A Step Back for Holdback Trust Accounts: Amendments to New Brunswick’s Construction Remedies Act

December 11, 2023

New Brunswick’s Construction Remedies Act (the “Act”) received Royal Assent on December 18, 2020.  The “new” Act, which replaces the Mechanic’s Lien Act, applies to all construction contracts entered into on or after November 1, 2021.

On April 1, 2022 sections 37 and 38 of the Act came into force, creating and outlining the requirements for a construct previously foreign to New Brunswick construction law: the holdback trust account.

Applicable to most projects, the newly implemented provisions mandated the establishment by owners of a separate holdback trust in which the statutorily mandated holdback would be held until sixty (60) days following the substantial performance, completion, abandonment or termination of the contract. The new sections also required, in most cases, that the property owner and contractor act as trustees in the administration of the holdback trust account. This meant that joint consent was necessary for decisions such as authorizing the release of funds.

Following their implementation, many industry stakeholders found the new trust account provisions cumbersome, confusing and unworkable in the context of the average construction project.  Due to concerns regarding their impracticality and the additional burden created by the new requirements, Bill 41: An Act Respecting Holdback Trust Accounts was tabled in the New Brunswick legislature to repeal sections 37 and 38.  The new legislation came into force on July 16, 2023.   

While all part of the growing pains associated with the implementation of the new Act in New Brunswick, Bill 41 represents a step back to the former legislation by relegating holdback trust accounts to the history books.

This publication was also collaborated on with Charles-Olivier Roussel, Articling Student at Cox & Palmer Moncton.

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