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COVID-19 and release of holdback under Ontario’s Construction Act

( Disponible en anglais seulement )

1 avril 2020 | Dražen F. Bulat, Kenneth R. Rosenstein

UPDATE:  The issues raised in this advisory have been addressed by Ontario’s issuance of O.Reg.137/20.  Here is a link to our communique on O.Reg. 137/20.

 

On March 17, 2020 the Ontario Government declared a state of emergency. On March 20, 2020 the Government passed O. Reg. 73/20 which automatically suspends any limitation period imposed by any Ontario law for the duration of the emergency, retroactive to March 16, 2020.

Under Ontario’s Construction Act R.S.O. 1990 (the “Act”) an owner (including a landlord paying tenant improvement allowances after completion of tenant work) is required to release the holdback after “all liens that may be claimed against that holdback have expired or been satisfied, discharged or otherwise provided for” under the Act. Liens will typically expire unless they are preserved (generally, registered against title) within 60 days of the date of publication of a certificate of substantial performance. However, if the effect of O. Reg. 73/20  is to suspend the time for liens to be registered, that would mean liens would not expire after 60 days (as long as the Regulation is in effect). And, if liens do not expire, owners (including landlords) who release the holdback may be subject to liens and may be liable to pay the holdback again.

Although there is some uncertainty as to whether the requirement to register liens within 60 days is a “limitation period” which is suspended by O. Reg. 73/20, the safer course of action for owners, lenders and landlords is to consider not releasing the holdback until (a) the Government or the Courts clarify the effect of O. Reg. 73/20, or (b) the state of emergency is lifted (at which point O. Reg. 73/20 would end). In the meantime, we are considering possible alternatives that would allow holdback to be released.

The construction industry is facing unprecedented circumstances right now. If you have questions or would like to discuss issues relating to your project, please feel free to contact a member of our real estate or construction groups.

 

Miller Thomson is closely monitoring the COVID-19 situation to ensure that we provide our clients with appropriate support in this rapidly changing environment. For articles, information updates and firm developments, please visit our COVID-19 Resources page.

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