2020.04

Caution Up Ahead: Register your Construction Liens and Release Holdbacks

By: Shane E. Kazushner

As everyone knows by now, the Ontario Government declared a state of emergency because of the COVID-19 pandemic.  Shortly thereafter, on March 20, 2020, the Ontario government issued a regulation, under the Emergency Management and Civil Protection Act, suspending limitation periods and procedural time periods in Ontario retroactive to March 16, 2020.

Almost immediately, the construction industry was concerned about this suspension order and its impact on the flow of funds on construction projects especially the release of holdback funds.  In other words, there was uncertainty as to whether the suspension order applied to construction liens under Ontario’s Construction Act, and how it would subsequently affect the timing and release of holdback funds.  Basically, if the suspension applied and the time period to register construction liens would continue for an indefinitely period of time then holdback funds could not subsequently be released safely now without the payer having the risk of possibly having to pay holdback again if construction liens are registered later. 

Due to this uncertainty, it was common for construction lawyers, like myself, to promote the safer and more conservative approach and recommend not releasing holdback funds until this uncertainty was addressed by the Ontario Government.  Fortunately, the construction industry has now received this clarification.

On April 9, 2020, the Ontario Government issued a further order amending the earlier regulation and now, effective April 16, 2020, the suspension order specifically does NOT apply to the Construction Act or its regulations.

This means that, as of April 16, 2020, the time periods outlined the Construction Act (including the times periods to preserve and perfect construction liens as well as the subsequent release holdback funds) are back in force.  So, if someone had remaining days to complete a task which would have expired on or after March 16, 2020 (being the date of the suspension order) then those number of days start again from April 16, 2020. 

To be clear, limitation and time periods are NOT restarted.  Rather, whatever time was remaining for a party to do something before March 16, 2020 continues again from April 16, 2020.

This clarity by the Ontario Government is a welcomed relief and it will finally allow the release of holdback funds in a safe and risk free environment.

Should you require any advice or assistance with this or any other issue affecting your business then please do not hesitate to contact us.  We continue to monitor the COVID-19 pandemic regularly in order to provide our clients with the most accurate and up to date information.

 

For further information,  please contact Shane E. Kazushner by phone at (416) 368-6431 or by email at skazushner@businesslawyers.com

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