Construction law and practice, largely governed by the Construction Act, R.S.O. 1990, c. C.30 (the “Act”), is a specialized field of law which has unique attributes, processes and deadlines. One cannot contract out of the application of the Act and must abide by its provisions. Without going into the various intricacies, the following is a brief primer on some (not all) key parts of the Act for those that may need legal assistance with a construction related dispute.
The Initial Contract
A construction project will typically start with a contract between a property owner and a general contractor. For a fee, the contractor takes on the responsibility of overseeing the project and supplying services and/or materials to the construction project.
The Subcontracts
The contractor often needs help from tradespeople (“subcontractors” or “subtrades”) with various aspects of the project like plumbing, painting, etc. For such assistance, the contractor tends to enlist the services of several subcontractors via “subcontracts”. A subcontract is an agreement between the contractor and a subcontractor or subtrade, or between two or more subcontractors or subtrades, for the supply of services and/or materials to the project. If a subcontractor or subtrade is not paid, the owner may be liable for payment.
Holdback
Due to the potential liability exposure of the owner to subcontractors or subtrades, the owner must retain or “holdback” an amount equal to 10% of the price of the services and/or materials provided under the contract with the general contractor. Contractors and subcontractors or subtrades have similar holdback obligations under the further subcontracts that they enter into. The actual specifics of the holdback requirements under the Act will not be further particularized in this blog.
The Lien
A lien is an encumbrance on title that secures payment of an obligation. In other words, a lien essentially indicates, to anyone that performs a search of the title to the property, that there is a debt associated with the property and, as such, a lien makes it difficult for property owners to do what they please with the property (for example, to obtain financing or sell the property).
Contractors and subcontractors have a lien on the property that they provide services or materials to which arises the minute they first supply these services or materials to the property. The amount of the lien is limited to the value of the services or materials provided.
This is one of the unique aspects of construction law because one might in other circumstances require a contract with someone to whom one provides services or materials to maintain a successful lawsuit for unpaid work. This is called privity of contract. However, in construction law, a subcontractor, who does not have a direct contract with the owner of the property, still has this right via the construction lien.
Key Deadlines to Remember
There are several deadlines enumerated in the Act with which it is important to comply. Most of these deadlines are subject to a number of exceptions which are not going to be covered in this blog.
The following is a list of some (not all) of the key deadlines that are detailed in the Act:
Prompt Payment Regime
- Owner Must Pay: Once the owner receives a “proper invoice” (technical definition provided in the Act) from the contractor, the owner must pay this invoice within 28 days.
- Contractor Must Pay: Within 7 days of receipt of full payment for the “proper invoice”, the contractor must pay each subcontractor who supplied materials and/or services that were included in the “proper invoice”.
- Subcontractor Must Pay: Within 7 days of receipt of full payment under the “proper invoice”, a subcontractor must pay each subcontractor who supplied materials and/or services, under a further subcontract with them, that were included in the “proper invoice”.
To learn more about the prompt payment regime and “proper invoices” please see our blog: Prompt Payment Regime Takes Effect For Construction Projects.
Construction Liens
- Expiry of Contractor’s Lien: Unless preserved through the registration of a lien, a contractor’s lien, absent a certification or declaration as to substantial performance, will expire within 60 days after (i) the date the contract is completed or (ii) the date the contract is abandoned.
- Expiry of Subcontractor’s Lien: Unless preserved through registration of a lien, a subcontractor’s lien, absent a certification or declaration as to substantial performance, will expire within 60 days after the date the subcontractor last provided services or materials.
- Expiry of Preserved Lien: A preserved line expires unless it is perfected by commencement of an action within 90 days after the last day it could be preserved (please note that a subcontractor may also have the opportunity to shelter under another perfected lien from the same project).
- Expiry of Perfected Lien: A perfected lien will expire 2 years after the action that perfected the lien was commenced unless the matter is set down for trial or ordered to be set down for trial.
At Gilbertson Davis LLP, our lawyers can represent you in your construction dispute, whether you are an owner, contractor, subcontractor or subtrade, as we have experience in Construction Litigation, Arbitration, Mediation and Civil Litigation matters and can assist you in resolving your legal issues in a timely and cost-effective manner. We offer advice and represent clients on construction law matters. Our mission is to provide creative, sensible, cost-effective long-term resolutions to construction disputes. Please contact Gilbertson Davis LLP to schedule a consultation.
Brief informational summaries about insurance litigation, commercial litigation and family law litigation matters in the courts of Ontario and Canada are periodically published on our website. Please note that our website content is for informational purposes only, and should not be construed or relied upon to provide legal advice. If you require legal advice, please request an initial consultation with Gilbertson Davis LLP using the Request Consultation Form on this webpage or by contacting our Intake Coordinator on (416) 979-2020, ext. 223 (both subject to the Terms of Use described on our Contact page).
Comments & Opinions by Gilbertson Davis LLP lawyers and staff on its Blog, or in media interviews, appearances or publications, or in professional publications, are personal to them, and do not necessarily represent the opinions of the Firm or anyone at the Firm other than the individual expressing those comments or opinions.
About the Author
