A new procedure for lien claims against municipalities
Topic: Construction Law June 27, 2019 by Ron Petersen & Matthew Smith
Municipalities should brace themselves for further amendments to the construction law regime in Ontario. Effective October 1, 2019, lien claimants will no longer be required to register a lien against property owned by a municipality. This change will affect contracts between contractors and municipalities in the province of Ontario, regardless of the date the parties entered into the contract.
It has long been the case that lands owned by the federal and provincial governments could not be subjected to a lien. Rather, a charge would apply in favour of the lien claimant on those amounts retained under the holdback provisions.
From a policy perspective, it is easy to understand why liens do not attach to Crown lands. The Crown is required to pay all final judgments against it. The security that the lien provides when it attaches to land (i.e. the power to order a sale of the land) is unnecessary because there is no risk of non-payment at the conclusion of proceedings.
After years of consultation with various stakeholders, the provincial government has now amended the Construction Act (the “Act”) and its regulations as they relate to municipalities. Effective October 1, 2019, a lien will not attach to a municipality’s interest in lands. Municipalities cannot become bankrupt and, therefore, the additional security of registering a lien is unnecessary.
As a result of this legislative change, lien claimants will no longer be required to register a lien against lands owned by a municipality. Instead, a copy of a claim for lien shall be given to the clerk of the municipality, which claim will constitute a charge upon the holdbacks required to be retained by the municipality.
The exemption to municipal lands is a welcome change to the Act. The Legislature has made it clear that municipal lands should not be subject to court-ordered sales. Further, any concerns from contractors and subcontractors will be allayed. The giving of a claim for lien will trigger obligations under the Act and it will provide security to lien claimants without the costs of registration.
Under the new amendments to the Act, a municipality may provide a method or methods for the giving of a copy of a claim for lien by publishing a statement on its website. These methods include:
- Sending a copy of the claim for lien by email to a specified email address.
- Completing and submitting the claim for lien through a specified web portal.
The methods detailed above appear to be permissive rather than prescriptive. If a municipality has not published on its website a method for the giving of a claim for lien, then a copy may be served in any manner permitted under the Rules of Civil Procedure or it may be sent by certified or registered mail or delivered by hand.
Some stakeholders have raised concerns about the increased responsibility of municipal clerks to receive and locate liens under this new legislation. Municipalities should prepare accordingly. If they do not already have a prescribed method for the giving of a claim for lien, then such arrangements should be made in advance of October 1, 2019.
Our experienced construction lawyers at Low Murchison Radnoff regularly consult with and advise municipalities and contractors on construction-related matters. We would be happy to meet with your organization and to assist you in defending or prosecuting such claims and implementing procedures for the receipt of lien claims.[ssba]