July 1, 2018 – The First Day of the Rest of the New Ontario Construction Act’s Life

Change to the construction payment and lien landscape has been rolling towards us for several years and it’s finally upon us.  So, ready or not, it’s time to learn and implement these changes. Fortunately, to stagger their impact and give people a chance to adjust a bit more gradually, the in-coming changes to the Construction Lien Act (to be renamed the Construction Act) will take effect in two separate phases.  The first set of changes will come into effect on July 1, 2018 and the second set of changes will come into effect 15 months later, on October 1, 2019.

The changes are a result of the passing of the Construction Lien Amendment Act, 2017 in December 2017 and the changes have, as their objectives, improving promptness of payment in the construction industry and “modernizing” the construction lien and trust regime in the Province of Ontario.

The first set of changes are the focus of this post.  A future post will delve into the (arguably more dramatic and complicated) changes coming in 2019.

If you’re inclined to comb through the legislative changes themselves, you can click here to link to the Construction Lien Act and you can click the following links to the new regulations (relating to general matters, forms, and procedures for actions under Part VIII of the Construction Act).

Transition provisions for projects

The first thing to note is that, while a raft of changes take effect July 1, 2018, they won’t necessarily apply to every project.  The transition rules are set out under section 87.3 of the Construction Act and the old Construction Lien Act will continue to have effect if, before July 1, 2018:

  • a contract for the improvement between the owner and the contractor was entered into; or
  • a procurement process for the improvement was initiated; or
  • the premises in question is subject to a leasehold interest, with the lease being entered into before then.

So, no existing construction work or projects will be subject to the new regime under the Construction Act and even projects at a procurement (tendering, RFP) stage at any time prior to July 1, 2018 will remain under the old Construction Lien Act.

So…what’s the big deal? What’s changing on July 1, 2018?

The changes coming into force July 1, 2018 are wide-ranging and scattered throughout the legislation and regulations.  This post doesn’t aim to identify or discuss each and every one of them. Rather, the following is a summary of the most significant changes and those likely to be of the most interest to those in the industry.

Alternative Financing and Procurement (AFP or P3)

There are some new provisions dealing with these unique projects which seek to clarity how the Construction Act will apply to projects with this delivery model having different processes and requirements than “typical” projects.  Because these changes are of targeted application and are quite lengthy, they aren’t discussed in detail here but (for those interested) they can be found at the new section 1.1 of the Construction Act.

Lien Timelines

Perhaps one of the most iconic changes is the demise of the 45-day lien periods with which everyone is so familiar.  The current 45-day period to register (preserve) a lien will now be 60 days and the current further 45 days to perfect a lien will be 90 days.

In addition, “termination” is added as an express 60-day trigger and, in cases of termination, there is a new requirement to publish a notice of the termination as prescribed by regulation.

A word of caution – when it comes to preserving or perfecting a lien, if there is any doubt as to whether a project falls under the old Construction Lien Act or the new Construction Act under the transitionary rules, unpaid parties with lien rights would be wise to assume that the shorter 45-day periods apply in order to avoid the risk of the inadvertent expiry of lien rights.

New Provisions re Trust Funds

Everyone below the owner (contractors and subcontractors) who is a statutory trustee will have new obligations in dealing with trust funds and these include:

  • depositing trust funds in a bank account in the trustee’s name; and
  • maintaining written records regarding the trust funds (debits, credits, transfers) for each trust.

Provided the new rules are followed, funds can be held in a single bank account though it might wind up being prudent and good practice to establish separate project or contract specific accounts to make compliance and accounting easier and less susceptible to error.

Holdback Rules

The new Construction Act makes it mandatory for an owner to release the statutory holdback once the lien period has expired unless the owner

  • publishes a notice of non-payment in the prescribed form within 40 days of the publication of the certificate of substantial performance, and
  • notifies the contractor of the publication.

This new provision requires the owner to have a legitimate reason to refuse to release the holdback and to make it known so that others (contractors and subcontractors) can make decisions and take action accordingly.

Another change related to holdbacks permits the release of holdback on an annual basis or phase/milestone basis where:

  • the contract provides for an annual or phased release of accrued holdback;
  • the contract price is over the prescribed amount (currently $10,000,000);
  • 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 been either vacated or discharged at the time the accrued holdback is to be released.

Mandatory Labour and Material Payment Bonds

All contractors (except architects and engineers) working under a “public contract” (newly defined) are now required to provide labour and material bonds and performance bonds for 50% of the contract price for contracts valued at $500,000 or more.  However, the minimum coverage limit is 50% of the contract price for contracts valued at $100 Million or less, and a minimum coverage of $50 Million if the contract value is $100 Million or more where the project falls under section 1.1 (AFP/P3).

Some Other Miscellaneous Changes to Note

Some of the other notable changes that are a little more difficult to group together include:

  • The “3-2-1 Formula” for determining when substantial performance has been achieved now uses percentages of $1 Million in contract price as opposed to the old $500,000;
  • When a section 39 request for information is sent to a mortgagee and the mortgage funds were advanced, in part, to buy the land and, in part, to finance construction, the mortgagee must identify the amounts advanced under each segment in its response;
  • Condominium unit owners can now expressly bring a motion to vacate liens for work done to common elements from their own units by posting security (this could be done before but required a cobbling together of the Construction Lien Act, the Condominium Act, and caselaw);
  • Lien claims for less than $25,000 can now be brought in Small Claims Court;
  • lien claims and trust claims can now be joined in an action;
  • When vacating a lien by posting security in Court, the maximum security for costs that must be posted increases from $50,000 to $250,000;
  • Appeals from interlocutory orders are now permitted but only with leave of the Divisional Court.

While far from a comprehensive description or analysis of the incoming changes, hopefully the foregoing provides a useful overview of some of the ones of broad application and a sense of what sort of changes to practices and procedures will be required.  If you have any specific questions or would like to consider engaging us to assist you with implementing and navigating the Construction Act please contact me at azasada@sorbaralaw.com or 519-741-8010 x 248.

The Ontario “Construction Lien Amendment Act” Passes

On December 5, 2017, the Ontario Legislature passed Bill 142 – the “Construction Lien Amendment Act” which will dramatically change and modernize the Ontario Construction Lien Act (to be re-named the Construction Act) – legislation that has stood in place in this Province with little in the way of change for decades.

Those involved in the construction industry that will be affected by this new legislation – from owners to lenders to contractors to suppliers – have different and varied interests and so it’s no surprise, really, that there will likely be little consensus as to what changes will represent an improvement to the current regime and which ones will prove problematic. From conversations I’ve had and seminars I’ve attended, though, it seems that there is fairly widespread agreement that 1) some of the changes are overdue and 2) the learning curve for both industry players and their lawyers is going to be relatively steep as the changes take effect.

It’s expected that the amended legislation will roll out and come into force sometime in 2018.

Lien legislation under review in both B.C. and Ontario

Ontario’s Construction Lien Act is under review and I was recently asked (and agreed) to participate in the process. However, I didn’t know, and just read in “B.C. Builders Lien Act reform getting underway” by Russell Hixson in the Journal of Commerce, that British Columbia’s Builders Lien Act is currently undergoing a similar review. While the lien legislation of the two Provinces share a lot of similarities, they also have some pretty significant differences. It will be interesting to see how the reviews unfold and whether the proposed (and ultimately implemented) changes take the two acts in the same direction or if, instead, one finds a change (or changes) that the other doesn’t.

An imperfect pleading (apparently) still perfects a construction lien

ScalesA Decision (arising from a motion to have a construction lien discharged and security posted returned) in 984499 Ont. Inc. v. 1159337 Ont. Inc. et al. was released by the Ontario Superior Court of Justice on July 2, 2013, and we are – yet again – reminded how forgiving the Ontario courts can be when a lien claimant has arguably failed to comply with some ostensibly fundamental aspect of the Construction Lien Act.

The facts are (whittled down) as follows:

The Plaintiff (a general contractor for a hotel renovation) was unpaid and preserved its lien by registering a construction lien within the required time.  The owner posted security with the Court in order to vacate the lien from title and the lien claimant commenced an action.  However, the action commenced by the Plaintiff did not:

    • expressly seek to enforce a construction lien – against the security in Court or against the land;
    • mention the lien claim registered on title, the vacating order, the monies paid into court or perfection of the lien; and
    • mention or plead the Construction Lien Act at all other than to plead reliance on the trust provisions of the Construction Lien Act.

The Defendant (owner) brought a motion for a ruling that the construction lien had not been perfected in accordance with the Construction Lien Act because the Statement of Claim was not in the nature of an action to enforce the lien as is required by section 36(3) of the Construction Lien Act and that it could not be an action to enforce a lien because it pleaded the trust provisions of the Construction Lien Act and section 50(2) says that an action to enforce a lien and a trust claim shall not be joined together.

Mr. Justice Whalen dismissed the motion and, relying on Rules 1.04(1) and 26 of the Ontario Rules of Civil Procedure, allowed the Plaintiff to “cure” or “fix” the Statement of Claim to effectively bring it in compliance with the Construction Lien Act.

My own view is that this Decision is wrong and, like other similar Decisions, is in stark contrast to what I think is a better line of cases in B.C. (under its fundamentally very similar Builders Lien Act) which hold that lien legislation, while being remedial, creates an extraordinary remedy (it allows one party to encumber the property of another before judgment and creates priorities between creditors, etc) that is strictly a creature of statute and so the legislation must be interpreted strictly and the court has no discretion to depart from the express statutory requirements.  I have little doubt that if 984499 Ont. Inc. v. 1159337 Ont. Inc. et al. had been decided in B.C., the Defendant’s motion would have succeeded.  See, for example, Nita Lake Lodge Corp. v. Conpact Systems (2004) Ltd., a 2006 Decision of the Supreme Court of B.C. in which a $300K+ lien was extinguished solely because the lien claimant failed to properly name the company with which it had contracted and from which it claimed to be owed money.

While, the Ontario Construction Lien Act contains a curative provision at section 6, it does not apply to pleadings and is not so broad as to convert a Statement of Claim that does not seek to obtain or enforce a construction lien into one that does.  Similarly, this wasn’t a case where there was some poorly drafted paragraphs but it was still, in substance, a claim to enforce a construction lien as required by the Construction Lien Act such that a Rule 26 amendment could improve the pleading or fix some minor flaws.  Rather, it was an action that did not plead material facts to support a finding of a lien or claim a lien as a remedy and so the Plaintiff, in my view, had not perfected its lien as required by section 36 of the Construction Lien Act and the lien should have been discharged and the security returned to the owner.

Ontario Court of Appeal finds that the decisions of Tarion’s inspectors are “judicial decisions”

The Ontario Court of Appeal  released  Metropolitan Toronto Condominium Corporation No. 1352 v. Newport Beach Development Inc. earlier this week.  It’s an interesting case and may actually provide some useful jurisprudence in litigation involving defects and claims under the Ontario New Home Warranties Plan Act (ONHWPA).

The facts are nicely summarized at the outset of the Decision as follows:

2] The respondent Metropolitan Toronto Condominium Corporation No. 1352 (“Metro 1352”) manages a luxury condominium project in Etobicoke near the shore of Lake Ontario. It alleges that the project has two major construction defects. It claims that the sanitary sewer system was not built properly, causing toilets in the condominium units to overflow and the units themselves to flood with sewage. It also claims that a systemic failure of the exterior cladding over the project, called the exterior insulated finish system (“EIFS”), has caused water penetration in the condominium units.

[3] Metro 1352 sought compensation for these two defects under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. 0.31 (the “Act”). The administrator of the Act, the respondent Tarion Warranty Corporation, denied compensation. Instead of appealing Tarion’s decisions to the Licence Appeal Tribunal, as it was entitled to do, Metro 1352 started this litigation. It has sued Newport, the vendor and declarant of the project; Canderel, a developer related to Newport; Spampinato, an officer of Canderel; Enersys Engineering Group Ltd. and Eric Pun, the engineers on the project; and Tarion. It has asserted causes of action for breach of statutory warranty, negligence, breach of fiduciary duty and breach of contract. The engineers have been noted in default. The other defendants have not delivered a statement of defence.

[4] On its Rule 21 motion Newport asked for various forms of relief, but principally for an order dismissing the action on the ground that the litigation is an abuse of process. Newport argued that Tarion’s decisions denying warranty coverage could only be reviewed by an appeal to the License Appeal Tribunal. Either the doctrine of issue estoppel or the rule against collateral attack prevented Metro 1352 from re-litigating its claim by a civil action. The motion judge, Corrick J., disagreed and dismissed the motion in its entirety.

[5] On its appeal Newport raises three issues, which I put in the form of questions:

(1) Did the motion judge err by failing to dismiss Metro 1352’s claims relating to defects in the sanitary sewer system and the EIFS, both against Newport and Tarion, as an abuse of process?

(2) Did the motion judge err by failing to dismiss the claim for breach of warranty for defects in the sanitary sewer system on the ground that they do not constitute a major structural defect under s. 13(1)(b) of the Act?

(3) Did the motion judge err by failing to dismiss the claim for defects in the EIFS on the ground that the claim was a new cause of action added by amendment to the statement of claim after the expiry of the limitation period?

One of Newport’s arguments in relation to the first question above was that the doctrine of “issue estoppel” should – Metro 1352 having already been provided determinations by Tarion that the defects were not compensable under the ONHWPA – prevent Metro 1352 from suing Newport in Court over those very same issues.

In analyzing Newport’s argument regarding issue estoppel, one of the things that the Court of Appeal had to consider was whether Tarion’s decisions were “judicial” decisions.  To my surprise and horror (OK…not horror, near horror), the Court of Appeal disagreed with the motion judge and ruled that the decisions of Tarion’s inspectors are “judicial” in nature.

I obviously don’t know whether any of the learned judges hearing this appeal have personally gone through the process of a Tarion inspection and of finding out what Tarion deems “warranted” or “not warranted” via its Warranty Assessment Report process. I also don’t know what evidence the learned judges had before them in terms of what the inspectors do (process, rules, policies) and what sort of education and training they have.  That said, in addition to representing clients involved in disputes with Tarion, I’ve been through several Tarion inspections myself  and  “judicial” is not a word that comes to mind when I consider how the Tarion inspectors handled my claims.  In my own experience, the Tarion inspectors that determined what was deemed warranted and what was deemed not warranted:

  • Communicated regularly with both me and the builder in the absence of the other before (and after) issuing the Warranty Assessment Report, making the process far from open and transparent. Both sides can feed the inspector information without the other side necessarily knowing about it and there is, therefore, no way to know what information is being provided and what sort of verification is being done.
  • Did not hold anything that could reasonably be considered a “hearing”.
  • Don’t allow third/non-parties to be present during the inspection. If it is “judicial” or adjudicative in nature, why wouldn’t an owner or builder be permitted to have a lawyer or an expert, for example, present?
  • Adhered rigidly and inflexibly to Tarion’s “Construction Performance Guidelines” which are a useful but, in my view, imperfect and incomplete set of “guidelines”.  There is not much “judicial” analysis involved in robotically applying “guidelines” as though they are infallible and carry no exceptions.
  • Did not have any legal training.
  • Ignored large amounts of information provided to them (such as manufacturer’s installation instructions that had not been followed by our builder).  None of this showed up anywhere in our Warranty Assessment Reports and when I asked about it at the inspection, I was told by one of the inspectors that he “hadn’t looked at it”.
  • Didn’t bring a ladder or binoculars or have any way of “inspecting” second story exterior deficiencies for which they had ample and complete notice were to be assessed.  If the inspectors are tasked with inspecting deficiencies and then making a “judicial” determination regarding same, how can they possibly do so if they show up and don’t have any manner of even looking at the alleged deficiency?
  • Didn’t take note of most things either party said during the inspection. While I don’t think a detailed transcript should be required, when few notes are taken one is left to wonder how much information is actually making it onto “the record”.

At the end of the day, I think that the outcome (and most of the analysis) in this Decision is correct so it may be that not much turns, in practice, on this aspect of the Decision.  It just strikes me – as I expect it might strike many who have had the experience of actually going through the Tarion conciliation inspection and assessment process – that to call Tarion’s internal decision making process “judicial” is inaccurate and diminishes truly judicial decision making.  Just because an animal has a bill, webbed feet, and lays eggs, doesn’t necessarily mean it is a platypus.

Can the Ontario Repair and Storage Liens Act be used to secure unpaid debts in the construction context?

The short answer: Possibly sometimes, maybe.

I recently had a case where this was one of the primary issues.  My client was supplying coated structural steel for a large steel building.  Raw (uncoated) steel was purchased in the US, shipped to Ontario to be coated by a third party subcontractor and, once coated, the steel was then shipped to the project site (located in another Province).  A dispute arose between my client and the subcontractor coating the steel regarding price and claimed extras and the subcontractor asserted a construction lien in relation to the steel already delivered to the project site and a possessory lien under section 3 of the Repair and Storage Liens Act (RSLA) over the steel still in the subcontractor’s possession.

In my view, the subcontractor’s invocation of the RSLA to assert a possessory lien over the steel in its possession (effectively holding my client’s steel hostage until my client posted security with the Court to secure its release) was a twisted and tortured application of legislation ostensibly designed to provide security to an unpaid “repairer” who had fixed a sailboat or a car or a wristwatch or some other widget (you get the idea).  However, the definitions of “article”, “repair”, and “repairer” under the RSLA are so expansive that, at least at first blush, it can be argued to apply to individual items (i.e. steel) in the manufacturing process.  The relevant definitions are:

“article” means an item of tangible personal property other than a fixture;

“repair” means an expenditure of money on, or the application of labour, skill or materials to, an article for the purpose of altering, improving or restoring its properties or maintaining its condition and includes,

(a) the transportation of the article for purpose of making a repair,

(b) the towing of an article,

(c) the salvage of an article;

“repairer” means a person who makes a repair on the understanding that the person will be paid for the repair;

As you can see, these definitions are extremely broad and almost any item is capable of being an “article” and almost anything that someone can do to that item (with the expectation of compensation or profit) can be considered a “repair”.  The real pinch, though, is just how powerful (and some might say draconian) the RSLA is – without getting into the fine legal details, it gives the party asserting the possessory lien the ability to hold the item(s) hostage, name its price, and barring early and expensive court challenge or the posting of security, sell the item(s) without any trial or court Order.  No other statute in Ontario, that I’m aware of, gives a self-declared creditor that kind of power without any kind of pre-execution/pre-sale judicial process.

Realistically, this apparent potential for misapplication of the RSLA in the manufacturing/construction process is not likely to have a frequent or significant effect on the general construction industry – the problem my client ran into with the RSLA can only practically arise when Party A delivers its own material to party B for Party B to “alter” or “improve” that material and then a dispute arises between Party A and Party B while Party B still has Party A’s “articles” in its possession.  This is where Party B can hold Party A’s own material hostage to extract payment (or the posting of security) for Party A to secure its release.  In the more common scenario where Party A is paying Party B money to build or “alter” or “improve” Party B’s own material, the RSLA doesn’t really work because Party B would simply be refusing to release its own material to Party A – doesn’t pack quite the same punch.

If your business (or that of one of your clients if you are a lawyer or professional advisor) involves delivering materials to someone else for them to be altered or improved, beware the RSLA.  Where this is the case, the RSLA permits the parties to contract out of the repairer’s right to a possessory lien (the opening words of section 3) and doing so should be given some very serious consideration.

Legistative Amendment Required – Posting security to clear a “common element” related lien from an individual condominium unit should be easier

I recently learned that, when it comes to securing the release of a construction lien for work done to the common elements from an individual condominium unit by paying security into Court, the Ontario Construction Lien Act and the Ontario Condominium Act don’t play particularly well together.  The problem is that neither piece of legislation has a clear and express mechanism for the owner of a condominium unit to pay money into Court as security to clear title to the unit where a construction lien attaches to the unit but arises from work done to the common elements of the condominium corporation.

Where the work is done to an individual unit (i.e. a kitchen renovation) and the construction lien is registered against that unit, section 44(1) of the Construction Lien Act provides a simple mechanism for the owner to clear title (to sell or refinance, for example).  However, the Construction Lien Act provides no such simple mechanism where the work was done to the common elements (i.e. a roof replacement or elevator repair) and the contractor and its subcontractors have registered the full value of their alleged liens against title to all of the units comprising the condominium corporation.

I had occasion to argue this issue in Court recently and cobbled together an argument using:

  • sections 11, 13, 14, 18(2), and 23(6) of the Condominium Act;
  • sections 44(2) and 44(4) of the Construction Lien Act; and
  • the Decision of Master Polika in Associated Mechanical Trades Inc. v. Kurzbauer, [2008] O.J. No. 4688 (S.C.J.)

to argue that the proper amount to be posted as security to clear title to individual units should be the unit’s proportionate share of the lien (determined by the unit’s interest in the common elements as established by the declaration) and that same proportion of the unit owner’s potential exposure to the security costs contemplated by section 44(1) of the Construction Lien Act.  The lawyer opposing my motion had a couple of different theories of what security my client ought to post in relation to each unit.  At the end of the day, Mr. Justice Reilly agreed with my argument.  However, if the legislation – either the Condominium Act or the Construction Lien Act – were amended to provide a clear mechanism to address this problem, costly Court hearings such as the one I recently argued could be avoided and it could be as simple to clear title by positing security for condominium units as it is under section 44(1) for non-condominium properties.

On a closing note, the B.C. legislature seems to have recognized this need and provided a solution.  The B.C. equivalent of Ontario’s Condominium Act is the Strata Property Act and its equivalent of Ontario’s Construction Lien Act is the Builders Lien Act.  Under the Strata Property Act, Division 5 of Part 5 (sections 86-90) plus section 166 provides what is pretty much a complete mechanism for an owner of an individual strata lot to remove a builders lien arising from work to common property upon payment into Court of the strata lot owner’s proportionate share of the lien.  I can’t see any good reason why the Ontario legislature shouldn’t follow suit to enact similar provisions in Ontario since this seems to be the combined, though not clearly articulated, intent of sections 11, 13, , 14, 18(2), and 23(6) of the Condominium Act and sections 44(2) and 44(4) of the Construction Lien Act.

Two recent Court Decisions affirming that the Ontario New Home Warranty Plan is for the protection of new home buyers

The courts in Ontario have held, on a number of occasions, that the Ontario New Home Warranties Plan Act (“ONHWPA”) is legislation established to protect and provide additional remedies to buyers of new homes.  These Decisions have normally arisen in the context of disputes between homeowners on one side and their builder and Tarion on the other.  Two interesting Decisions recently came down from the Ontario Court of Appeal that have, albeit in a completely different context, affirmed that the ONHWPA is remedial, consumer protection legislation. The first of these Decisions is Tarion Warranty Corporation v. Boros, 2011 ONCA 374 (CanLII) (leave to appeal to the Supreme Court of Canada refused) and the second is Tarion Warranty Corporation v. Kozy, 2011 ONCA 795 (CanLII).  In both cases, the issue before the Court of Appeal was whether the homebuilders were “builders” under the ONHWPA such that they were caught by the registration (and other) requirements of the legislation.

From a residential builder’s perspective, these cases are primarily of significance because there is now clear and strong authority that the ONHWPA can’t be circumvented or avoided by simply leaving a small portion of construction out of the contract for the buyer to complete.

From a homeowner’s perspective, there are two noteworthy things about these cases:

  1. I believe that this is the first time the Ontario Court of Appeal has so clearly and unequivocally affirmed that the ONHWPA is remedial consumer protection legislation and that it is to be interpreted broadly and liberally as such; and
  2. Under the circumstances of these cases, it appears to have been Tarion, not new homeowners, arguing for this purposive, broad, and liberal interpretation of the ONHWPA.

It will be very interesting to see what the courts do with this purposive, broad, and liberal interpretation of the ONHWPA (and Tarion’s corresponding purpose and obligations) when a good case comes along within which to test and question how Tarion assesses and handles homeowners’ claims regarding deficiencies and “unauthorized substitutions”.  Having read many, many License Appeal Tribunal and court Decisions, I’ve yet to see one that gives a comprehensive and satisfactory treatment on this important aspect of the warranty.

Tarion providing protection to Ontario’s new homebuyers?

I watched an interesting little piece on CTV’s W5 last night that dealt with several Ontario homeowners’ difficulties surrounding the heating systems installed in their new homes and their frustration in dealing with Tarion.  Click here for a link to the online article on the same piece.

Tarion provides and administers Ontario’s mandatory new home warranty program under the Ontario New Home Warranties Plan Act (“ONHWPA”) and its regulations.   Based on the W5 story and others I’ve seen, Tarion still seems to be really struggling with the concept that the ONHWPA is consumer protection legislation and that, as such, protecting homeowners is Tarion’s primary (if not sole) mandate.  There have been at least a couple of cases decided by the Ontario Courts where the Court has expressly stated that the ONHWPA is consumer protection legislation and yet the piece on W5 is just the most recent of many, many stories and articles in the media telling a very similar story.  The message – even when delivered by the Courts – just doesn’t seem to be getting through.

I’m skeptical by nature and, a few years ago, I might have chalked these media stories about problems with Tarion up to whiny homeowners and/or overzealous reporters.  However, as the purchaser of two (consecutive) new homes in the last four years, I’ve had the personal displeasure of tangling with Tarion not once, but twice.  I won’t bore you with the details but I will tell you that, with both houses, I had several substantial and legitimate deficiencies that Tarion deemed “Not Warranted”.  If you’ve ever received a Warranty Assessment Report from Tarion, you will be entirely too familiar with these two words.  I’ve been litigating construction deficiency claims for more than a decade and I have a pretty good sense for what should be covered by a warranty and what probably isn’t.  Tarion knew I was a construction lawyer and I was still treated by Tarion as though I had no idea what I was talking about and would just placidly accept its patently wrong decisions.  It was a real eye-opener and I remember feeling extremely sympathetic to folks that are trying in vain to get help from Tarion and don’t have the skills or resources to take Tarion to task when it determines some of their very legitimate complaints to be “Not Warranted”.

Seeing this W5 story has renewed my interest in trying to help to educate homeowners and I will, in the near future, post some information here that Ontario homeowners dealing with Tarion might find helpful.

“Recent” amendments to the Ontario Construction Lien Act

In the age of Twitter and electronic media, it’s old news by now (the last of the amendments came into force last summer) but, in the interest of one-stop-shopping, I figured I ought to throw up a brief post summarizing the “recent” amendments to the  Construction Lien Act.

Definition of “improvement”

The definition of  “improvement” at section 1 of the Construction Lien Act has been amended and now expressly includes the installation of industrial, mechanical, electrical or other equipment on the land where the equipment is essential to the normal or intended use of the land.

It will be very interesting (for construction law nerds like myself, anyway) to see how far the courts will go in extending lien rights to installed equipment.  See my other post on this here.

Condominiums

Under this amendment (new section 33.1 of the Construction Lien Act), condominium developers will be required to publish notice of their intention to register the condominium declaration in accordance with the Condominium Act in a construction trade newspaper (the Daily Commercial News) five to fifteen days prior to registration.

This amendment will provide unpaid persons having liens notice of the pending registration of the condominium declaration so that they can preserve their lien rights before the lands and premises are legally divided into separate condominium units and title is transferred to homebuyers.

Prior to the registration of the declaration, the condominium improvement can be liened in the normal manner, even if the work of the person having a lien is to parts of the project which, after registration of the declaration, will be common elements. This amendment will provide an opportunity to avoid the much more expensive and time consuming requirement of liening the common elements of a condominium after the declaration has been registered.

Check out one of my colleague’s comments on this change here.

Affidavit of Verification

Prior to these amendments (to sections 34 and 40(1) of the Construction Lien Act), a claim for lien had to be verified by an Affidavit of Verification which was typically sworn by the lien claimant. In an effort to keep pace (or at least not fall out of sight) with the new(ish) electronic registration system for land titles documents, verifying a claim for lien by Affidavit will no longer be required.

Also, instead of cross-examining the deponent of the Affidavit of Verification, the lien claimant, the agent or assignee of the lien claimant, or a trustee of the workers’ trust fund (as the case may be) will be subject to cross examination.

Sheltered Liens

Under these amendments (to sections 44(9) and 47(2) of the Construction Lien Act), a lien claimant whose lien is sheltered under a certificate of action that has been vacated from title by Court Order will still be able to proceed with an action to enforce its sheltered lien as if the Order to vacate had not been made.

These amendments were introduced to facilitate the vacating of liens by Court Order while, at the same time, protecting the rights of sheltered lien claimants.