Recent changes which may suspend the time periods for preserving and perfecting lien claims under the Construction Act (the “Act“) and, under its predecessor legislation, the Construction Lien Act (“CLA”), have been implemented in response to the COVID-19 crisis, by virtue of the passing of the Emergency Management and Civil Protection Act (the “Regulation“) in Ontario.
These changes are retroactive to March 16, 2020, and although still subject to final judicial interpretation and until then somewhat controversial among construction lien experts, may suspend the existing requisite time periods for a maximum period of 90 days, subject to further extension in certain circumstances.
This suspension/extension of the current requisite time periods under the Act and CLA (as applicable), would have significant impact for owners of real properties currently under construction or renovation, as well as for their contractors and subcontractors. This would also inevitably have a major impact on mortgage lenders who are financing or refinancing construction projects.
Prior to the enactment of the Regulation, a lien automatically expired, unless within the period specified for same under the Act or the CLA (as applicable),
i) the lien was preserved by registration of a lien claim against title to the real property, and
ii) unless it was perfected within the period specified for same under the Act or the CLA (as applicable), by issuance of a Statement of Claim and registration of a Certificate of Action on title to the real property.
The Regulation may have, by design or unintentionally (yet to be determined), extended both such time periods by at least 90 days.
Given the pending controversy as to whether or not the Regulation extends the requisite timelines as mandated by the Act and/or CLA (as applicable), and so as to protect the respective rights of owners, contactors, subcontractors and mortgagees pending final adjudication of same, the parties may wish to follow the following suggested guidelines.
Preservation and Perfection of Lien Claims
See article ‘Are Lien Rights Affected by COVID-19?’ above.
Release of Holdback
Since, as a result of the Regulation, lien claims may now not expire for an additional 90 days or more, the party releasing a holdback should, prior to release of post March 16, 2020 holdbacks, out of an abundance of caution:
i) presume that the requisite periods have been extended by the additional maximum 90-day suspension period mandated by the Regulation,
ii) make sure no liens have been registered or notified to such party within such extended period, and
iii) ascertain that the maximum suspension period mandated by the Regulation has not been further extended beyond the 90 days stipulated in the Regulation.
If you have any questions as to how this may impact your loan or your project, please do not hesitate to contact me.