This material is for information purposes and is not intended to provide legal advice in relation to any particular fact situation.  Readers who have concerns about any particular circumstance are encouraged to seek independent legal advice in that regard.

                                                                                                                            April 11, 2020

Two Significant Easter Weekend Amendments to Ontario's Emergency Management and Civil Protection Act:

of lien timeframes and essential construction services

Rob Kennaley April 11, 2020

 

Construction Act to Be Exempt From Order Suspending Limitation Period

 

Regulation 73/20, issued under Ontario’s Emergency Management and Civil Protection Act, ordered statutory limitation periods suspended as of March 16, 2020, for the duration of the COVID-19 state of emergency.  A significant concern was that, if the Order were to apply to construction lien expiry timeframes, holdback funds would have to be retained from contractors and subtrades for the duration of the emergency, and beyond.

 

The stakes, of course, were high.  In response to concerns raised both formally and informally, Ontario’s Attorney General, Doug Downey, announced yesterday that Regulation 73/20 would be amended to expressly remove the “procedural time periods under the Construction Act” from the scope of the prior Order, effective April 16, 2020.  Significantly, the announcement is that all “limitation periods and procedural time periods under the Construction Act” be excluded from the Order’s operation.  Although at the time of writing the actual amending Regulation has not been posted for public access, this will have significant consequences for those who participate in construction in Ontario. 

 

First, in relation to lien expiry time frames and the holdback:

 

a)  if a lien claimant had a number of days remaining to preserve or perfect a lien (or to obtain a trial date in a lien action) so as to avoid lien expiry as at March 16th, he or she will now have the same number of days to do so commencing April 16th; and

b)  as the holdback may (and at times must) be released once all liens that could be preserved against it have either expired or been discharged or vacated under the Act, any delay in the release of holdback due to the Order suspending limitation periods will now be limited to no more than 31 days (the number of days between March 16 and April 16).

 

Given the potential for COVID-19 related cash-flow issues and insolvencies, however, lien claimants should take care where-ever there is a realistic concern about non-payment to preserve their liens in a timely fashion.

 

As above, all of the Construction Act’s “procedural timeframes” will apply unchecked by the Order suspending limitation periods, at least as at April 16, 2020.  All parties in construction ladder will accordingly need to be ready to meet these, notwithstanding COVID-19.  These include (in addition to the lien expiry timeframes discussed above):

 

a)  the timeframe for registering a notice of intention to register lands as a condominium;

 

b)  the 21 days to respond to a request for information made under s. 39 of the Act;

 

c)  the 7 days’ notice upon which a cross-examination on a claim for lien can be scheduled;

 

d)  where the Act’s pre-July 1, 2018 provisions apply, the time within which a landlord must respond to a contractor’s written notice that the landlord will be subject to liens as would an Owner;

 

e)  if the Act’s July 1, 2018 amendments apply, the time to give a “notice of non-payment of holdback” and “notice of termination of contract”;

 

f)  if the Act’s October 1, 2019 amendments apply:

 

i.  the mandatory prompt payment timelines applicable for notices of non-payment and for payments to be made; and

 

ii.  the mandatory adjudication timelines for the appointment of an adjudicator, the giving of adjudication materials and the time within which an adjudicator must make a determination; and

 

g)  all of the procedural timelines applicable in a lien action (which will vary depending on whether or not the July 1, 2018 amendments apply);

 

A failure to meet the above will not necessarily be as fatal as is a failure to meet a lien-expiry deadline.  In many circumstances such a failure can be forgiven under s. 5 of the Act or under the Rules of Civil Procedure.  Still, however, caution dictates that such timeframes be met to avoid the time, risk and expense of addressing a failure.  Further, because it is not clear that the original Regulation 73/20 Order applied to suspend the Act’s non-lien-expiry timelines, caution dictates that parties meet the timelines (where applicable) as if the Order suspending limitation periods had never been made.

 

The Construction Act’s July 1, 2018 and October 1, 2019 amendments apply if the contract for the subject improvement was procured or entered into after those two dates, respectively.  The amendments are complicated and the latter, in particular, will have a substantial impact on the construction industry in Ontario.  Participants in construction might take advantage of any COVID-19 down time to better understand, and develop processes for, these changes.  We have previously written and spoken extensively on these changes and further information in this regard can be found on our website at Our Blog page.   These, and other issues, will also be explored in our free Tuesday morning webinar series, once the impact of COVID-19 becomes less pressing. 

 

An Important Change to the Order Closing Construction Projects under O Reg. 82/20

 

In our April 4th blog article we noted that, conspicuous by its absence in the amended Order which limited the number of construction projects that will be allowed to continue, was any clear statement that the construction, expansion or renovation of buildings used by essential businesses would be allowed.  This, we suggested, would lead to confusing results.  By way of one example we pointed to, under the amended Order it appeared clear that new construction or renovation intended to increase food productivity and distribution must stop.

 

On Thursday April 9, 2020, the Attorney General issued an amendment to address this issue.  The amendment introduces a new paragraph 29.1 to the Order and is available here:  www.ontario.ca/laws/regulation/r20136.  It confirms that “construction projects that are due to be completed before October 4, 2020 and that would provide additional capacity in the production, processing, manufacturing or distribution of food, beverages or agricultural products” are deemed essential.  This, in and of itself of course, is neither significant nor surprising. 

 

However, in deciding that an amendment was necessary the Attorney General has made it clear that the construction, expansion, renovation, repair or maintenance of buildings or premises that provide essential services will only be allowed if that work is itself specifically deemed essential in paragraphs 20 or 27-31 of the Order.  In the face of the amendment, it will not in our view be possible to argue that a project should continue merely because it is being undertaken on the operations of an essential business.  This is so even if the work will substantially increase the ability of the business to provide its essential services and regardless of the extent to which the public is in need of such expanded services.  See our prior article on the issues for a discussion of what type of work might fit into paragraphs 20 and 27-31.  

 

We will discussing these Easter Weekend developments in our forthcoming free Tuesday webinars.  To register, please visit Our Webinars page.   As always, wash your hands and stay safe!

 

Rob Kennaley

Kennaley Construction Law