Chapter 11

The Running of Time for the Filing of Liens
and Release of Holdback

11.1 What is the relationship between the time for the filing of liens
and the time for the release of holdbacks?

Time periods generally

 

Commentary: the purpose of requiring the retention of holdbacks from a contractor or subcontractor is to protect persons lower in the construction pyramid and provide additional security for their liens. It follows that the release of the holdback should not be permitted until the possibility of lien claims against it is exhausted. Time limits for the filing of liens and the release of holdbacks have been set so that the release of a holdback will be permitted only after the time for filing liens has expired. The time for releasing a holdback, therefore, is somewhat longer than the time within which a lien must be filed.

For this principle to operate consistently, in both cases, the beginning of the time period, in both cases, must be triggered by the same event.

11.2 What are these time periods?

The basic time periods

Commentary: the time for filing a lien is no later than 45 days after the event which “triggers” the running of time. The period during which a holdback must be retained expires 55 days after the “triggering” event.
[See sections 8 and 20]

In reckoning these time periods, the first day is excluded and the last day is included.

[See Interpretation Act, section 25*]

11.3 What event or events will trigger the running of time?

Triggering events

Commentary: the Act identifies three different events that may trigger the running of time. Which of these events is applicable will depend on the circumstances of the individual project or contract.

  • a certificate of completion is issued
  • the head contract is completed, abandoned or terminated
  • the improvement is completed or abandoned

Which of these events is applicable will depend on the circumstances of the individual project or contract.

11.4 What is the role of the certificate of completion?

Certificate as trigger

Commentary the issuance of a certificate of completion will trigger the running of time with respect to the release of the holdback.

[See section 8(1)]

A certificate of completion will also trigger the running of time for the filing of liens by the contractor or subcontractor whose work is being certified and any person claiming under that contractor or subcontractor.

[See section 20(1) and paragraph 10.6*]

11.5 What if time had already started to run when a certificate is issued?

Certificate where time
has begin to run

Commentary: a certificate may be issued after time has already began to run by the operation of another triggering event. This might occur where some event other than the issue of a certificate has acted as a trigger, or an earlier certificate that started time running.

[See Figure 14* for an example where this might occur]

The Act is clear that the issue of a certificate of completion does not operate to extend or renew the time for filing of a lien for time would otherwise be determined with reference to

  • an earlier certificate or
  • some other, earlier, event that caused time to begin running.

[See section 20(3)]

11.6

What about the other events that will trigger the running of time?

Completion, abandonment, termination

Commentary: where no certificate of completion has been issued, the event which starts the running of time will depend on whether or not the owner has engaged a head contractor.

[See definition of “head contractor” in section 1(1) and paragraph 3.3*]

Where a head contractor has been engaged, time runs from when “the head contract has been completed, abandoned or terminated.”

[See sections 8(2)(a) and 20(2)(a)]

Where the owner did not engage a head contractor, time begins to run from when “the improvement has been completed or abandoned.”

[See sections 8(2)(b) and 20(2)(b)]

11.7

What does completion mean in this context?

Completion

Commentary: the meaning of completion will depend on whether the word is used with reference to the head contract or the improvement.
So far as the head contract is concerned, completion is determined with reference to financial criteria. These were discussed in the context of certification.

[See definition of “completed,” section 1(2) and paragraph 10.4*]

Section 1(3) of the Act deals with the completion of an improvement:

1(3)  For the purposes of this Act, an improvement is completed if the improvement or a substantial part of it is ready for use or is being used for the purpose intended.

11.8 When is a contract or an improvement abandoned?

Abandonment

Commentary: this is dealt with in section 1(5):

1(5)  For the purposes of this Act, a contract or improvement is deemed to be abandoned on the expiry of a period of 30 days during which no work has been done in connection with the contract or improvement, unless the cause for the cessation of work was and continued to be a strike, lockout, sickness, weather conditions, holidays, a court order, shortage of material or other similar cause.

11.9

When will the head contract be “terminated?”

Terminated

Commentary: the Act provides no guidance on the meaning of “terminated.” Generally speaking, a contract or subcontract may be terminated by agreement of the parties to it, when one party is entitled to treat the contract as terminated owing to substantial non-performance by the other, or where the agreement is frustrated in some fashion. These are concepts drawn from the law of contract generally and are applicable here.

Go back to Chapter 10, go ahead to Chapter 12, or return to the Table of Contents.


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