Amendments to the Construction Lien Act (CLA) of Ontario are essential because contractors are being hammered by deficiencies in the Act that keep them from collecting money owed for work completed.

“The simplest way we can put it is that we’re asking for legislation that ensures that contractors get paid or they never lose their right to lien,” says Hugh Laird, executive director, Interior Systems Contractors Association. Near the top of the list of amendments proposed by an industry-wide alliance is the extension of a contractor’s right to lien the property past the current 45-day limit because most contractors see payment delays of 60-90 days. “That means by the time many subs realize they are not getting paid, their lien rights have expired,” explains Ron Johnson, deputy director, ISCA.

The Council of Ontario Construction Associations (COCA) is leading the charge for reform. David Zurawel, vice-president of policy and government relations, says the Act doesn’t always work the way it is intended to because business has found ways around the legislation. “Contractors should never be without both their money and their lien rights, but currently it is the practice that they find themselves without both.”

The alliance is holding meetings with the Ministry of the Attorney General, responsible for the CLA. It is optimistic that the amendments could be passed this year. ISCA is providing legal counsel to COCA to help draft the language of the amendments.

Another key amendment proposed by the group is the automatic release of the contractor’s holdback money upon substantial completion of their contract. The holdback is 10 percent of the total value of the contractor’s contract. As it stands, developers are not always releasing that money immediately, leaving contractors with cash flow problems in lean economic times.

Bob Pirocchi, president of 4 Star Drywall Ltd., concurs that it is vital contractors have lien rights until they get their holdback money. “Right now, if I don’t get my holdback by the 44th day [of the lien period] do I call my lawyer to prepare a lien to put on the property on the 45th day? That doesn’t make any sense.”

Pirocchi says a big concern in the industry is that developers might be using holdback funds to invest in other developments. “It’s illegal but what can we do? We are at the developer’s mercy.”

Laird says in exchange for delaying the return of holdback money, a developer might promise the contractor work on a new project once development and building permits are approved. “A lot of contractors in the lowrise market will take that deal because there is not much work going on.” Still, without their holdback money contractors may not have enough cash to pay health and welfare benefits to their workers. “It’s a vicious circle,” says Laird. “In good times this kind of thing is not a big problem.”

Changes to the CLA will also facilitate changes to Ontario’s Condominium Act, says COCA’s Zurawel. Currently, if a contractor wants to apply a lien against a condo project, the contractor must file liens against individual unit holders, a potentially long and expensive process that can cost them more than the value of their holdback.

COCA has been trying to get amendments to the Construction Lien Act passed for almost a decade. Business practices have outgrown the Act’s last revisions implemented in 1990, says Zurawel.

Most of the building industry’s players—including architects and general contractors—support the alliance’s proposed amendments, says Laird. Only the development community wants things left alone.

ISCA’s Johnson says the issue has brought together a “broad coalition” that agrees on reform and it has garnered significant attention in the government. “Early indications from the Minister responsible (Chris Bentley) are that if we can come up with industry-wide consensus that the Liberal government would act on it.”

On that basis, Laird is optimistic that the changes will be passed this year. “It’s the right thing to do.”