Construction Lien Act review

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Bruce Reynolds
Bruce Reynolds

Bruce Reynolds begins consultations as owners, generals and trade contractors stake out their positions

Ontario Construction Report staff writer

Ontario’s construction payment review process has moved to a crucial stage as Bruce Reynolds has released his information package on the Construction Lien Act (CLA) Review, and industry stakeholders prepare for further consultations.

Reynolds, in a 72-page document released on July 15, outlines some issues and possible considerations for change in the lien legislation, last updated in the 1980s, including the issue that led to the review – a call from trade contractors for prompt payment legislation.

Other topics include lienability, holdback and substantial performance, lien expiry, proof of financing, trust provisions, interrelationship between the CLA and insolvency legislation and the challenges created by relatively new Public-Private-Partnership (PPP) structures.

In his report, Reynolds says “the issues that the review will consider are complex and varied.”  He also observes that his information package is preliminary and is “for consideration purposes only and is not intended to express a view, perspective, or conclusion.”

The review process involves stakeholders – there are more than 60 of them – reflecting varying interests and each has a point of view.  Owners, general contractors, subtrades, suppliers and sureties all have their own perspectives, with varying levels of co-operation, co-ordination and consultation.

“We are meeting shortly to discuss our next steps on the review and are currently reviewing the package issued by Mr. Reynolds,” said Ontario General Contractors Association (OGCA) president Clive Thurston.  “OGCA is in contact with several major owners’ groups and other industry stakeholders, (with whom) we are co-operating and sharing ideas.”

“We are not publicly discussing possible positions or recommendations as they are still under development.  We have done an internal survey of our members on some of the basic issues and will be reviewing these results shortly as well.”

He said the OGCA and owners “still have some major areas where we disagree. It is just that we can talk with each other without worrying that one of us will run off and blind side the other.”

“We have not had any direct contact with COCA (Council of Construction Associations of Ontario) or PPO (Prompt Payment Ontario), who we consider to be the same anyways, but should they wish to talk we would respond in a positive collaborate manner.”

PPO spokesperson Sandra Skivsky said the alliance of more than 40 stakeholders seeking the prompt payment legislation is working with a legal and research advisory team to address the items for consideration raised in the information package.

PPO president Eryl Roberts said: “The stakeholder information package was worth waiting for. It is well researched and thorough, confirming Bruce Reynolds’ commitment that ‘everything is on the table’.”

“The PPO advisory team is now prioritizing the issues raised for their significance to trade contractors and prompt payment. PPO is also fine tuning its survey tools to properly capture those priority issues,” Roberts said.  The government appointed Reynolds to conduct the CLA review after a PPO initiative to propel a private member’s bill (Bill 69), that would have mandated prompt payment standards for the industry, was derailed by an alliance of major owners and general contractors, who advocated that CLA amendments would be the more effective solution to resolve industry payment challenges. The government responded by appointing Bruce Reynolds to conduct the review.

“This process is not the same as we undertook for Bill 69 and each stakeholder group needs to research and present their position on the issues,” Skivsky said.  “The good thing is that is most stakeholders have a high degree of confidence in Mr. Reynolds and his review team to bring the whole thing together. I know that PPO members are very appreciative of the time and effort that the CLA review team has put into the work to date.”

“We’re not inventing anything new,” she said. “Some form of payment security and risk legislation exists virtually everywhere in the industrialized world.”

Reynolds cited some of the legislated systems and reviews in other countries in his information package document.

“Nothing is ever perfect, especially in a world of differing opinions, so no one should expect the any new legislation will give us a utopian system,” Skivsky said.  “However, we believe that if the government acts on what comes out of this process, the construction industry will be better off than where we are now.  The current system is untenable,” Skivsky said.

“But in order for this review to have the information to make its recommendations, stakeholders should have some rational quantitative information to address their issues.”

The original prompt payment legislation ran into snags when some owners were concerned about financial disclosure requirements and general contractors were concerned they could be caught in the middle if an owner failed to pay, but the contractor would be obligated under the prompt payment legislation to pay its trade contractors.

Meanwhile, trade contractors say they have been saddled with an unfair risk burden, as they struggle to meet payroll and cover their suppliers’ costs and benefit payment requirements when owner/general contractors or developers delay payments.

Roberts, in an earlier published interview, said that after “the OGCA backed off the consensus with us over Bill 69,” PPO would “focus on the relationship between the general contractor and trades.”

“There is value in the Lien Act for the general contractors in the relationship with owners,” he said. “But, our contract is with the general contractors, so that is where we have to focus our attention.”

However, Thurston believes that the prompt payment issue can only be resolved if the owners are recognized in the construction payment pyramid. “It’s the owners that control the flow of money,” he said in the earlier published interview. “Whatever you make the generals do is irrelevant, if you don’t make owners pay. You have to solve both bottlenecks at the same time and that is key. As far as we are concerned, that is the only way to address it.”

Reynolds, meanwhile, will also have to tackle the special challenges in new contracting concepts, where ownership structures are more complex than before. Public-Private-Partnerships (PPP) blur the lines, and create new responsibility challenges and payment scheduling issues.

Reynolds says he will begin a series of consultation meetings, and receive written submissions from stakeholders.  He also writes there will be a review questionnaire to be completed by stakeholders that will be “focused on the substantive issues under consideration.”

Then he will write and submit his report to the provincial attorney general and minister of Economic Development, Employment and Infrastructure, which will set the stage for a revised Construction Lien Act. The review process and final report will be completed before the year’s end.

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