Civil Litigation
Ontario's Construction Lien Act
Sun/12/2012 16:03
Individuals who choose to construct their own homes as the “builder” should be aware of the special obligations created by Ontario’s Construction Lien Act.
The Construction Lien Act is legislation that helps to ensure that contractors, subcontractors and workers are paid for the labour and materials supplied in the course of construction and building projects.
Generally, contractors who do not receive payment for their work have 45 days to register a lien against the property. They are then required to initiate a proceeding in court to sustain the lien.
If a contractor hired by a builder invokes the Construction Lien Act, both sides would be required to file pleadings (Statements of Claim and Defence) and attend a mediation/settlement conference. If no resolution is forthcoming, a judge will decide the merits of the claim.
If a Construction Lien Act matter arises, progress advances under a construction mortgage will likely come to a halt until the matter is resolved. This can delay a home construction project if a builder does not otherwise have access to funds to complete the work.
The Construction Lien Act also imposes other obligations on property owners. For example, the Act requires that a percentage of project funds be held back until subcontractors are paid and requires that project funds not be diverted for other purposes (i.e. another construction project).
The Construction Lien Act sometimes comes into play when a builder and contractor have a dispute over the quality of materials or workmanship. A builder who is not satisfied with the quality of materials or workmanship is faced with the prospect of significantly delaying their project if the contractor is not paid in accordance with the construction contract. Despite the protection afforded to contractors in the Construction Lien Act, contractors are required to carry out work using appropriate materials and workmanship.
Time-consuming and costly Construction Lien Act litigation can be averted by ensuring that the builder and contractor execute clear and unambiguous construction contracts which provide for alternative dispute resolution in the event of a disagreement between the builder and contractor.
In considering the construction of a new home, builders must be aware that construction contracts are a special breed of contract because of the implications of the Construction Lien Act.
The Construction Lien Act is legislation that helps to ensure that contractors, subcontractors and workers are paid for the labour and materials supplied in the course of construction and building projects.
Generally, contractors who do not receive payment for their work have 45 days to register a lien against the property. They are then required to initiate a proceeding in court to sustain the lien.
If a contractor hired by a builder invokes the Construction Lien Act, both sides would be required to file pleadings (Statements of Claim and Defence) and attend a mediation/settlement conference. If no resolution is forthcoming, a judge will decide the merits of the claim.
If a Construction Lien Act matter arises, progress advances under a construction mortgage will likely come to a halt until the matter is resolved. This can delay a home construction project if a builder does not otherwise have access to funds to complete the work.
The Construction Lien Act also imposes other obligations on property owners. For example, the Act requires that a percentage of project funds be held back until subcontractors are paid and requires that project funds not be diverted for other purposes (i.e. another construction project).
The Construction Lien Act sometimes comes into play when a builder and contractor have a dispute over the quality of materials or workmanship. A builder who is not satisfied with the quality of materials or workmanship is faced with the prospect of significantly delaying their project if the contractor is not paid in accordance with the construction contract. Despite the protection afforded to contractors in the Construction Lien Act, contractors are required to carry out work using appropriate materials and workmanship.
Time-consuming and costly Construction Lien Act litigation can be averted by ensuring that the builder and contractor execute clear and unambiguous construction contracts which provide for alternative dispute resolution in the event of a disagreement between the builder and contractor.
In considering the construction of a new home, builders must be aware that construction contracts are a special breed of contract because of the implications of the Construction Lien Act.
Consequences of Backing out of an Agreement of Purchase and Sale
Thu/11/2010 19:45
Sometimes a buyer is unable to complete the purchase of a property after signing the Agreement of Purchase and Sale.
Since the Agreement of Purchase and Sale is a legally binding contract there are a number of possible considerations that a buyer should consider in these circumstances.
The Deposit
The Agreement of Purchase and Sale may directly address what happens to the deposit if the buyer defaults. If the Agreement of Purchase and Sale does not address this issue, a court will likely find that the seller is within his or her right to keep the deposit amount.
Damages
If the matter went to court, the buyer who backed out of a deal after signing the Agreement of Purchase and Sale could be required to compensate the seller for expenses that he or she incurred because of the buyer backing out of the deal.
This could include the costs of having to put the property back on the market, moving expense and other immediate expenses that the seller incurred because of the buyer’s default.
The buyer could also be liable for a host of other expenses incurred by the seller. For example, if the seller agreed to buy another property on the basis of having sold his or her existing home, the defaulting buyer may be liable for the deposit amount and any other expenses incurred as a result of the seller having to back out of this subsequent purchase.
Although a court is unlikely to order the buyer to complete the transaction (compel the buyer to purchase the house), a defaulting buyer could have to pay the seller thousands of dollars if, for example, the seller is unable to find a buyer and is forced to sell the house at a lower price.
Conclusion
The Agreement of Purchase and Sale is a legally binding contract and a buyer should only make an offer to purchase if they are certain about their ability to close the deal.
