May 14, 2009

Alliance pushes for reforms to Construction Lien Act of Ontario

DON PROCTER

correspondent

The Construction Lien Act of Ontario is due for revision because contractors are being stung by holes in the legislation that keep them from collecting money owed for services rendered.

An alliance for reform to the Act, led by the Council of Ontario Construction Associations (COCA), proposes the automatic release of holdback funds (10 percent of the subcontractor’s total contract value) upon substantial job completion as one of the key amendments to the Act.

The Act does not always work the way it was designed to, says David Zurawel, vice-president, policy and government relations of COCA.

Contractors or unions (liening for health and welfare benefits, pension benefits or wages) should either receive money for work completed or still have lien rights as a means of retrieving that money. But the way that business has adapted to the Lien Act, there is no guarantee that contractors will get money owed to them, he says.

For some contractors that don’t get their holdback money, keeping their businesses afloat is difficult.

Bill Nicholls agrees that the release of the holdback is “essential.”

Nicholls, executive director of the International Union of Painters and Allied Trades District Council 46, says, “It means once the employer receives his payout, then we can expect a timely remittance of benefits to our administrators on behalf of the membership.

“On many occasions the employer benefits (pension/health & welfare/vacation pay) come late to the administrator. Employers blame this on the GC for not releasing the holdback.”

The alliance, which is catching the ear of the province’s Ministry of the Attorney General (responsible for amendments to the Act), is optimistic legislation will be introduced this spring. Along with COCA, the alliance includes the province’s building trades, the Carpenters & Allied Workers Local 27 and Interior Systems Contractors Association (ISCA).

Ron Johnson, deputy director of ISCA, says that indications from minister Chris Bentley are that the Liberal government would act on changes if there is industry-wide consensus.

Another change proposed by the alliance calls for the extension of lien rights through to the substantial completion of the main contract. Currently the lien period is 45 days but the billing period tends to be 60-90 days, points out Johnson. “By the time many subs realize they are not getting paid, their lien rights have expired.”

Nicholls adds contractors will have breathing space with an extended lien period. “We won’t be under the gun to check the timeliness of benefits sent or not sent because there is a two-month administration time before we see those benefits in our system.”

Secondly, he says extended lien rights allows for more investigation time into coming up with the amount owed. Currently, “we are pressured to guess what amount might be outstanding.”

Amendments to the Lien Act will also facilitate positive changes to Ontario’s Condominium Act, says Zurawel.

Currently, if a contractor wants to apply a lien against a condo project, the contractor must file liens against individual unit holders, a potentially long process that can cost them more than the value of their holdback.

COCA has been trying to get amendments to the Lien Act passed for almost a decade because business practices have outgrown the Act’s last revisions implemented in 1990, says Zurawel.

Johnson is optimistic the Act will be revised. “There are two things interesting about all of this: we’ve been able to build this broad coalition that is in agreement with the changes and we’re as close as we’ve ever been to seeing this through.”

Print | Email | Comment