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Civil Litigation, Construction

New law could take courts out of construction lien disputes

Construction lien litigation could be dramatically reduced once new legislation fully kicks into gear, Toronto litigator Jessica Vickerman tells AdvocateDaily.com.

Bill 142, the Construction Lien Amendment Act, which is designed to bring a “prompt payment” regime to Ontario, has been implemented in stages since its passage at Queen’s Park last year. The amendments, which represent the first major revision to Ontario construction lien law since 1983, will be fully phased in by October 2019, says Vickerman, an associate with the Toronto office of Shibley Righton LLP.

She says Ontario’s Superior Court currently has a specialized system in some jurisdictions for handling construction lien disputes, with a number of masters devoted entirely to hearing them.

However, Vickerman says the amendments will bring Ontario in line with other prompt-payment jurisdictions around the world with the creation of a new mandatory interim adjudication system for construction disputes.

“It remains to be seen what role the court will have once the adjudication process gets underway,” she says. “Judging by the experience in the U.K., there may be a decline in the volume of litigation involving construction disputes. It’s possible the court will take a more limited role than it has previously.”

Still, the court will have some part to play, Vickerman says. Although adjudicators’ payment orders must be satisfied within 10 days and may not be appealed, she says the law makes it clear that orders made under the mandatory process are only interim and not binding on any arbitrator or court subsequently ruling on the same subject matter.

“While litigation or arbitration remains open to the parties, it seems that it rarely happens in practice,” Vickerman says. “That may be a big change, but there is a lot to happen before October next year.”

In the meantime, she says the industry is waiting on the selection of a body designated by the provincial government to run the mandatory adjudication process, known as the Authorized Nominating Authority.

“It’s an important next step to see who that will be and how the roster of adjudicators will be developed,” Vickerman says.

In July, the latest set of Bill 142 regulations came into effect. According to a provincial government release, some of the key changes include:

  • Clarifying language to better reflect large-scale public projects with multiple owners
  • New 60-day deadline for contractors and subcontractors to register a lien, as well as a 90-day limit for court actions
  • New bookkeeping rules to protect subcontractors in the event of bankruptcy
  • Surety bond requirements for public-sector owners on certain contracts
  • Rules allowing condo unit owners to remove liens related to improvements to the common elements
  • A requirement that project owners pay contractors and subcontractors holdbacks once the timeline to file liens has passed.

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