Change Afoot: New Brunswick’s Construction Remedies Act

November 18, 2021

New Brunswick’s Bill 12: Construction Remedies Act received Royal Assent on December 18, 2020, and the majority of its provisions came into force on November 1, 2021.  The new Act replaces the Mechanics’ Lien Act, SNB 1973, c.M-6.

While the new Construction Remedies Act retains a number of the key elements of the  Mechanics’ Lien Act it replaced, it also contains critical modifications and additions which, taken together, represent the most significant effort to modernize New Brunswick’s construction lien legislation in over forty-five (45) years.

This article is intended as an overview of some of the significant new features of the new Act.

Transitional Provisions

The Mechanics’ Lien Act will continue to apply to contracts entered into prior to November 1, 2021, while the new Act will apply to all contracts entered into on or after that date.

While most provisions of the new Act came into force on November 1st, some, including those mandating the creation of holdback trust accounts by owners, have not yet come into force.

Time for Filing and Perfection of a Lien

The new Act harmonizes the timelines for filing all forms of lien claims (by contractors, subcontractors and workers) to sixty (60) days, although the events triggering the date the time limit begins to run differ depending on the type of claimant filing the lien.  In order to ensure a lien is claimed in time, it is recommended that potential claimants obtain legal advice in order to address their particular circumstances.

The timeline for perfecting a lien through the filing of an action and the registration of a Certificate of Pending Litigation remains the same (ninety (90 days)) under the new Act.

Residential Liens

Unlike the Mechanics’ Lien Act, the new Act contains provisions specially addressing residential properties.  Contractors working on residential projects (i.e. where a building is used or intended to be used for residential purposes), must provide a Notice to Owner in a form prescribed by regulation no later than forty-five (45) days after the first day services or materials are supplied.  The new Regulations and Forms pursuant to the new Act, including the Notice to Owner (Form 9), can be found here.

The purpose of the Notice to Owner is both to provide homeowners with the names and addresses of contractors and subcontractors working on the project and to notify them of their obligations under the Act, such as the establishment and maintenance of a holdback (pursuant to section 34 of the new Act) and of the potential that their property could be subject to a lien if a party suppling material or services is not paid in full for their work.

The residential notice provisions are strict in the sense that a contractor is not entitled to register a lien against a residential property if notice is not properly given to the owner of the property within the forty-five (45) day period.  Luckily, for subcontractors and others entitled to lien, their rights to do so are not affected by any deficiency in the notice provided to the owner by the contractor or by the failure of a contractor to give notice to the owner.

Certificate of Substantial Performance & Payment Certifiers

Under the Mechanics’ Lien Act, final certificates were used only with respect to certain projects under the supervision of an engineer or architect.  The new Act, through its introduction of “Certificates of Substantial Performance,” is expected to broaden the use of certificates for certifying when a project is substantially complete.  Pursuant to section 7(1) of the new Act, a contract is substantially performed:

(a)       when the improvement under the contract is ready for use or is being used for the purposes intended, and

(b)       when the improvement is capable of completion or, if there is a known defect, of correction, at a cost of not more than

(i) 3% of the first $250,000 of the contract price,

(ii) 2% of the next $250,000 of the contract price, and

(iii) 1% of the balance of the contract price.

The date a certificate of substantial performance is signed is one of the triggering events which causes the time to begin to run during which a party must file its lien.

The new Act also introduces “payment certifiers,” who are required to be architects, engineers or, if not an architect or engineer, a party identified in the contract as being the payment certifier for the project.  Payment certifiers are one of the designated parties who may complete a certificate of substantial performance in relation to a given project.   A contractor or subcontractor may request a certificate of substantial performance from the payment certifier, owner or contractor and owner, as the case may be, and the party to whom the request is made must sign the certificate seven (7) days after the request is made or after it is determined that the contract has been substantially performed, whichever is later.

The introduction of certificates of substantial performance and payment certifiers appears intended to streamline and simplify the process for certifying the substantial completion of a project.

Holdbacks

Under the Mechanics’ Lien Act, the amount of the holdback was 20% where the total work and materials supplied was less than $15,000 and 15% where the contract exceeded that amount.

Under the new Act, the holdback is streamlined at 10% of the contract price.   However, where the owner is the Crown, the holdback is 5% for contracts requiring a bond.

Application to the Crown

The new legislation contains comprehensive provisions concerning contracts for Crown and highway improvement projects.

The new Act repeals and revises a number of sections of New Brunswick’s Crown Construction Contracts Act, RSNB 2014, c 105.  For example, the “old” payment bond provisions are replaced with a new scheme which provides for liens against a “public owner’s holdback” and, in certain circumstances, surety bonds.

Under the new Act, a public owner’s holdback is retained when the improvement is for an owner that is the Crown or for highway improvements where the owner is a local government.  The default amount of the public owner’s holdback is 10% of the contract price, although it is reduced to 5% where a labour and material payment bond and performance bond are required under the provisions of the Act.  Such bonds must be issued by an insurer licensed under the Insurance Act or one prescribed by regulation.

The ability of a party to place a lien against a public owner’s holdback is essential because the Act precludes anyone providing services or materials to the Crown or local government, as the case may be, from placing a lien on Crown land, improvements thereon or highways belonging to local governments.  Absent the right to lien the public owner’s holdback, a party providing work or materials in these types of scenarios would have limited options for enforcing payment.

Lienholders’ Rights to Information

The new Act greatly expands lienholders’ rights to information.  A party with a right to lien may provide a written request for information from an owner, contractor, subcontractor, Crown or local government, as the case may be.   Examples of information that may be requested from an owner or contractor may include:

  • the names of all parties to the contract,
  • the contract price;
  • a copy of any labour and material payment bond;
  • a statement of whether the contract provides that payment under the contract shall be based on the completion of specified phases or on the reaching of other milestones;
  • the name and address of the financial institution at which a holdback trust account has been established, if applicable, and the name of the account holder;
  • a statement of deposits and withdrawals from any holdback trust account; and
  • information regarding the state of account between the owner and the contractor.

A party receiving a written request for information must provide it within twenty-one (21) days.  A party who fails to provide the requested information within the twenty-one (21) day time limit or who knowingly or negligently misstates the information requested is liable to the person who made the request for any damages suffered as a result.   Additionally, the new Act provides that, at any time, whether or not an action has been commenced, a court may order a person to comply with a written request for information and may order costs against them when doing so.

The new Act also contains provisions which provide for the examination of persons verifying by affidavit the information in a claim for lien.  This right of examination exists whether or not an action has been commenced and does not require a court order.   While only one (1) examination may be held, every person named in the claim for lien who has an interest in land, the contractor and the person who is liable to pay for the supply of services or materials giving rise to the claim for lien may participate.

Summary

While the new Construction Remedies Act is intended to bring New Brunswick’s construction lien legislation into the twenty-first century, it remains to be seen how its provisions will ultimately be applied by the courts.  The extent to which the construction industry in New Brunswick will embrace and adopt some of the more discretionary provisions of the legislation (such as the expanded statutory rights to information), will remain unknown until the Act is fully in force.

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Cox & Palmer publications are intended to provide information of a general nature only and not legal advice. The information presented is current to the date of publication and may be subject to change following the publication date.