Timelines under the Construction Act: Preservation - Part II

 

Last week we discussed the concept of “preserving” lien rights. Today, we discuss the importance of preserving prior to the expiry of lien rights. Lien rights are deemed to expire in several situations, one of which we will discuss today.

Pursuant to Section 31 of the Construction Act (“CLA”), unless preserved under Section 34 (as discussed last week), the liens arising from the supply of services or materials to an improvement expire at the conclusion of the sixty (60)-day period earlier of:

  • the date on which a certificate or declaration of substantial performance of the contract is published; or

  • the date the contract is completed, abandoned, or terminated.[1]

Note that the above is not the only scenarios triggering computation periods for preservation. Additionally, prior to July 1, 2018, the time-period for preservation was forty-five (45)-days. As such, prior to computing the time period within which potential claimants intend to preserve their liens, they must first determine whether the time-period is calculated pursuant to the old Construction Lien Act or the Construction Act.[2] A simple way to determine whether the old or new CLA apply is to determine whether contract for improvement was entered or whether there any procurement processes took place prior to July 1, 2018. However, it is not yet clear how far the procurement processes qualification applies.[3]

In addition to understanding when the time-period begins, one must also understand the procedural element of computation. In computing the time period for preservation, the actual first date (of completion/abandonment/termination) is not counted. However, the last date is of the time period is included (except where it falls on a public holiday or weekend, in which case the last date then falls on the first subsequent business date).[4]

Consider the following hypothetical example:

  • A materials supplier entered into a contract with a sub-contractor for the provision of aggregates on July 2, 2018;

  • Between July 2 and August 30, 2018, the materials supplier provided aggregates to the premises as required by the contract;

  • On August 31, 2018, the sub-contractor notified the materials supplier that it was unhappy with the quality of aggregates and decided to terminate the contract.

In this scenario, the following factors are now at play:

  • The contract was entered into after July 1, 2018, meaning the new CLA rules apply;

  • The date on which the contract was terminated is deemed to be August 31, 2018.

Accordingly, the computation of a sixty-day period begins on September 1, 2018, being the following date after the contract was terminated. Note also that, in this case, September 1, 2018 happens to be a Saturday. Computation would indeed start on the Saturday, as the first date of computation may fall on a weekend or public holiday. Accordingly, the materials supplier in the example must preserve its lien rights on or before October 30, 2018.

Now, if the facts of this hypothetical were different and time was different insofar as the termination date was on September 4, 2018, the potential claimant would have sixty-two days, as the original sixty-date deadline fell on a Saturday. In any event, it is the proper and responsible practice to preserve lien rights significantly prior to the limitation date, so make sure you contact a Construction Lawyer sooner rather than later!

Tune in next week as we discuss “perfection” and computation of time for same.

Until next week!  

[1] Construction Act, R.S.O. 1990, c. C.30, s. 31(1)(a)(i)-(ii).

[2] Ibid, s.87.3(1).

[3] Ibid, s. 87.3(2)

[4] Argus Steel Construction Ltd v Burns Transport Ltd (1961), 1961 CarswellOnt 56 (CA).

The foregoing is for informational purposes only, and should in no way be relied upon as legal advice. For legal advice tailored to your circumstances and business, please contact any of Sutherland Law's lawyers by email or telephone.

 
Sutherland Law Staff Writer