Holdback Release Where the July 1, 2018 Changes Apply:

  • the owner will now be allowed to retain the holdback in the form of a bond or letter of credit, instead of cash;

  • if the construction contract price is $10 million or more, the lien holdback may now be released either annually or in phases, on certain conditions and so long as no subsisting preserved liens remain that have not been vacated.  The owner and contractor must agree to do so.

  • while annual or phased release of holdback will help contractors and subcontractors get paid in full earlier in some circumstances, their lien rights can now be lost against a portion of the holdback long before their lien rights expire.  This is new and may have a significant impact if not managed properly;

  •  section 39 of the Act allows suppliers or services or materials to ask the owner or contractor if the holdback is to be released by the owner in phases;

  • if an owner wishes to set-off against the holdback once it becomes due (by alleging backcharges for deficiencies or delay, for example) the owner must now publish a notice to that effect -- in the same way a certificate of substantial performance is published -- within 40 days from the date the certificate of substantial performance was published or, where no certificate is published, from the date the contract was complete, abandoned or terminated.  Owners must therefore be careful to assess, within the 40 day timeframe, the extent to which they may have backcharges;

  • contractors and subcontractors who have received a notice by the payer above them in the ladder must now give notice of this to those beneath them, in accordance with Act, if they are to avoid the payment obligation;

  • these new notice requirements will allow contractors and subcontractors to better assess whether or not they wish to preserve a claim for lien;

 

As always, determining one's rights and obligations under construction legislation can be very complicated.  The above is intended for general information and not for use in any particular circumstance.  It is recommended that experienced construction law counsel be consulted in this regard. 

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