New Brunswick seeks feedback on Mechanics’ Lien Act reform proposals
June 27, 2018
BY Gurinder Cheema
In May 2018, the Legislative Services Branch (LSB) of the Office of the Attorney General (New Brunswick) released Law Reform Notes #41. These notes consider potential reforms to New Brunswick’s Mechanics’ Lien Act (“the Act”) – a topic initially addressed in Law Reform Notes #40, released in December 2017.
Law Reform Notes #40
In Law Reform Notes #40, the LSB confirmed a project to reform the Act. This will not extend to major changes to the Act’s key elements, namely liens, holdbacks and construction trusts. The LSB anticipates a series of modernizing changes that will result in a new statute, tentatively named the Construction Act. In generating its reform proposals, the LSB reviewed commentary, case law and prior law reform efforts, particularly the final report of the Expert Review of Ontario’s Construction Lien Act.
Some of the changes the LSB is considering include:
- amending the definitions of “improvement” and “owner” (s. 1);
- raising the minimum amount of lien claim (s. 4(4));
- amending the time period for the preservation of a claim of lien, so it is the same for all parties (s. 24);
- adding termination as a “trigger” for the commencement of the preservation period (s. 24(4));
- adding a requirement that people who supply services/materials to a site must give the owner notice of their intent to file a claim of lien;
- reducing the holdback to 10% (s. 15);
- specifically defining “substantial performance”;
- adding a requirement to give notice of substantial performance;
- amending s. 15 to better facilitate the early release of holdback;
- allowing annual, phased and/or segmented release of holdback in certain circumstances;
- increasing the protection of trust beneficiaries in the event of insolvency;
- adopting a tiered dispute resolution process for claims arising under the Act;
- clarifying the relationship between the Act and s. 7 of the Arbitration Act;
- expanding the right to information from owners, contractors and others (s. 32);
- allowing parties to withdraw from the holdback and lien scheme where appropriate payment bonds are in place; and
- adding further penalties and types of enforcement mechanisms to the Act to address general non-compliance.
Law Reform Notes #41
This issue of the notes include feedback the LSB received with respect to the potential reforms discussed in the previous issue.
Law Reform Notes #41 focus on the following issues related to modernizing the Act: Crown immunity, security of payment and bonding on public projects.
The LSB plans to recommend that New Brunswick should narrow the extent of Crown immunity. In the notes, the LSB points to Nova Scotia as a useful model for reform and highlights that New Brunswick is one of just three provinces where the provincial Crown has blanket immunity to construction lien legislation.
With respect to security of payment, the LSB suggests that the claims process in the Crown Construction Contracts Act should be eliminated if the new Construction Act (replacing the current Mechanics’ Lien Act) is made binding on the Crown. Eliminating this claims process “would increase consistency within the New Brunswick construction industry, align New Brunswick’s practices with those in other provinces and simplify a complex area of law.”
The LSB says that the use of bonding on public projects should be increased. The LSB is also considering whether unpaid suppliers of services/materials should be required to claim against a bond in place on a project where the Crown is an “owner,” rather than exercising lien rights.
The LSB suggests that New Brunswick should adopt a prompt payment scheme like the one recently introduced in Ontario. It proposes that the scheme should apply to all construction projects in the public and private sectors, and all levels of the construction pyramid (except wages). The notes also address contingent payment clauses. The LSB is considering allowing pay-when-paid clauses, but prohibiting or limiting pay-if-paid clauses.
The LSB says that if New Brunswick adopts prompt payment, some type of expedited dispute resolution mechanism should also be enacted. The notes review Ontario’s scheme in detail, but the LSB is unsure whether such a scheme is feasible in New Brunswick. The LSB welcomes comments on what type of dispute resolution scheme might be viable in New Brunswick.
The LSB welcomes comments and suggestions on content from Law Reform Notes #40 and #41. The deadline for responses is July 15, 2018. Responses should be sent to [email protected] or the following address:
Legislative Services Branch, Office of the Attorney General Chancery Place, P.O. Box 6000, Fredericton, N.B., Canada E3B 5H1
Related BCLI Work
The British Columbia Law Institute is undertaking a comprehensive review of the Builders Lien Act, with the help of an expert Project Committee. The project will culminate in the production of a report to the Ministry of the Attorney General, containing recommendations for reform of the Builders Lien Act. For more information about this project, please click here.