”

    This blog was co-authored by Law Student, Sanaz Sakhapour.

     

    [1] Devlan Construction Ltd. v SRK Woodworking Inc., 2023 ONSC 3035 (CanLII).

    [2] Ibid at para 7.

    [3] Ibid at para 15.

    [4] Ibid.

    [5] Damasio Drywall Inc. v. 2444825 Ontario Limited, 2021 ONSC 8398 (CanLII) at para 8.

    [6] 6628842 Canada Inc. v. Topyurek, 2022 ONSC 253 (CanLII).

    [7] Supra note 1 at para 16.

    [8] R.R.O. 1990, Reg. 194.

    [9] Supra note 1 at para 23.

    [10] O. Reg. 302/18, s. 3(2).

    By Fauzan SiddiquiBlog, Construction Law

    Ontario Court of Appeal Affirms That Construction Liens’ Priority Under the Construction Act is Limited to Extent of the Deficiency in the Owner’s Holdback

    BCIMC Construction Fund Corp. et al. v. 33 Yorkville Residences Inc. et al., 2023 ONCA 1 (CanLII)
    The decision in BCIMC Construction Fund Corp. et al. v. 33 Yorkville Residences Inc. et al.[1], involved a number of lien claimants which had provided services and materials to the owner of a condominium development. The owner of the condominium had become insolvent and the property subject to the improvement had sold by a Receiver pursuant to a court order. At the time of sale, there were six mortgages registered against the property and two were building mortgages pursuant to Section 78(2) of the Construction Act.[2]The parties did not dispute that the lien claimants are entitled to a priority payment out of the proceeds of sale to the extent of any deficiency in the owner’s holdback under Section 22(1) of the Construction Act. The issue in dispute was the distribution priority pursuant to Section 78(2) of the Construction Act, which outlines the method in determining the amount of the deficiency to which the priority applies. The lien claimants brought a motion to determine this issue.

    The lien claimants took the position that because there were two building mortgages, they were entitled to priority with respect to the deficiency in holdback over each mortgage. In other words, where the deficiency in holdback was the 10% which the owner was required to retain under the Act, the lien claimants took the position that they were entitled to a 10% priority over each building mortgage such that the total amount for which their liens had priority amounted to 20% of the price of services and materials supplied.

    In interpreting Section 78(2) of the Construction Act, the Ontario Superior Court held that lien claimants are limited to priority over all combined building mortgages, rather than each mortgage separately.[3] As such, the lien claimants’ motion was dismissed. The claimants appealed to the Ontario Court of Appeal. The Ontario Court of Appeal dismissed the lien claimants’ appeal.

    Background – The Construction Act

    Under Section 22(1) of the Construction Act, each payor in a contract or subcontract where a lien arises must retain a 10% holdback of the price of the services or materials supplied until all liens have expired or are satisfied.[4] Section 78 of the Construction Act provides additional rules concerning priority between mortgagees and lien claimants and provides that subject to exceptions, liens from an improvement have priority over all mortgages.[5]

    The exception in this case appears in Section 78(2) which deals with building mortgages. Section 78(2) provides that the lien has priority to the extent of any deficiency in the holdbacks required to be retained, regardless of when that mortgage or the mortgage taken out to repay it is registered.[6]

    The lien claimants submitted that the interpretation of Section 78(2) requires that each lien claimant has priority over each building mortgage to the extent of the deficiency in the holdback. Since there were two building mortgages registered on the property, the lien claimants argued that they were entitled to priority over each building mortgage to the extent of the deficiency in the holdback totalling a 20% holdback fund. The lien claimants further argued that the context and purpose of the Construction Act was to protect lien claimants as subsequent building mortgagees expect to assume more risk than prior mortgagees and should not be insulated from additional risk by limiting a lien claimant’s priority to one 10% deficiency claim. Finally, the lien claimants submitted that the case of GM Sernas & Associates Ltd v. 846539 Ontario Ltd.[7] should be distinguished from the present case. In Sernas, the Ontario Court of Justice held that the maximum priority of a claim for lien over two mortgages is 10%, saying that there is one holdback figure and that the deficiency is the full holdback figure.[8] The lien claimants argued that the issue on whether priority is to measured against each mortgage separately was not addressed in Sernas and that as such, Sernas was not binding on the claimants.[9]

    Ontario Superior Court’s Decision

    The Ontario Superior Court dismissed the lien claimants’ motion as the lien claimants’ interpretation of Section 78(2) of the Construction Act limited the meaning and effect of key words in the section, reads in additional language that is not present in the section, and produces a result that is inconsistent with the scheme and purpose of the Construction Act.[10] Justice Penny held that Section 78(2) provided priority to a mortgage taken with the intention to secure the financing of an improvement “to the extent of a deficiency” in the owner’s holdback.[11] As such, there is only one holdback available for lien claimants regardless of the number of building mortgages registered on the property.

    Furthermore, the Court emphasized that when read as a whole, the Construction Act does not have any underlying policy directed solely to protect lien claimants. Referencing RSG Mechanical Incorporated v. 1398796 Ontario Inc., the Court held that there was no suggestion that the interests of lien claimants should be favoured above the interests of mortgagees beyond the value of the holdbacks the legislation requires.[12]

    Ontario Court of Appeal Decision

    The lien claimants appealed the Ontario Superior Court’s decision and argued that as the matter is one of statutory interpretation of the Construction Act, the lien claimants argued that the motion judge’s decision and reasoning was incorrect.
    In reviewing the lower court’s decision, the Court of Appeal found that the motion judge correctly identified and applied the purposive and contextual approach to statutory interpretation and determined that there was no error in the motion judge’s application of the rules of statutory interpretation.[13] As such, the appeal is dismissed.

    Conclusion

    This case provides greater clarity for lenders engaged in construction financing with regards to the extent of holdback priority in situations with multiple building mortgages. As the cost of construction increases, especially following the COVID-19 pandemic, it is crucial for lenders to ensure that owners are continuing to maintain the appropriate holdback amount in accordance with the Construction Act. As it stands for now, lien claimants are only entitled to one holdback fund, irrespective of the number of building mortgages registered on the property.

    If you have any questions about construction law in general, please contact Christopher Statham at 416-446-5839 or christopher.statham@devrylaw.ca.

    “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 situations and needs.”

    This blog was co-authored by student-at-law, Abby Leung

    [1] 2023 ONCA 1 [BCIMC].
    [2] R.S.O. 1990, c. C.30 [Construction Act].
    [3] 2022 ONSC 2326 [2022 ONSC 2326] at para 3.
    [4] Construction Act, supra note 2 at s.22(1).
    [5] Ibid at s.78(1).
    [6] Ibid at s. 78(2).
    [7] [1999] O.J. No. 3714 (S.C.).
    [8] 2022 ONSC 2326 supra note 3 at para 16.
    [9] Ibid at paras 17-18.
    [10] Ibid at para 20.
    [11] Ibid at para 21.
    [12] Ibid at para 28.
    [13] BCIMC, supra note 1, at paras 13-14.

    By Fauzan SiddiquiBlog, Construction Law, Real Estate

    More Homes Built Faster Act, 2022

    The Ontario provincial government has introduced new legislation in the form of the More Homes Built Faster Act (Bill 23) to support Ontario’s newest Housing Supply Action Plan. Bill 23 is intended to provide the groundwork to increase the housing supply and affordable housing options for Ontarians by getting 1.5 million homes built over the next 10 years. It boldly does so in a number of very significant and controversial ways.

    The highlights the Bill 23 include:

    The Planning Act

    The most significant changes to the Planning Act will limit/extinguish the appeal rights of third parties, including upper-tier municipalities which are not approval authorities for official plan amendments. Whereas at present persons or public bodies who participate in the planning approvals process enjoy a right of appeal with respect to a zoning by-law, official plan, consents, and minor variances Bill 23 would restrict such rights of appeals to public bodies and “specified persons” (public utilities, operators of railway lines, and telecommunications providers).

    This change, clearly aimed at preventing NIMBY appeals, will be huge for neighbours and residents’ associations. It will be interesting to see if this will lead to increasing pressure on municipalities to participate in appeals of development applications which face neighbourhood opposition.

    This could have a significant impact on the caseloads of the Ontario Land Tribunal (OLT) and the Toronto Local Appeal Body. It should also increase the significance of local Committees of Adjustment as they may now be the only opportunity to oppose a project.

    Importantly this provision has retroactive effect and will nullify appeals where a hearing on the merits has not been scheduled before October 25, 2022.

    Bill 23 contains other consequential changes including:

    1. exempting pits and quarries from the two-year moratorium on applications to amend official plans or zoning by-laws. This is a huge, hard-fought, win for the industry;
    2. allowing the Minister of Municipal Affairs and Housing to make amendments to official plans where the Minister is of the opinion that a plan will adversely affect a matter of provincial interest;
    3. allowing up to three residential units in a house to be permitted “as of right”;
    4. revising the formula (recently introduced by this same government) for determining the amount of a community benefit charge (formerly known as a section 37 benefit) that may be imposed by a municipality on new developments. Municipalities will now have to revise their recently passed section 37 by-laws to incorporate this cap on benefits chargeable to developers;
    5. making changes to the provisions of section 41 to exempt residential development of up to 10 units and a land lease community home from site plan control. Exterior design is also removed as an element of site plan drawings. Given the degree to which some smaller municipalities rely on site plan control as a way of regulating specific development this could represent a significant change;
    6. revising parkland dedication requirements by removing that requirement for non-profit housing and the development of up to three residential units in a house. Moreover the timing of the calculation and the calculation of the maximum rate (alternative rate/hectare and the cash-in-lieu) will be changed in ways that lessen the ask from municipalities. Bill 23 will also permit owners to propose portions of their land, including encumbered lands, for parkland conveyance as opposed to having to rely on the determination of the local municipality. It will also force municipalities to spend at least 60% of monies collected for parkland purposes at the beginning of each year; and
    7. amending section 51 by removing the requirement for a public meeting on subdivision applications.

     

    Conservation Authorities Act

    Bill 23 proposes to amend the Conservation Authorities Act to greatly reduce the ability of Conservation Authorities to regulate development activity by removing their ability to comment on development applications and to require permits for projects approved under the Planning Act. Moreover, the Minister will have greater powers to make exceptions for development applications.

    Development Charges Act, 1997

    Bill 23 proposes to make various amendments to the Development Charges Act, 1997. New sections are added to fully exempt affordable residential units, non-profit housing developments, and inclusionary zoning residential units from development charges. The Development Charges Act would also be amended to require a reduction in the maximum development charge that could otherwise be charged for the first four years a development charge by-law is in force. These reductions would be applicable to development charges imposed pursuant to development charge by-laws passed on or after June 1, 2022.

    Under Bill 23, rental housing development charges would be reduced for residential units intended for use as rented residential premises by 25% for premises with three or more bedrooms, 20% for two-bedroom units, and 15% for all other residential units. The Development Charges Act would also be amended to require municipalities to spend and/or allocate at least 60% of the monies in reserve funds for water supply services, including distribution and treatment of services, wastewater services, and treatment and services related to highways.

    City of Toronto Act, 2006

    Under Bill 23, the City of Toronto Act, 2006 would be amended to give the Minister the power to make regulations that impose limits and conditions of the municipality’s power to prohibit and regulate the demolition and conversion of residential rental properties under Section 111 of the City of Toronto Act. Ironically the City has always relied on this cherished ability to protect tenants and rental, particularly affordable rental, units.

    Ontario Land Tribunal Act, 2021

    Traditionally, in the interests of encouraging public participation in the planning process, the OLT has not awarded costs to unsuccessful parties except where the conduct of such parties has been patently unreasonable and/or vexatious. This could change as Bill 23 will amend the Act to specify that the OLT may order an unsuccessful party to pay the costs of a successful party. Depending on how the OLT decides to implement this, and given how expensive hearings can be, opponents of development projects may be very wary of appealing those projects.

    Additional proposed changes to the Ontario Land Tribunal would include clarifying the Tribunal’s powers to dismiss appeals due to unreasonable delay and failure to comply with a Tribunal order and prioritizing certain classes of proceedings.

    Changes to Consumer Protection and Land Speculation

    If passed, Bill 23 would further strengthen consumer protections for new home buyers by doubling maximum fines for unethical builders and vendors of new homes who unfairly cancel projects or terminate purchase agreements under the New Home Construction Licensing Act. These fines would increase from the existing $25,000 fine to $50,000 with no limit for additional financial penalties. These changes would also assist the Home Construction Regulatory Authority to use funds from these penalties to provide funds back to affected consumers which would make Ontario the first jurisdiction in Canada to provide these funds to consumers.

    Further changes to Ontario’s New Home Construction Licensing Act would also involve cracking down on land speculation as home builders are taking extended periods of time to complete their planning applications which delays home creation. Bill 23 would allow Ontario to work with industry partners to consult on the issue of land speculation and to determine whether regulatory changes under the New Home Construction Licensing Act are needed to address the issue.

    Ontario Heritage Act

    Bill 23 will significantly change the provisions of the Ontario Heritage Act by, among other things:

    1. requiring that “listed” properties meet prescribed criteria for determining whether a property is of cultural heritage value. Such criteria already exists with respect to the designation of heritage properties pursuant to Ontario Regulation 9/06 and new or different criteria may be developed by way of further regulation;
    2. imposing time limits on how long a property can be listed. Municipalities will now have to initiate the designation process for listed properties within 2 years of the listing. Otherwise a property will be delisted and cannot be listed again for a period of 5 years. The process of designation can be an expensive one for municipalities given the requirements for notice and the possibility of appeals;
    3. restricting the ability of municipalities to designate a property in response to a development application. If the property is not already listed it cannot be designated in this circumstance; and
    4. adding additional requirements for the establishment of heritage conservation districts. Those criteria will also be established by regulation.

     

    As noted above, Bill 23 has the potential to greatly change the landscape of development approvals. To better understand the changes and the transition provisions around this subject please contact one of the following municipal and development lawyers today!

    Marc Kemerer–marc.kemerer@devrylaw.ca, 416-446-3329

    Adam V. Grossi–adam.grossi@devrylaw.ca, 416-446-5094

    David S. White–david.white@devrylaw.ca, 249-888-6633

    Christopher W. Statham–christopher.statham@devrylaw.ca, 416-446-5839

    Larry W. Keown-larry.keown@devrylaw.ca, 416-446-5815

    Louis A. Gasbarre–louis.gasbarre@devrylaw.ca, 416-446-3318

     

    By Fauzan SiddiquiBlog, Construction Law

    Procedure for Obtaining a Construction Lien

    What is a Construction Lien?

    Under Part III of Ontario’s Construction Act, a construction lien is a registration on title to a property and is available to any person who is under a contract and has supplied services or materials to the “improvement” of the property in Ontario. In accordance with the Act, an “improvement” to the land includes, but is not limited to: an alteration, addition, capital repair, demolition or installation.[1]

     

    A lien provides all people working on the building process with a legal claim on the property, and thus, a method to collect money owed to them. It allows the lien claimant to sell the debtor’s property and seek payment before anyone else. It is beneficial in that it provides “security” because the debtor’s asset will belong to the lien claimant, especially in the event of bankruptcy. A lien can also entitle payment of holdback funds that are to be retained.

     

    A lien’s value is the price of services and materials that one provides to the project and includes any direct costs incurred as a result of the delay.[2] However, the value does not extend to interest or any indirect costs like overhead costs for a project that has been delayed.[3] A lien can be applied when one does work for a tenant, public road or street, or a provincial and municipal property. With respect to public infrastructure, and provincial or municipal government property, a lien does not attach to the title of the property, instead, it attaches by writing to certain people.

     

    Preservation

    To pursue a construction lien, an individual must preserve it by registering the lien against title to the property or providing a copy of the lien to the owner of the land (i.e. when the land is owned by the provincial or municipal government). The lien of a contractor must be registered no later than 60-days from either the date on which a copy of the certificate or declaration of the substantial performance of a contract is published (if there is one), or the date the contract is completed, abandoned or terminated.[4] The same limitations for preserving a lien can be applied to a subcontractor or sub-subcontractor, in addition to, no later than 60-days from: (1) when the person last supplied services or materials to the improvement; and (2) when the subcontract is certified to be completed.[5]

     

    Perfection

    Once a lien is preserved, it must be perfected and enforced by commencing a court action in the Superior Court of Justice. The Act states: “a lien that has been preserved expires unless it is perfected prior to the end of the 90-day period next following the last day, under section 31, on which the lien could have been preserved.”[6] When a lien attaches to the premises a lien claimant must also register a certificate of action on the title.

     

    What happens if you miss a deadline?

    If a lien claimant misses a deadline, they will lose their right to lien and may not see any payment. Unless a lien is preserved and perfected under the above timelines, it will expire.[7] If one loses the enforcement muscle of a construction lien by missing the deadlines, their recourse is through traditional enforcement by commencing a statement of claim.

     

    In addition, according to section 37 (1) of the Act, a perfected lien also expires immediately after the second anniversary of the commencement of the action that perfected the lien unless:

    • An order is made for the trial of an action in which the lien may be enforced; or
    • An action in which the lien may be enforced is set down for trial.[8]

     

    When a lien has expired under the section 37 (1) provision, a motion may be made and the court shall make an order dismissing the action to enforce that lien or order that the registration of a claim for lien be vacated.[9]  If a court declares expiration and dismisses the action, then any amount that has been paid into the court in respect of that action would be returned to the person who paid the amount into court, and any security in respect of that action shall be cancelled.[10] As such, a discharge of a lien is irrevocable and the discharged lien cannot be revived .[11]

    “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.”

     

    [1] The Construction Act, R.S.O. 1990, c. C.3, s. 1(1).

    [2] Ibid s. 1(1).

    [3] Ibid s. 1.2.

    [4] Ibid s. 31 (2)(a).

    [5] Ibid s. 31 (3).

    [6] Ibid, s. 36 (2).

    [7] Ibid, s. 31 (1) and 34 (2).

    [8] Ibid, s. 37 (1).

    [9] Ibid, s. 46.

    [10] Ibid, s. 46 (4).

    [11] Ibid, s. 48.

    Have Questions? Book a Consultation with Adam Grossi!

    By Fauzan SiddiquiBlog, Construction Law

    Ontario Regulation Governing Excess Soil Management

    The province of Ontario has implemented the On-Site Soil Management Regulation (Regulation 406/19) to ensure the best management of excess soil from construction projects.  Phase 1 of Ontario’s on-site soil management project came into effect on January 1st, 2021. The soil that is affected by this regulation is any soil that has been excavated from a construction site. The purpose of the regulation is to ensure that the most amount of soil is reused on a future construction site. The goal ultimately from the province is to reduce the amount of soil that is designated as waste.

    Ontario’s On-Site Soil Management Regulation (Regulation 406/19) regulation project is to ensure that resources from a job site are not poorly wasted and the materials are able to see their full reuse potential. When the province refers to “Excess Soil”, it is talking about soil, including soil that includes rocks that have been excavated from a project area. This does not include hazardous soil, or soil from a pit, quarry, or aggregate site. The soil also must be dry soil that is intended to be deposited at a reuse site.

    The On-Site Soil Management Regulation (Regulation 406/19) does exempt projects from the regulation, but most construction sites that include excavation will have to follow the government regulation without exemption.

    There are exemptions from the documentation that is required under the regulation. These exemptions include soil that has been removed from an agricultural site within the meaning of Ontario Regulation 153/04, and when the project area for removal is a parkland, regulation use, or institution use within the meaning of the Ontario regulation 153/04. When the project leader knows that the soil has been affected by contaminants, the exemptions do not apply.

    The process set out by the government covers several phases of soil management, but the primary requirements are: ensuring that there is an assessment of past uses; there is a proper sampling of the current soil on-site; completing a Soil Characterization Report; assessing the destination of soil in the soil destination report, and using the Tracking System to ensure that each load of excess soil reaches the pre-approved destination.

    The assessment of past uses is to ensure that contaminated soil is located and that it is remediated and sent to the proper recycling location and does not end up at a soil reuse site, as hazardous materials are not included in this Ontario Regulation. This step is the key feature of the On-Site Soil Management Regulation by the province. The purpose of this is to ensure that a qualified person is able to gain an initial idea of the quality of soil that is on the site and to identify all of the available reuse sites.

    A Qualified Person as per Ontario Regulation 153/04, a person meets the qualifications to be a qualified person if the person holds a license, limited or temporary license with the Professional Engineering Act, or the person has a certificate of registration under the Professional Geoscientists Act, 2000 and is a practicing, temporary or limited member of the Association of Professional Geoscientists of Ontario.

    The Sampling and Analysis Plan is when a Qualified Person assesses the characteristics of the soil to ensure that once the soil is fully understood, there is no need to adjust the original plan set out from the assessment of past use. Sampling and analysis are essential for the soil characterization report to ensure that there is a laboratory understanding of the project area.

    The Soil Characterization Report is the final report to explain the quality of soil that was sampled and tested by the Qualified Person working on the project. In this report, the Qualified Person will set out the narrative of the project area by featuring a site plan and valid laboratory certification.

    The Tracking System will ensure that the project’s soil reaches all of the pre-approved soil reuse destinations that were set out in the Soil Characterization Report. This is for the final confirmation that the reuse plan reaches its full potential to ensure that no possible soil that is destined to be reused is sent to a waste facility.

    Although these challenges may seem like a large amount of additional work for all the project managers that are managing the excavation portion of the project, it is essential to ensure that these steps are taken to ensure that there is minimal waste sent to waste facilities. In conclusion, the priority of the legislation is to ensure that excess soil management is managed to the best of its possibility and that there are not valuable resources being wasted and contaminates are not mismanaged.  

    “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 or speak to 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 Law, COVID-19

    Ontario COVID-19 – Can Your Company Work This Construction Season?

    The extension to the provincial stay-at-home order has caused even greater confusion among all industries, but most specifically, the construction sector which is now subject to additional guidelines.

    On April 16th, the government announced enhanced regulations for the construction sector, adding to and revising how the construction community is to operate at this time. This restriction is in effect until Step 1 of the re-opening plan begins on June 13th.

    The government’s original requirements, which include physical distancing, good ventilation, and disinfection of surfaces/machines/tools, remain in place.  With respect to the recent government regulations, the important change to now note is what construction is considered essential? This post provides an update on what activities and projects are considered essential and an update on the guidelines that were announced.

    As set out in the amended Ontario Regulation 82/20, permitted construction projects and related activities (including land surveying and demolition services) are those that:

     (a)  are associated with the health care sector or long-term care, including new facilities, expansions, renovations, and conversion of spaces that could be repurposed for health care space;

    (b)  ensure safe and reliable operations of, or provide new capacity in,

    (i)  municipal infrastructure, or (ii)  provincial infrastructure, including but not limited to, the transit, transportation, resource, energy and justice sectors;

    (c)  support the operations of, or provide new capacity in, electricity generation, transmission, distribution and storage, natural gas distribution, transmission and storage or in the supply of resources;

    (d)  support the operations of, or provide new capacity in, schools, colleges, universities, or child care centers within the meaning of the Child Care and Early Years Act, 2014;

    (e)  are required for,

    (i)  the maintenance and operations of petrochemical plants and refineries, (ii) significant industrial petrochemical projects where preliminary work commenced before April 17, 2021, or (iii)  industrial construction and modifications to existing industrial structures limited solely to work necessary for the production, maintenance or enhancement of personal protective equipment, medical devices such as ventilators and other identified products directly related to combatting the COVID-19 pandemic;

    (f)  would provide additional capacity in the production, processing, manufacturing or distribution of food, beverages or agricultural products;

    (g)  were commenced before April 17, 2021, and that would, (i)  provide additional capacity for businesses that provide logistical support, distribution services, warehousing, storage or shipping, and delivery services,(ii)  provide additional capacity in the operation and delivery of Information Technology (IT) services or telecommunications services, or (iii)  provide additional capacity to, or enhance the efficiency or operations of, businesses that extract, manufacture, process and distribute goods, products, equipment, and materials;

    (h)  support the operations of broadband internet and cellular technologies and services;

    (i)  are residential construction activities or projects and related services;

    (j)  prepare a site for an institutional, commercial, industrial or residential development, including any necessary excavation, grading, roads or utilities infrastructure;

    (k)  are necessary to temporarily close construction sites that have paused, or that are not active, to ensure ongoing public safety;

    (l)  are funded in whole or in part by, (i)  the Crown in right of Canada or in right of Ontario, (ii)  an agency of the Crown in right of Canada or in right of Ontario, or (iii)  a municipality;

      (m)  are, (i)  intended to provide shelter or supports for vulnerable persons or affordable housing, and (ii)  being funded in whole or in part by, or are being undertaken by, (A)  the Crown in right of Canada or in right of Ontario, (B)  an agency of the Crown in right of Canada or in right of Ontario, (C)  a municipality, (D)  a service manager as defined the Housing Services Act, 2011, (E)  a registered charity within the meaning of the Income Tax Act (Canada), or (F)  a not-for-profit corporation; or (n)  support the operations of or provide new capacity for, veterinary facilities within the meaning of the Veterinarians Act.

    It is clear from the aforementioned list of permitted activities in the regulation that the majority of them are focused on the health care, telecommunications, and personal protection equipment sectors. In addition to that, some other essential construction activities include the maintenance and construction of roads and infrastructure, public safety, and affordable housing services.

    If you have any questions about whether your construction company is able to work during Ontario’s battle against COVID-19, please contact Devry Smith Frank LLP Lawyer Adam Grossi at adam.grossi@devrylaw.ca or 416 446 5094 for any assistance with this matter.    

    “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 Law

    Construction Law 101: Explaining Construction Liens

    What is a Construction Lien?

    Under the Construction Act a person who supplies services or materials to an improvement for an owner, contractor or subcontractor, has a lien for the price of the services or materials over the interest of the owner on the premises. In this respect, a lien functions as a security interest, securing payment of the individual providing services or materials.

    A lien arises and takes effect as soon as a person first supplies services or materials to the improvement. It is also important to note that a lien does not attach to the premises where the Crown (defined broadly under the Construction Act) is the owner of the premises.

    Preservation and Perfection of Liens

    Construction liens are typically (but not always) registered on title and recorded in the Land Registry Office. This means that the registered lien will be publically accessible to anyone seeking information about that property.

    However, not every construction lien can be registered on title ( i.e. when the land subject to the improvement is owned by the Crown) In such cases, a copy of the lien is given to the owner of the land.

    In order to perfect a lien, the claimant must commence an action in the Superior Court of Justice. Where the lien attaches to the premises, a lien claimant must also register a certificate of action on the title.

    There are strict deadlines for the preservation and perfection of liens.

    If you require assistance, pertaining to construction law matters, involving liens, holdbacks and contractual disputes, please contact the construction lawyers at Devry Smith Frank LLP to discuss your rights and options.

    This blog was co-authored by Law Student Amar Gill.

    “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 Law

    Ontario Stone, Sand & Gravel Association Expresses Support For Aggregate Approval Process

    The Ontario Stone, Sand & Gravel Association  (“OSSGA”) has recently written to the Honourable Doug Ford, premier of Ontario, to state that the Premier should not interfere in the licensing and approval process for pits and quarries in the Province [1]. OSSGA did so in response to alarming comments made by the premier about preventing, at any cost, the licensing of a quarry in the Milton area. Comments here.

    The aggregate industry is vital to Ontario.  The stone, sand and gravel which it supplies are used to build homes, schools, libraries, colleges, universities, hospitals, fire and police stations, as well as to construct roads, highways, water and sewer infrastructure, public transportation systems, workplaces, recreational and social centres, arenas and stadiums.  We all contribute to the need for aggregates and we all benefit from the activities of the industry which extracts them.

    Aggregates are to be extracted as close to market as possible to ensure an economical supply of material with shorter truck trips. This also significantly lowers overall emissions.  The industry creates jobs, generates vital revenue for local governments and operates under strict regulations.

    To balance the interests of all stakeholders and to protect the public, the licensing and operation of pits and quarries are subject to the requirements of the Aggregate Resources Act, the Planning Act and 23 other pieces of legislation and hundreds of regulations. The process also involves consultation with First Nations, the scrutiny of provincial government ministries, the review of local planning authorities and governments, the examination of the community, and, often, a hearing in front of the Local Planning Appeal Tribunal.

    The process is a careful, deliberative, and rigorous one. It takes years and a wide array of technical and expert reports, including environmental studies, to complete.  At the end of the life of a pit or quarry, the land must be rehabilitated, which adds green space to the Province.

    The aggregate licensing system in Ontario represents a solid, safe and sustainable approach to bringing vital material to the market. It should not be undermined by political considerations.

    “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 Law, Planning and Development Law
    More Changes to the Construction Lien Act Are Coming in 2019

    More Changes to the Construction Lien Act Are Coming in 2019

    Ontario’s new Construction Lien Amendment Act (the “Act”) has significantly overhauled Ontario’s construction law rules. While the first set of the amendments have already come into force (see our previous blog here), the second set of changes with respect to prompt payment, a new adjudication process and procedural rules are set to come into force on October 1, 2019.

    Prompt Payment

    The Act imposes some tight timelines for payments to contractors and subcontractors in situations involving both public and private contracts. Under the Act, outstanding amounts between an owner and contractor must be paid within 28 days of a proper invoice. Subsequent payments to subcontractors must be paid within 7 days that the contractor receives the payment from the owner. If the contractor was not paid within the 28 day period, the contractor can either pay out its subcontractors anyways or issue a notice of non-payment in the prescribed form. If the owner disputes a portion of the funds, the owner must still pay out the undisputed amount within 28 days. If the contractor only receives partial payment from the owner, it must still distribute the funds to its subcontractors within 7 days, either in full or rateably.

    The sending of a proper invoice triggers these timelines and payment cannot be made contingent upon certification or the prior approval of the invoice by the owner. The owner is required to comply with these timelines or provide a notice of non-payment within 14 days. The contractor must give a notice of non-payment within 7 days after receiving a notice of non-payment from the owner or, if the owner has not issued said notice, within 35 days from the date of delivery of a proper invoice. Any payments made outside of the timelines will have interest accrue at a specified interest rate (as per the Courts of Justice Act, s.127(2)).

    As an invoice triggers these timelines, the Act sets out what is contained in a proper invoice:

    • the contractor’s name and address;
    • the date of the proper invoice and the period during which services or materials were supplied;
    • information identifying the authority (typically the contract) under which services or materials were supplied;
    • description, including quantity, of the services or materials supplied;
    • the amount payable for services or materials supplied and payment terms;
    • the name, title, telephone number, and mailing address of the person to whom payment is to be sent; and
    • any other information that may be prescribed by the contract.

     

    New Adjudication Process

    In an effort to facilitate the quick resolution of construction issues, the Act introduces a new interim adjudication process. The intention of the adjudication process is to allow parties to resolve issues while still pursuing the preservation/perfection of a lien under the Act. Parties are free to agree on any adjudication terms to be added to their agreement.

    Several types of disputes can be referred to adjudication, including, but not limited to, delays, set-offs, deductions, security, proper invoicing and the valuation of work, services and materials. The scope of the availability of adjudication is broad and includes “any other matter that the parties to the adjudication agree to.”

    Adjudicators are appointed from a Authorized Nominating Authority registry. Adjudicators cannot be appointed in advance and must be nominated only when a dispute has arisen.

    Delivering a Notice of Adjudication commences the process. Within 30 days of the Notice, the adjudicator must provide a written determination of his or her decision, with reasons. Adjudication decisions are binding in the interim and enforceable. As such, payment must be made as per the adjudicator’s determination within 10 days of the decision or else the amount is subject to non-waivable interest. The Act allows a party to suspend work as per an adjudicator’s determination but does not allow for the suspension of work until the adjudication is complete. Any decisions rendered outside 30 days are of no force or effect. If a party does not agree with the adjudicator’s determination, they are allowed to appeal it to the courts or an arbitrator as well as negotiate a written agreement varying the terms.

    Jurisdiction and Procedure

    As the Act will have an adjudication process, several provisions relating to jurisdiction and procedure will be repealed. For instance, leave for interlocutory steps is will no longer be required, lien and trust claims will be brought in a single action, and the requirement that a lien action must be commenced in the jurisdiction where the land is located will be removed.

    What this Means

    The laws with respect to construction in Ontario and elsewhere are changing. It is very important to consult an experienced construction law lawyer with respect to vetting your organization’s invoices, contracts and general practices.

    “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 Law
    Ontario Has a New Construction Act: What You Need to Know About the Transition Period

    Ontario Has a New Construction Act: What You Need to Know About the Transition Period

    On July 1, 2018, the first set of changes under Ontario’s Construction Lien Amendment Act (the “Act”) came into force. This Act overhauls Ontario’s construction regulatory framework. Not only should the changes be made note of by Ontario businesses in the construction sector, but the implementation of similar legislation is expected to follow in other provinces.

    The legislation was enacted after a 2016 report from the Ministry of the Attorney General called Striking the Balance: Expert Review of Ontario’s Construction Lien Act made 100 recommendations for modernizing Ontario’s Construction Lien Act. On May 31, 2017, the Ontario legislature passed the Act (Bill 142) adopting almost all of the recommendations in the report.

    The first amendments that came into force were those modernizing the construction lien and holdback rules as well as the alternative financing and procurement provisions. The second set of amendments deals with prompt payment, a new adjudication process and procedural matters (to be discussed in a subsequent blog) and will come into force on October 1, 2019.

    Transition Provisions

    It is important to note that the new Construction Act primarily applies to prime contracts that were entered into after the legislative provisions come into force. The old version of the Construction Lien Act still applies if the prime contract was entered into prior to the changes coming into force (regardless of when any subcontract under the contract was entered into), if the procurement process was commenced by the owner prior to the changes coming into force or if the premise is subject to a leasehold interest and the lease was first entered into prior to the amendments coming into force.

    Preservation and Perfection of Liens

    Prior timelines with respect to liens were often not workable given common delays in paying invoices in the construction industry. The Act extends the deadline for preservation of a lien to 60 days (from 45 days) and the deadline for perfection of a lien to 90 days (from 45 days) from the last day which a lien could have been preserved. This extension allows parties to have more time to negotiate payment as well as to utilize the new adjudication process, coming into force on October 1, 2019.

    What is lienable has also changed: prior to the amendments, the definition of improvement included general repairs. Now, the legislation has narrowed the term to a “capital repair” that extends the “normal economic life” of the land. While this may seem like a minor one word addition, the result is that true ordinary maintenance is expressly not considered to be an improvement and does not give rise to any lien rights.

    The definition of a “price” under the Act has also changed so that a lien can include any direct costs incurred by the contractor as a result of the delay, but “direct costs” excludes any indirect damage suffered such as a loss of profit, productivity or opportunity as well as any head office overhead costs.

    Holdback Payments

    The Act has also significantly modified the law with respect to holdback payments. It is now mandatory for an owner to release the statutory holdback funds once the lien period has expired, unless the owner publishes a notice of non-payment within 40 days of the certificate of substantial performance and notifies the contractor of the publication of the notice of non-payment. In reality, the new provision requires the owner to have a bona fide reason to refuse to release the holdback as an unjustified refusal would raise the material risks of disputes and liens as the 40 day period occurs prior to the expiry of the lien period (see above).

    Moreover, the Act now allows for the release of holdback payments on an annual basis or upon the occurrence of milestones or phases. This can occur if the following conditions are met:

    • The contract provides for an annual or phased release of accrued holdback;
    • The contract price is over the prescribed amount (currently set at $10,000,000)(not applicable for the design phase);
    • The contract time is scheduled for over one year, or provides for work to be completed in identified phases; and
    • There are no liens registered that have not either been vacated or discharged at the time the accrued holdback is to be released.

    There are also new duties imposed on contractors, subcontractors and owners as trustees of trust funds. In particular, trustees are required to deposit the price they received on their contract/subcontract price to a bank account in the trustee’s name. Moreover, they must maintain written records of the trust funds and keep all information regarding transfers in and out of the trust.

    In addition, the Act has limited a trustee’s right to set-off. Previously, the Construction Lien Act allowed for a trustee to set-off money owed for any outstanding debt or damages whether or not related to the improvement. Now, the right to set-off must be related to the specific improvement.

    Alternative Financing and Procurement

    Prior to the amendments, there was uncertainty about who was the owner on projects where a special purpose company contracts with a public sector entity to undertake a specific project. Now the Act deems the special purpose company to be the owner and the contract between the company and the contractor will be deemed to be the contract with respect to the provisions relating to substantial performance, calculating the lien period, certification of substantial performance, and information requests under the Act. For all other purposes the Crown, municipality or broader public sector organization who owns the premise continues to be the owner under the new Act.

    What this Means

    The laws with respect to construction in Ontario and elsewhere are changing. It is very important to consult an experienced construction law lawyer with respect to vetting your organization’s invoices, contracts and general practices.

    “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 Law, Corporate Law