OSPE and its industry partners, through the Construction & Design Alliance of Ontario (CDAO), have been in constant communication with the Premiers office, and the Ministries of Labour and Skills Development, Infrastructure and Attorney General’s Office, regarding the unintended consequences of the decision to suspend limitation and procedural time periods under the Construction Act.
The government heard and understood our concerns, and revised one element of the previous emergency order, O. Reg. 73/20 made under the Emergency Management and Civil Protection Act, which suspended limitation periods and procedural time periods retroactive to March 16, 2020.
Original Government Decision and Implications
On March 20, 2020, under subsection 7.1(2) of the Emergency Management and Civil Protection Act, the government suspended limitation periods and procedural deadlines in Ontario proceedings, retroactive to March 16, 2020.
This decision had the unintended consequence of creating a liquidity crisis for Ontario’s professional and construction services industry.
The suspension of limitations effectively “deactivates” lien “clocks” under Sections 31 and 36 of the Construction Act, enabling any party to a project to file a lien against a project at any time. In addition, the suspension means existing liens cannot expire. This puts project owners at risk should they release holdback funds. Holdback funds represent the vast majority, if not the entirety, of many company’s available operating capital. Losing access to these monies would have resulted in many companies become illiquid very quickly.
The entire design and construction project pipeline was directly and negatively impacted by the current withholding of holdback funds arising from this government order.
As part of the province’s economic maintenance and recovery strategy responding to the COVID-19 crisis, the Construction & Design Alliance of Ontario makes the following recommendations:
- The government should amend Reg. 73/20 as detailed in the attached Appendix A prepared by McMillan LLP and provided by the Ontario General Contractors Association.
This proposal will enable professional and construction services businesses to operate normally as it would restore conditions permitting liens to expire and enable payors to release holdback funds.
- The government should prescribe for the duration of the COVID-19 crisis that project owners, including provincial agencies and municipalities, take holdback funds through forms of security other than cash as defined in Part IV, Section 22, Subsection 4 of the Act, including demand-worded holdback bonds or letters of credit.
These measures will maintain the required security for projects as prescribed by the Act while enabling Ontario’s professional and construction services industry to remain viable until more normal economic conditions can return to the market.
The Ontario Government and the Honourable Doug Downey, Attorney General of Ontario issued the following letter, adopting our recommendations. The government stated that:
“The emergency order has been amended to lift the suspension of limitation periods and procedural time periods under the Construction Act. This will allow for the release of holdback payments to contractors and subcontractors in the normal course, helping to resolve a potentially significant cash flow problem as a result of the order for the construction industry.
The suspension will be lifted on April 16, 2020, to give the industry time to prepare for these changes. Once lifted, parties will have the same amount of time to meet a deadline that had been remaining before the suspension began on March 16, 2020.”
OSPE, CDAO and the broader design, professional services and construction sector is extremely pleased to hear that the Ontario Government heard our concerns and put into place our recommendations.
We will continue to work through the current crisis with the provincial government and its agencies to ensure the continuation and completion of important infrastructure projects, that impact our members.
For more on COVID-19 and its affect on engineering in Ontario, visit our COVID-19 news page.