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Mechanic’s Lien & Bond Claim Rights in Kansas

Posted on December 2, 2019 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Click Your Heels Three Times for Mechanic’s Lien and Bond Claim Rights in Kansas

OK, maybe you can’t simply click your heels to file a lien in Kansas, but you can read today’s post to learn more about the steps to securing lien and bond claim rights!

Kansas Mechanic’s Liens

For private, commercial projects there is no statutory provision requiring a preliminary notice, however, we recommend serving a non-statutory notice as a best practice.

For private residential projects there is a statutory notice:

  • Residential Projects(residence intended for use by not more than two families):
    • New Construction: File a Notice of Intent to Perform no earlier than 18 months prior to filing a lien, but prior to title passing to the buyer.
    • Improvement: Serve warning statement upon the owner or obtain and retain a statement signed by the owner that states they were given a warning statement.

Whether furnishing to commercial or residential, the mechanic’s lien deadlines are as follows.

  • Subcontractors or Material Suppliers:
    • File the lien within 3 months from last furnishing materials or services and serve a copy of the lien on the owner, the prime contractor and the party with whom you contracted.
  • Prime Contractors:
    • File the lien within 4 months from last furnishing materials or services and serve a copy of the lien on the owner.

When furnishing to a commercial project, a Notice of Extension to file lien, which extends the time to file a lien to 5 months from last furnishing materials or services, may be filed within the above lien period. Serve a copy of the Notice of Extension on the general contractor or construction manager, and on the owner.

In the event the mechanic’s lien does not prompt payment, you should file suit to enforce the lien within 1 year from filing the lien or, if a promissory note was attached to the lien in lieu of a statement, within 1 year from the maturity date of the promissory note.

Bonus Tips

  • Kansas is a full balance lien state, which means the lien is enforceable for the full amount owed, regardless of payments made by the owner.
  • The contractor or owner may record a payment bond as security, preventing liens from attaching to the property or discharging any liens already filed.

Bond Claim for a Private Project? Yep!

Kansas statute provides that a properly recorded payment bond will prevent mechanic’s liens from attaching to the property. It is recommended to serve a bond claim upon the prime contractor within 90 days from last furnishing materials or services.

Kansas Bond Claims

Like commercial projects, the public Kansas statute does not provide for a preliminary notice & we recommend serving a non-statutory notice.

Generally, payment bonds are required for general contracts exceeding $100,000; you should always attempt to obtain a copy of the payment bond from the public entity. There are separate bond requirements for state highway projects & county road projects.

  • State Highway Projects: Generally, payment bonds are required on general contracts exceeding $1,000.00.
  • County Road Projects: Generally, payment bonds are required on general contracts exceeding $25,000.00.

You should serve the bond claim notice in accordance with the terms and conditions of the payment bond. Frequently a bond claim notice is required within 90 days from last furnishing.

For state highway projects, you should serve your bond claim within the terms of the bond, plus you should file an itemized statement of account with the Secretary of Transportation within 6 months from completion of the project.

Should you need to proceed with suit to enforce your bond claim, you should file suit within 6 months from completion of the project, unless it is a state highway project, where the deadline is within 1 year from completion of the contract.

The Retail Bankruptcy Apocalypse

Posted on November 15, 2019 by - In Other Commercial Credit News

Run! It’s the Retail Bankruptcy Apocalypse

“The Retail Bankruptcy Apocalypse!” A phrase you have likely heard or read in the news; perhaps written in scary font from a 1950’s horror movie. The consistent roll call of retail bankruptcies is wreaking havoc on ill-prepared suppliers. While apocalyptic may be a bit of an exaggeration, retail bankruptcies are, without question, harmful to creditors. What can you do to protect your business from retail bankruptcy?

Secured Transactions – Even on Consignment

Article 9 of the Uniform Commercial Code (UCC) provides an opportunity for trade creditors to secure their goods and/or accounts receivable by leveraging the personal property assets of their customer. Properly perfected security interests via UCC filings will mitigate (though not eliminate) risk.

In retail, creditors frequently engage in consignment sales. Creditors will tell us, “It’s alright, we sell on consignment, we’re protected.” But that’s not always the case **cough cough, Sports Authority, cough cough**.

How does a true consignment work? The consignor/owner retains title to the delivered goods, while the consignee/recipient holds and attempts to sell the goods. If/When those goods are sold, the owner’s security attaches to the proceeds of the sale. If the consignee is unable to sell the goods, they can simply return the goods to the owner. However, to maintain title to those goods, you must perfect a security interest via a UCC filing.

But Wait, There’s More!

In addition to filing UCCs, there are other steps you can take to protect yourself in the event your customer files for bankruptcy.  Here are some additional tips from Stephanie Wickouski’s article, Avoid a Catastrophic Loss from a Customer’s Bankruptcy – Five Tips. 

Up first? Recognize the warning signs of default or financial distress.

“These signs include increasing degrees of lateness in paying invoices and communication anomalies. Communications might be irregular in a variety of respects, ranging from uncharacteristic unresponsiveness to effusive assurances that all is well and “the check is in the mail.” A troubled customer may also try to appeal to the vendor’s sense of loyalty, in order to lull the vendor to continue to supply goods despite growing delinquencies.”

Next? Ensure you have established terms & conditions.

“Terms and conditions which provide for interest and legal fees if payments are delinquent, or damages if the conditions are violated, potentially increase the amount you can claim and recover in the event of a bankruptcy.”

And? Consider withholding shipments until the account is current.

“Once payments are delinquent, consider moving to COD (cash on delivery) for new orders, or declining to ship further goods until the account is brought current.”

Wickouski also mentions you may want to move to consignment terms. However, be aware that even consignments should be secured through a UCC filing.

Then? Watch deliveries & mind the 20-day clock.

“State law generally gives vendors a right to reclaim goods from an insolvent buyer within 20 days of delivery. If the buyer files bankruptcy, the reclamation period is extended to 45 days. Payment for goods delivered within 20 days of the bankruptcy may be entitled to a priority of payment.”

Lastly? Maintain communication.

“It’s always better to be communicating regularly with a customer. Even if things head south, vendors who are regularly in touch with a customer fare better in a bankruptcy than those who do not. Frequent communication with a customer will allow you to know more about the customer’s circumstances (and to know it earlier). This knowledge will allow you to make more informed decisions to manage the account.”

  Questions? NCS can help!

Fabricated Invoice Date Leads to Invalid Mechanic’s Lien

Posted on November 11, 2019 by - Mechanic's Liens & Bond Claims

Filing a Lien? Make Sure You Have Documentation to Backup Your Furnishing Dates.

As One Creditor Learned, Making Up a Fake Invoice Date Could Lead to Invalid Mechanic’s Lien

Thinking of changing an invoice date to extend a lien deadline? While it may be tempting to alter an invoice, don’t do it! As one contractor discovered, a fabricated invoice date may lead to an invalid mechanic’s lien.

Altered Invoices = Invalid Mechanic’s Lien

The State: Texas

The Case: Consolidated Reinforcement, LP v. Cheraif

The Parties:

  • Owner: Two Investors (Owner)
  • General Contractor: Cheraif

This relationship is a bit different than a typical owner/GC relationship. In this case, Cheraif and the investors contracted together under an investment contract. Ultimately, under the investment contract, Cheraif would live in the home being constructed. Cheraif was to be paid $50,000 as general contractor, provided he could “…present clear property title” to the house free of any liens within ten months after the date construction on the house began.”

  • Subcontractor: Russell Bankston (Bankston)
  • Material Supplier: Consolidated Reinforcement, LP (CRI)

The Payment Problem

Bankston was hired by Cheraif to pour foundation for the home. Bankston hired CRI to supply materials. Once the foundation was finished, Bankston was paid in full; however, Bankston didn’t pay its material supplier, CRI. Subsequently, CRI filed a mechanic’s lien.

The Key Dates

  • Bankston’s work was complete in June 2014.
  • CRI had an invoice with a ship date of July 2014.
  • CRI filed its mechanic’s lien October 2014.

The Problem with the Key Dates

The trial court determined this was a residential project. With the completion of Bankston’s work in June 2014, CRI should have provided notice of its unpaid claim by August 2014 and filed its mechanic’s lien by September 2014. However, CRI didn’t serve its notice until September 2014 and file its lien until October. CRI calculated its deadlines from the July invoice.

Now, I should note, there were many issues with this case. In fact, there were additional issues with this July invoice, aside from the obvious “it was issued after work was completed.” For example, there were discrepancies on what was furnished vs. what was invoiced, such as CRI invoiced for tensioning, but it wasn’t a tension slab/foundation.

The Court Ruled

The trial court ultimately determined CRI filed an invalid mechanic’s lien and caused additional financial loss to Cheraif (i.e. the $50,000 Cheraif was to be paid if the home maintained clear title).

“… intentionally and knowingly used the altered invoices in an attempt to send the above-referenced notices and file the Lien Affidavit within their respective statutorily prescribed deadlines. This was done in order to cause financial injury to Cheraif in an attempt to have him pay for material for which he would not be required to pay had those deadlines not been met, and furthermore to have him pay for material that was not provided on his project.”

As the saga continued, other issues were uncovered, such as the “lack of diligence” by CRI’s attorney to serve Cheraif with a copy of the notices.

Alas, the trial court deemed CRI’s lien invalid, wouldn’t permit a foreclosure of the lien, and awarded fees to Cheraif.

As you’d imagine, CRI was miffed that the trial court wouldn’t allow it to foreclose on the mechanic’s lien. But, as we know, it was an invalid mechanic’s lien — which means, foreclosing is obviously not an option. And, an award in fees can be expensive, so it’s not surprising that CRI argued the trial court erred in awarding fees. Much to CRI’s dismay, the appeals court agreed with the trial court on all counts.

  • The lien is invalid.
  • Foreclosure is not permitted.
  • Attorney’s fees awarded to Cheraif.

And all this craziness because CRI altered an invoice date so it would appear it timely served its notice and filed the lien.  Gosh, that got expensive!

The Moral

Tracking lien deadlines can be a challenge. Missing deadlines stinks. But fudging an invoice date so you can “extend” your lien deadline is just not worth the cost of the consequences.

What Information Should You Include In Lien Waivers?

Posted on November 8, 2019 by - In Other Commercial Credit News

Information You Should Include In Lien Waivers

What Information Should You Include In Lien Waivers?

Lien waivers; we can’t get enough of ‘em! A lien waiver is a signed document in which the lien claimant agrees to waive rights to its claim based on payment to be received or received. So, what information should be included in a lien waiver?

Lien Waivers Should Include

Every lien waiver should clearly identify the property name & project location, the debtor’s name (your customer), the invoice or purchase order number, the payment amount and the disputed claim amount. If the lien waiver is for partial payment, you should also include the payment period or a through date.

Conditional or Unconditional: Lien Waivers, Not Love

Unconditional love is great! Unconditional lien waivers, not so much. In the lien waiver world, conditional is always better.

  • Conditional Lien Waivers: A signed document agreeing to waive rights to a claim given conditioned upon receipt and clearance of a final payment. If the client does not get the final payment, the waiver does not waive their rights.
  • Unconditional Lien Waivers: A signed document agreeing to waive rights to a claim. The waiver is not conditioned upon clearance of a final payment. The client’s rights will be waived whether payment is received or cleared.

What Else Can Be Included in Lien Waivers?

This week we shared an article by Jason Lambert, Construction Lien Waiver Provisions Contractors Should Be Using. Lambert recommends that those who request lien waivers include the following in their waivers:

  • Lien waivers don’t have to waive lien rights only.

“…a lien waiver can also include releases of any claims against surety bonds, other statutory rights or claims, and at its broadest, claims against the paying party. One example of a provision that could help accomplish this is a release of ‘any right arising from a payment bond that complies with a state or federal statute, any common law payment bond right, any claim for payment, and any rights under any similar ordinance, rule, or statute related to claim or payment rights.’”

  • Confirmation that others have been paid.

“…contractors can include language requiring the company receiving payment to represent and warrant that all subcontractors of a lower tier have been paid or will be paid within a certain time frame using the funds provided and that these are material representations and inducements into providing payment.”

  • Make them a payment affidavit.

“…turn a lien waiver into a miniature payment affidavit and require the party receiving payment to swear that subcontractors have been paid or will be paid. They can also require that a list of unpaid subcontractors or material suppliers be listed on the affidavit to give them the ability to track a continuing lack of payments or to confirm that previously unpaid subcontractors have been paid as the project continues.”

Lambert also recommends including an indemnification provision.

“…include an indemnification provision requiring the party receiving payment to indemnify them (and maybe even the property owner) from payment claims made by lower tier subcontractors or material suppliers. This can provide another incentive to a payee to use the funds to pay downstream subcontractors if they know that failing to do so will subject them to additional liability.”

What’s in Your Lien Waiver?

Man, I wanted that to sound like the actor “What’s in your wallet?” Alas, I don’t do voice-overs, however I do recommend all lien waivers be reviewed by legal counsel PRIOR to executing the waivers. It’s imperative you remain protected.

Changes Ahead for Louisiana Mechanic’s Lien Rights

Posted on October 25, 2019 by - In Other Commercial Credit News

Changes Ahead for Louisiana Mechanic’s Lien Rights

It’s hard to believe we are only a few months away from the year 2020! 2020 will be a BIG year, not only for NCS (we’re turning 50!) but also for states with changes to mechanic’s lien and bond claim statutes; states like Louisiana.

Louisiana’s 2019 legislative session included the passage of HB 203, which becomes effective 1/1/2020. Let’s review one of the statute changes: the calculation of mechanic’s lien deadlines.

Current Mechanic’s Lien Deadlines

Louisiana has this tricky thing about its mechanic’s lien deadlines; the lien deadline is calculated by a combination of varying factors. Factors include whether the project is residential, whether a Notice of Contract was recorded, where you are in the ladder of supply, if/when a Notice of Termination is filed, or the date of substantial completion or abandonment of the project.

For example, under current statute, if you are the prime contractor, your lien should be filed within 60 days after a Notice of Termination, or if no Notice of Termination has been filed, within 60 days from substantial completion or abandonment.

If you are a subcontractor or material supplier, there is an additional layer: whether a Notice of Contract was recorded.

  • Notice of Contract has been recorded:
    • File the lien within 30 days after a Notice of Termination is filed.
  • Notice of Contract has not been recorded:
    • On commercial projects, file the lien within 60 days after a Notice of Termination or substantial completion or abandonment of the project, if no Notice of Termination is filed.
    • On residential projects, file the lien within 70 days after a Notice of Termination or substantial completion or abandonment of the project if no Notice of Termination is filed.

So, under current law, your mechanic’s lien deadline could be 30 days, 60 days, or 70 days.

2020 Mechanic’s Liens Deadlines

Under the new statute:

  • Notice of Contract has been recorded:
    • Prime contractors: File the lien within 60 days after a Notice of Termination is filed, or, if no Notice of Termination is filed, within 7 months after substantial completion of abandonment of work.
    • Subcontractors or material suppliers: File the lien within 30 days after a Notice of Termination is filed, or, if no Notice of Termination is filed, within 6 months after substantial completion or abandonment of work.
  • Notice of Contract has not been recorded:
    • On commercial projects, file the lien within 60 days after a Notice of Termination, or, if no Notice of Termination is filed, within 60 days after substantial completion or abandonment of the project.
    • On residential projects, file the lien within 70 days after a Notice of Termination, or if no Notice of Termination is filed, within 70 days after substantial completion or abandonment of the project.

This is text from the House Bill, in which legislators explain the change:

“It should be recognized, however, that the new six-month period is by no means a lengthening of the period permitted for filing statements of claim or privilege. It is, instead, the imposition of an outside deadline where none previously existed. If [a Notice of Contract was filed], a statement of claim or privilege filed more than thirty days after the filing of Notice of Termination is untimely. If [a Notice of Contract was filed] and no Notice of Termination is filed, the period for filing statements of claim or privilege will nevertheless expire six months after substantial completion or abandonment of the work, and a statement of claim or privilege filed later than that will be untimely.”

The effective date for these changes? Generally, if the Notice of Contract is recorded on or after 1/1/2020, and all work began on or after 1/1/2020, the new statute will take effect.

Best Practice:  Clarify your deadlines!  As provided by statute, serve notice upon the owner expressly requesting the owner to notify you of the substantial completion or abandonment of the work or the filing of a Notice of Termination of the work.  If in doubt, track your deadlines using the most conservative calculation.

Idaho: Lien & Bond Claim Rights in the Gem State

Posted on October 21, 2019 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Idaho Lien & Bond Claim Rights

Idaho: Mechanic’s Lien & Bond Claim Rights in the Gem State

Did you know the “Idaho Territory” was larger than Texas? According to Idaho.gov, although Idaho is now smaller than Texas, it is “as large as all six New England states combined with New Jersey, Maryland, and Delaware.” Do you know what that means? A lot of land for potatoes, construction and potentially mechanic’s liens!

Idaho Mechanic’s Liens

There is no statutory requirement for a preliminary notice for private commercial projects. For residential projects (owner or non-owner occupied dwelling of 1 to 4 units) if you are contracted directly with the owner and the contract exceeds $2,000.00, you should provide two disclosure statements to the owner:

  • Serve the first disclosure to the owner priorto entering a contract and include an acknowledgment of receipt to be executed by the owner.  Retain a copy of the executed disclosure and provide a copy to the owner.
  • Serve the second disclosure to the owner prior to the closing with a prospective residential purchaser or the final payment to the prime contractor.

File the lien after last furnishing materials or services, but within 90 days after last furnishing materials or services and serve a copy of the lien upon the owner within 5 business days from filing the lien. File suit to enforce the lien within 6 months from filing the lien.

The time in which to file suit may be extended if a payment on account is made, or an extension of credit is given with an expiration date, and such payment or credit and expiration date is endorsed on the record of the lien. Suit would then become due within 6 months from the extension.

Retainage on Idaho Private Projects

According to Idaho statute, retainage may not exceed 5% for private commercial projects.

29-115 (2) In any contract relating to the construction of any private work of improvement, the retention proceeds withheld by the owner from the original contractor or by the original contractor from any subcontractor from any payment shall not exceed five percent (5%) of the payment and in no event shall the total retention withheld exceed five percent (5%) of the contract price.

Idaho Bond Claim

Generally, payment bonds are required for general contracts of $50,000.00 or more. You should always attempt to obtain a copy of the payment bond from the public entity which contracted the project. If the public entity fails to require a payment bond, the public entity is liable to the claimant and shall make payment to the claimant upon demand.

Serve bond claim notice upon the prime contractor within 90 days from last furnishing materials or services.

When contracting directly with the prime contractor, no bond claim notice is required. File suit to enforce the bond claim after 90 days from last furnishing materials or services, but within 1 year from last furnishing materials or services. When contracting directly with the prime contractor, file suit to enforce the bond claim after 90 days from last furnishing materials or services, but within 1 year from the date on which final payment, under the subcontract, became due.

Retainage on Public Projects

Like the statute for private projects, retainage on public projects is also 5%.

54-1926 (3) Public bodies requiring a performance bond or payment bond in excess of fifty percent (50%) of the total contract amount shall not be authorized to withhold from the contractor or subcontractor any amount exceeding five percent (5%) of the total amount payable as retainage.

Statute also dictates that retainage should be released within 30 days after project completion/final acceptance.

Prompt Pay on Public Projects

Section 67-2302 of Idaho statute outlines prompt pay provisions for public projects. Parties should be paid within 60 days of billing receipt.

(2) All bills shall be accepted, certified for payment, and paid within sixty (60) calendar days of receipt of billing, unless the buyer and the vendor have agreed by a contract in place at the time the order was placed that a longer period of time is acceptable to the vendor.

Other Key Pieces of Info for Idaho Lien & Bond Claim

Here are a few other points of interest!

  • For commercial projects, the lien is enforceable for the full amount owed, regardless of payments made by the owner
  • Mechanic’s liens can be bonded off
  • Generally, only those contracting with the prime contractor or a first-tier subcontractor have a claim under the bond
  • Nearly 1/3 of all potatoes grown in the U.S. are grown in Idaho
  • More than 70 gemstones are mined from Idaho

Those last two bits won’t help you secure your lien rights, but they may help you on your next trivia night!

Rhode Island Mechanic’s Lien Rights are Mighty

Posted on October 18, 2019 by - In Other Commercial Credit News

Rhode Island May Be The Smallest State in Land Size, but Rhode Island’s Mechanic’s Liens are Mighty

Rhode Island may be the smallest state in land size, but don’t let that fool you when it comes to securing your mechanic’s lien or bond claim rights, because Rhode Island means business!

Rhode Island’s Notice of Possible Mechanic’s Lien

Generally, there is no statutory provision requiring a preliminary notice for private projects, unless you contracted directly with the owner.

If you contract with the owner, you should:

  • Obtain a written contract and include notification within the contract, or
  • Serve notice upon the owner prior to first furnishing materials or services.
  • When contracting directly with a tenant/lessee, also serve the fee owner with the notice.

R. Thomas Dunn recommends including the language within the contract, and serving the notice via certified mail, return receipt requested prior to furnishing, in his article An Easy Way to Preserve Your Mechanic’s Lien Rights in Rhode Island.

“The Notice of Possible Mechanic’s Lien may also be served by certified mail at ‘any time prior to commencing work or delivery of materials for construction, erection, alteration or repair as set forth in this chapter.’ This sounds straightforward but this deadline can be easily missed when construction commence with limited notices to proceed and/or oral agreements to start preliminary aspects of the work as contract amounts and other commercial terms are being negotiated. If the work has begun, but the contract has not been executed, include the Notice of Possible Lien into the written contract with the owner.”

Dunn also notes, if the Notice of Possible Mechanic’s Lien is required and isn’t served, you may lose your lien rights.

“Failure to provide this notice results in the contractor losing its ability to assert a mechanic’s lien for the labor and material supplied to the Project… In addition to losing its mechanic’s lien rights, a contractor who fails to serve the Notice of Possible Mechanic’s Lien is required to indemnify and hold harmless the owner from any costs incurred on account of liens claimed by the contractor’s subcontractors or suppliers unless the owner did not yet pay the general contractor.”

Rhode Island Mechanic’s Lien & Suit

You should serve and file the lien (Notice of Intention) within 200 days from first furnishing materials or services. The lien may be served and filed as late as 200 days after last furnishing materials or services but, it will only be effective for materials or services furnished 200 days prior to serving and filing the lien. (Fun Fact: some states have a trapping notice, Rhode Island has a trapping lien!) Act quickly if you need to enforce your lien; the suit deadline is 40 days from the date of the lien filing.

Rhode Island Bond Claims

Much like Rhode Island private projects, there is no statutory provision requiring a preliminary notice on public projects — regardless of who you contracted with. Typically, payment bonds are required for general contracts exceeding $150,000, and you should always attempt to obtain a copy of the payment bond from the public entity contracting for the work.

Your bond claim notice should be served upon the prime contractor within 90 days from last furnishing and you should file suit after 90 days from last furnishing materials or services, but within 2 years from last furnishing materials or services, or within the terms provided in the payment bond, whichever is later.

Bonus: Rhode Island Has Prompt Pay Statute

You can read the statutory guidelines in full here, but here’s the at-a-glance:

  • If the contractor submits its bill(s) correctly, the owner should pay within 30 days of receipt of proper invoice
  • The contractor should pay its subcontractors within 10 days of receipt of payment from the state.

There are, of course, caveats such as “This section shall not apply to contractors or subcontractors performing work pursuant to a contract awarded by the department of transportation unless the subcontractor provides a payment and performance bond in an amount equal to the contract between the contractor and subcontractor.” So, if you have questions, I recommend carefully reviewing statute, asking an attorney for guidance, or…

Contact NCS today!

Recap of Changes to Ontario’s Construction Lien Act

Posted on October 14, 2019 by - Mechanic's Liens & Bond Claims

Recap of Changes to Ontario’s Construction Lien Act

Over the last two years we have discussed the changes to Ontario’s Construction Lien Act. Now, with all changes in force, here’s a breakdown of what you should know.

More Time to File a Lien

The first wave of changes went into effect in July 2018 and included changes to the deadline calculations for the filing of a mechanic’s lien or a public improvement lien.

  • File the lien within 60 days from last furnishing materials or services, but within 60 days from the earlier of publication of the certificate or declaration of substantial performance, completion, abandonment or termination of the contract. (Increased from 45 days)
  • File suit to enforce the lien within 90 days from the period in which the lien must be filed. (Increased from 45 days)

The Ontario legislature had earlier provided clarification on whether contracts would fall under old statute or new statute. Would-be-claimants would follow old statute if:

  1. The contract/improvement was entered prior to 7/1/18
  2. Procurement process began prior to 7/1/18
  3. Project is a leasehold interest & the lease was in effect prior to 7/1/18

Essentially, the statutory provisions that became effective 7/1/18 would apply if the contract and procurement process were initiated on or after 7/1/18.

If you aren’t sure whether events took place on or after July 1, 2018, follow the old statute; be conservative in calculating your deadlines. You don’t want to rely on the new 60-day deadline and later find the general contract or procurement began prior to 7/1/18 and that your lien rights should have been secured by day 45. It is certainly better to file a lien early than file a late lien & risk it being unenforceable.

Also of note, as of October 1, 2019, the public improvement lien can no longer be filed against the property of a municipality.  Instead, the public lien will attach to the funds owed by the municipality to the prime contractor.

Requirement for Payment Bonds on Public Projects

While the threshold established for requiring a payment bond on a public project is large ($500,000.00), Ontario statute, effective July 1, 2018, requires the prime contractor to obtain a labour and material payment bond.  A claim must be made within 120 days from last furnishing materials and services, and suit must be filed within 1 year from completion of the project.

All New Adjudication aka Dispute Resolution

Effective for projects procured or entered into on or after October 1, 2019, adjudication is a rapid construction dispute interim resolution process to avoid payment issues that may otherwise result in project delay.

Adjudication is subject to the procedures set out in the contract or subcontract, if they comply with statute.  The party who wishes to refer a dispute to adjudication must serve a written notice of adjudication on the other party and then request adjudication from the Authorized Nominating Authority.  The legislation defines the matters that may be adjudicated as:

  • The valuation of services or materials provided under the contract
  • Payment under the contract, including in respect of a change order, whether approved or not, or a proposed change order.
  • Disputes that are the subject of a notice of non-payment
  • Amounts retained / set-off
  • Non-payment of holdback
  • Any other matter that the parties to the adjudication agree to or that may be prescribed

Hooray for Prompt Pay

Also effective for projects procured and entered into on or after October 1, 2019, and applying to both private and public projects, prompt payment rules will require payment to be made by the owner within 28 days from submission of a proper invoice.

A proper invoice is a written bill or other request for payment in respect of an improvement under a contract between the owner and the contractor, and it is to contain specific information as outlined by the Act or as required by the contract.  Failure to pay the invoice within the stated period will result in an automatic accrual of interest from the date the invoice was to have been paid.

The general contractor must pay the subcontractor within 7 days from receipt of payment from the owner.  And, all parties in the contractual chain below the general contractor must make payment within 7 days from receipt of payment.

If the owner is not going to make payment within 28 days from receipt of a proper invoice, the owner must submit a notice of non-payment to the general contractor within 14 days after receiving the proper invoice.  Similarly, parties below the owner in the contractual chain must submit a notice of non-payment within 7 days from receipt of a notice of non-payment.  The notice of non-payment must provide the reason for non-payment and the amount of any dispute.