Chapter 10: Certificates of Completion
10.1 | What is a certificate of completion?
Commentary: a certificate of completion is a document issued under section 7 of the Builders Lien Act which states that work under a contract or subcontract has been completed. Its significance is that, once a certificate has been issued, time begins to run under the Act for two different purposes. First, time begins to run for the release of the holdback that had been retained under the contract certified as complete. Second, time begins to run for filing of liens by persons claiming under the contractor or subcontractor whose job has been certified. Where the certified contract is one involving an early phase of construction, such as the excavation, these time periods could expire well before the improvement itself is completed.
10.2 | Who does the certifying?
Commentary: the Act refers to this person as the “payment certifier.” The payment certifier is normally the design authority such as an architect or engineer who is identified in a contract or subcontract as the person responsible for payment certification. [See section 7(1)(a)]
10.3 | What if a payment certifier is not identified in a relevant contract?
Certification by owner and contractor
Commentary: in that case, the payment certifier will be:
(i) the owner acting alone in respect of amounts due to the
(ii) the owner and the contractor acting together in respect of
amounts due to any subcontractor.
[See section 7(1)(b)]
10.4 | What does “completed” mean in this context?
Meaning of “completed”
Commentary: this question invokes a web of definitions and provisions: “Completed” is a term defined in section 1(1):
“Completed”, if used with reference to a contract or subcontract in respect of an improvement, means substantially completed or performed, not necessarily totally completed or performed;
The reference to “substantially completed or performed” invokes section 1(2):
1(2) For the purposes of this Act, a head contract, contract or subcontract is substantially performed if the work to be done under that contract is capable of completion or correction at a cost of not more than
(a) 3% of the first $500 000 of the contract price,
(b) 2% of the next $500 000 of the contract price, and
(c) 1% of the balance of the contract price.
A determination whether a contract or subcontract has been completed is a relatively objective exercise involving purely financial criteria.
It is important to note that this certification is only for the purposes of the Builders Lien Act. It does not, for example, constitute a certification that a building is fit for occupancy. The latter determination involves quite different criteria including considerations of safety. A building may not be fit for occupancy even though it meets the criteria of completion for the purposes of the Builders Lien Act.
10.5 | Must the certificate of completion be in any particular form?
Form of certificate
Commentary: the regulations to the Builders Lien Act provide a form of certificate of completion. This is Form 3. Form 3 calls for the following information to be set out:
- name and address of the payment certifier
- date for contract or subcontract was completed
- location of the improvement (a street address is sufficient)
- a brief description of the improvement
- a brief description of the contract or subcontract including the date it was made and the names of the parties to it
The certificate must be signed by the payment certifier along with the date of signature.
It might be noted that Form 3 calls for both the date the contract or subcontract was completed and the date the certificate was signed by the certifier. Various provisions of the Act refer to the date the certificate “is issued.” This must be the date it is signed by the certifier. Unless special circumstances exist, it is preferable if the date the contract or subcontract was completed is identified as the same date the certificate is signed simply to avoid any confusion as to the running of time.
[For “is issued,” see definition “notice of certification of completion“, section 7(2), 7(4), 7(5), 7(6), 8(1), and 20(1).
Use of Form 3 is permissive. The Act says the certificate “may” be in the prescribed form. If Form 3 is used, that is sufficient to comply with the Act.
10.6 | Where a certificate of completion is issued, who are the persons against whom time begins to run for the filing of lien claims?
Lien holders affected by certificate
Commentary: every person who claims under the contract or subcontract certified as complete is affected and time begins to run against them. [See Figure 12]
10.7 | How is a lien holder who is affected by a certificate of completion to know that it has been issued and that time has started to run?
Notice of certificate
Commentary: there are two ways provided in the Act through which a lien holder may become aware that a certificate of completion has been issued. First, the payment certifier must post on the improvement, in a prominent place, a notice that a certificate of completion has been issued. [See section 7(4)(c)]
More important, the Act permits a lien holder to submit a written request to the payment certifier that the certifier deliver to the lien holder particulars of any certificates of completion issued, either generally or with respect to particular contracts or subcontracts, and whether issued before or after the request.
[See section 7(2)]
On issuing a certificate of completion, the payment certifier must then deliver a notice that a certificate of completion has been issued to every lien holder who has made such a request.
The notice must be delivered within seven days after the certificate is issued.
It is good practice for lien holders to make a request for notification under section 7(2), particularly where they claim under a contract or subcontract that may be the subject of certification before the improvement itself is completed.
10.8 | Must the request made to the payment certifier for notice be in any particular form?
Form of request
Commentary: the Act does not set out any particular form in which the request must be made. At a minimum, however, the request should clearly:
- identify the lien holder
- identify the contractor or subcontractor who engaged the lien holder
- provide an address to which notices may be delivered.
10.9 | Must the notice given by the payment certifier be in any particular form?
“Notice of certificate of completion”
Commentary: the definition of “notice of certificate of completion” requires that the notice be in a prescribed form. The prescribed form is Form 2. In Form 2, the certifier is required to set out:
- The name or popular description of the project
- the date the certificate of completion was issued
- the identity of the parties to the contract certified
- a brief description of the work done under the contract or subcontract
- the location of the improvement.
Since a street address is sufficient for the certificate of completion itself, no greater specificity as to its location should be required in the notice of the certificate.
10.10 | What if the payment certifier fails to deliver or post a notice that a certificate has been issued and, as a result, a lien holder fails to file within the required time?
Liability of certifier to lien holder
Commentary: a payment certifier who fails to deliver or post a notice that is required is liable to any person who suffers loss or damage as a result.[See section 7(9)]
10.11 | Must a notice of certificate of completion be delivered to anyone else?
Delivery of notice to other persons
Commentary: yes. A copy of the notice of certification of completion must also be delivered, within seven days to the owner, the head contractor (if any) and the person at whose request the certificate was issued. [See section 7(4)(a)]
10.12 | What triggers the issue of a certificate of completion?
Request for certificate
Commentary: the certification process is triggered by a request made by a contractor or subcontractor to the payment certifier that the certifier determine whether the contract or subcontract has been completed and that, if it has been completed, that the payment certifier issue a certificate of completion. The payment certifier must do this within ten days after the date of the request. [See section 7(3)]
10.13 | Must the request to the payment certifier be in any particular form?
Form of request for certification
Commentary: the Act does not require that the request be in any particular form. In practice, the request should contain the same information as to the improvement, its location, the contract or subcontract and the parties as will be found in the certificate itself when issued. [See Form 3 for guidance]
10.14 | What if the payment certifier fails or refuses to issue a certificate of completion?
Certification by court
Commentary: the person who requested the certificate is entitled to apply to court for an order declaring that the contract or subcontract has been completed. Where such an order is made, the order is deemed to be a “certificate of completion.” [See definition of “certificate of completion.”]
When a court order is made, the payment certifier is under the same duty to deliver copies of the certificate, notices of the certification and to post the notice as if the payment certifier had, personally, met the certification.
[See section 7(7)]
A payment certifier who unreasonably refuses or fails to issue a certificate of completion may also be subject to civil liability.
[See section 7(8)]
10.15 | How does the certificate procedure permit the early release of holdbacks?
Certificate and early release of holdback
Commentary: once a certificate of completion is issued, time begins to run with respect to the holdback retained from the contractor or subcontractor whose job is certified as complete. Once 55 days have elapsed, and no liens have been filed by persons claiming under the contract or subcontract in question, the holdback may then be released to the contractor or subcontractor from whom it was retained.
10.16 | Does this have any impact on holdbacks higher in the pyramid?
Commentary: yes. The person who releases a holdback (holdback no. 1) with respect to a job may also have had a holdback (holdback no. 2) retained from it by the person next higher in the pyramid. But holdback no. 2 was, at least in part, retained for the benefit of the contractor or subcontractor whose job has been certified and all those claiming under that person. Since no further claims can be asserted down that particular contractual chain, the person who has paid out holdback no. 1 should be entitled to claim a corresponding payment from holdback no. 2. The right to claim that amount is set out in section 9(1).
9(1) A contractor is entitled to receive, from the holdback retained by the owner from the contractor, an amount equal to the holdback amount applicable to a subcontract if
(a) a certificate of completion has been issued in respect of the subcontract to which the contractor was a party, and
(b) the holdback period established under section 8(1) has expired without any claims of lien being filed that arose under the subcontract.
The contractor entitled to such a payment is entitled to payment from a holdback account established under section 5.
[See section 9(4)]
A corresponding right to claim a portion of a holdback exists where a certification is made with respect to a sub-subcontract.
[See section 9(3)]
An example of the application of section 9 is set out in Figure 13.
10.17 | Wouldn’t a release of holdback funds under this section allow the amount retained to drop below the level of the “required holdback?”
Impact on “required holdback”
Commentary: no. The Act guards against this in two ways. First, section 9(2) of the Act ensures that payments under this provision do not constitute non-compliance with section 4:
9(2) An owner is deemed to have complied with the requirements of section 4 even if the amount retained has been reduced to a lesser percentage than is required by that section if
(a) an amount is paid to a contractor in accordance with
subsection (1) of this section, and
(b) the amount retained by the owner would have complied
with the requirements of section 4 had no payments been
made under this section.
This is reinforced by the definition of “required holdback” which defines it as the amount required to be retained under section 4, less any payments under an entitlement to payment arising under section 9.
[See definition in section 1(1)]
An exception in favour of section 9 is also found in section 5(2).