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.

Still waiting to see what the Court does with the new definition of “improvement” under the Construction Lien Act?

In 2010, the Ontario Legislature passed the Open for Business Act, 2010, which included several changes to the Construction Lien Act.  When I learned of the coming amendments, the one that interested me the most was an amendment to the definition of what is an “improvement” under the Construction Lien Act.

In 2007 (and under the former definition), the Ontario Court of Appeal upheld a trial judge’s ruling that the transporter and installer of a 100,000 square-foot, 500,000 ton automotive assembly line (built off-site, disassembled, transported, reassembled on-site, and fastened to the building with 2,000 to 3,000 bolts) did not have lien rights, because the installation of the assembly line did not fall within the old definition of an “improvement” as it was “portable”.  The Court of Appeal refused to interfere with the trial judge’s finding that the assembly line was portable and the appeal was dismissed.  I’m not kidding. (See Kennedy Electric Limited v. Dana Canada Corporation, 2007 ONCA 664 (CanLII) and Kennedy Electric Ltd. v. Rumble Automation Inc., 2004 CanLII 47787 (ON S.C.)).

The construction industry (and more than a lawyer or two) was surprised by the Court’s interpretation and so too, it seems, did the Ontario Legislature disapprove because the definition of “improvement” at section 1 of the Construction Lien Act was amended to now expressly include the installation of industrial, mechanical, electrical or other equipment on the land/building/structure/works where the equipment is essential to the normal or intended use of the land/building/structure/works.

This amendment came into force in October, 2010 and I’ve been keeping an eye on the reported caselaw but have yet to see a decision that gives a meaningful interpretation to the new definition and that tests the boundaries of what sort of “other equipment” might constitute an improvement and what “essential to the normal or intended use” means. At one extreme, the new definition could be interpreted to extend to, for example, dishwashers or water softeners installed in homes. At the other extreme, the Courts might be more conservative and the new definition might be fairly narrowly applied to large scale, purpose built equipment (like the equipment in the Kennedy Electric case).  It’s something to think about.  As soon as I see something on this, I’ll put something up here.