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Mechanic’s Lien Rights in Canada at a Glance

Posted on October 4, 2021 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Let’s Talk Mechanic’s Lien Rights in Canada

Over the last few years, several provinces in Canada have modernized or proposed amendments to their mechanic’s lien laws. Notably, Ontario paved the way for longer lien deadlines and prompt pay statutes, with its changes in 2018. Like lien rights in the U.S., each of Canada’s provinces has its own statute, which dictates when/if a notice should be served, when a lien should be recorded, and when a suit action must be initiated. So, let’s travel north and review the steps for securing mechanic’s lien rights in Canada.

Project Types: Private, Provincial Crown, Federal Crown

Although today’s post is primarily about mechanic’s lien rights in Canada, it’s worth noting that projects in Canada will fall into one of three categories:

  • Private: improvement contracted by a private entity, e.g., a person, company, or corporation
  • Provincial Crown: improvement of public works or building under formal contract made by Provincial government
  • Federal Crown: a contract for construction, alteration, or repair of any public building or public work of the Canadian government

Provincial and Federal Crown projects are generally not lienable, and any remedy available to claimants will likely be under a Labour & Material Bond. The Labour & Material Bond is a surety bond issued as assurance of payment to certain parties should the principal of the bond breach their construction contract.

10 Provinces, 3 Territories, 1 Requires a Preliminary Notice

Canada is comprised of 10 provinces: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland / Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, Saskatchewan, and 3 territories:  Northwest Territories, Nunavut and Yukon. Only one requires a preliminary notice to preserve mechanic’s lien rights: Quebec.

For those familiar with securing lien rights in the U.S., it may seem odd to not have a preliminary notice requirement. After all, most states require a preliminary notice and NCS’ research shows 97% of the time serving a notice will prompt payment, reducing the likelihood of a mechanic’s lien.

Though most Canadian provinces do not have preliminary notice requirements, you could serve a non-statutory notice. This gently worded notice alerts parties on the ladder of supply that you are (or will be) furnishing to the project.

Is 1 the loneliest number? If you are furnishing to a project in Quebec, you should serve notice (Declaration of Contract) upon the owner prior to furnishing or prior to the fabrication of specially fabricated materials. The lien (aka legal hypothec), when later filed, will be limited to the materials or services provided after the notice has been served.

I did say only 1 province has a notice requirement, and while that is technically the case, both Ontario and Nova Scotia provide claimants an opportunity to serve a written request upon the owner, prime contractor, or subcontractor for project information and a copy of any payment bond.

Also, Ontario, Prince Edward Island, and Saskatchewan have a Notice of Lien which may be served upon the payer (the owner, prime contractor, and subcontractor), requiring them to retain, in addition to the holdback, an amount sufficient to satisfy a lien.

Lien & Suit Deadlines Will Sneak Up on You

When you review the chart below, you may notice two things right away: the lien deadlines are often calculated from your last furnishing, and the deadlines happen quite quickly. In the U.S., we frequently see lien deadlines within 90-120 days from last furnishing (even 8 months in New York!). The same is not true for Canada, where lien deadlines are generally within 30-60 days from last furnishing.

Mechanic’s Lien Rights in Canada at a Glance

The National Lien Digest provides greater detail, but here are the general lien deadlines for all 13 provinces/territories:

[table id=3 /]

Earlier I mentioned Ontario recently modernized their mechanic’s lien statute. Part of the modernization included the implementation of a longer lien filing period, giving would be claimants an additional 15 days to file their liens. (Lien deadline used to be 45 days from last furnishing.)

Advice for Lien Rights in Canada

Because deadlines are short, carefully track your deadlines, monitor open invoices, and maintain an open line of communication with your customer.

If you have questions about securing lien rights in Canada or need assistance with filing a lien, please contact us! In addition to our network of attorneys in the U.S., NCS has a well-established network of attorneys in Canada who are prepared to assist with your claim.

Arbitration is Alternative Dispute Resolution

Posted on October 12, 2018 by - Credit Risk Management, In Other Commercial Credit News

Dispute Resolution Alternative: What is Arbitration?

Arbitration, like mediation and adjudication, is a form of alternative dispute resolution and is typically favored in lieu of litigation. Generally, in arbitration an impartial third party listens to each side of the dispute and makes a decision resolving the dispute.

It’s important not to confuse arbitration with mediation, which, admittedly, I initially did. The American Bar Association notes “Arbitration is different from mediation because the neutral arbitrator has the authority to make a decision about the dispute.” In mediation, the third party is present to facilitate the conversation, rather than offer resolution.

The American Arbitration Association explains arbitration as “A private, informal process by which all parties agree, in writing, to submit their disputes to one or more impartial persons authorized to resolve the controversy by rendering a final and binding award.”

In most contracts, construction & otherwise, you will find an arbitration clause. On its website, American Arbitration Association provides visitors with the following standard construction arbitration clause.

“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Construction Industry Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.”

Clause is Present, Suit Dispute

Despite the presence of an arbitration clause within a contract, one or more parties involved in a dispute may file a lawsuit. Once a lawsuit has been filed, someone may file a motion to dismiss the lawsuit, based on the arbitration clause within the contract. However, according to a recent article by Robert Cox of Williams Mullen, once the court is involved, it’s up to a judge to determine whether the dispute should be arbitrated by the court or by an arbitrator.

“A court resolving an arbitrability dispute must engage in a two-step inquiry… First, the court must determine who decides whether a particular dispute is arbitrable – an arbitrator or the court. Second, if the court determines that it is the proper forum to adjudicate the arbitrability of the dispute, then the court must decide whether the dispute is in fact arbitrable.”

Cox goes on to say a dispute is suited for the courts unless the language within the contract “clearly and unmistakably provides that the arbitrator shall determine what disputes the parties agreed to arbitrate.” Further, according to Cox, courts have frequently determined “… that incorporation of the American Arbitration Association’s (AAA) arbitration rules constitutes clear and unmistakable evidence that the parties agreed to arbitrate arbitrability.”

When Arbitration Won’t Be Arbitrated, Arbitrarily

There may be circumstances when a judge will determine an arbitrator should not preside over a dispute. According to Cox, several U.S. Courts of Appeals have used a test called “wholly groundless” to determine whether arbitration is appropriate. What is “wholly groundless”? Essentially, if the claim is frivolous or deemed unlawful.

Parting Thoughts

There are many benefits to arbitration. Arbitration may be a faster and less expensive process than formal litigation; plus, in binding decisions, an arbitrator’s decision will be upheld by courts.

I admit, the arbitration clauses are a bit foreign to me, but I found The AAA Guide to Drafting Alternative Dispute Resolution Clauses for Construction Contracts, published by American Arbitration Association to be quite insightful. It appears American Arbitration Association maintains an industry standard for arbitration clauses, though as a best practice you should seek legal guidance when drafting and/or signing an agreement.

A Surety’s Perspective on Public Private Partnerships

Posted on December 2, 2016 by - In Other Commercial Credit News

A Surety’s Perspective on Public Private Partnerships

OK, I admit it. In recent memory, I don’t think I’ve read any articles on P3s from a surety’s perspective. I don’t find myself worrying “How does the surety feel?” when I read a case of an unpaid subcontractor.

I, for obvious reasons, tend to gravitate towards the portions of statute that protect our clients and afford those furnishing to construction projects the opportunity for payment security.

So, how does the surety industry view Private Public Partnerships (aka P3)? This precise question is answered in an article from Engineering News-Record (ENR).

Lenore Marema, VP of government affairs of the Surety & Fidelity Association of America (SFAA), wrote Surety Sector P3 Progress Report: How the Surety Industry Sees Public-Private Partnerships and she says, that although states are slowly adopting P3 laws, the number of states that have the laws is subordinate to whether or not the laws recognize the value of bonds necessary to complete these projects.

“State lawmakers have been adopting P3 laws slowly and steadily for over a decade. From the perspective of The Surety & Fidelity Association of America (SFAA), the critical issue isn’t how many states have such laws, but whether the laws recognize the value of surety bonds and lead to getting needed infrastructure projects done in states that lack the necessary funding.”

Marema goes on to note that SFAA and the American Insurance Association (AIA) feel the P3 laws need to have a bonding requirement and that these projects should be bonded in line with those projects bonded under a state’s Little Miller Act.

“Construction under any P3 produces a public facility, such as a road or wastewater facility, and it should be bonded under the state Little Miller Act just like a public works project delivered under any other method.”

Marema also noted that it’s important that these bonds only cover design and construction and are not for operations and maintenance, as design and construction are within their qualified purview.

Based on Marema’s review of 2016 P3 legislation, it appears states are on the right track. She specifically referenced the four states that have passed P3 legislation this year, (KY, LA, NH & TN), as all four have included a requirement for a surety bond for design and construction within their statute.

Marema’s parting words reinforce the vital need for sureties and bonds.

“There is a lot more work to be done to ensure sureties’ role in these projects. Bonding is sound public policy that has assured successful completion of construction projects and protected businesses for decades—and that holds true regardless of who is providing the revenue stream for the projects.”