This article explores Notices of Non-Payment under the Construction Act in closer detail, as well as their requirements and the consequences (or lack thereof) of non-compliance.

Deficiencies are a common reason for litigation in construction proceedings. Dissatisfaction due to deficient work can make homeowners act in a zealous manner – namely, firing existing contractors, hiring subsequent contractors to finish or correct remaining work, and litigating against the initial contractor for the cost of correcting such deficiencies. However, the law recognizes that reasonable opportunities must be provided to correct such deficiencies before setoff or claim rights are allowed.

Contrary to the commercial construction industry, in which prevenient agreements and purchase orders may be sufficient to govern the relationship between parties, contracts in residential construction must be formal in order to protect homeowners. Particularly, the Consumer Protection Act, 2002 has been deemed to apply to residential construction and renovation agreements.

In this case, the Court considers the importance of establishing a direct connection/chain between the party claiming a trust relationship and the party against whom trust obligations are imparted.  

Despite its benefits, holdback has disadvantageous features to certain subcontractors in the context of larger-scale projects – early release assists with this problem.

How can a Subcontractor stop payments in wake of ongoing construction dispute? In realizing the fast-paced nature of the construction industry, the drafters the Construction Act, created a mechanism allowing Subcontractors to cease payment on a project without having to actually preserve a lien. Namely, a “Written Notice of Lien.”

Although construction lien proceedings do not extend the same rights as ordinary proceedings, the Construction Act allows claimants to demand information pursuant to Section 39. The Act extends a similar fact-finding ability to Owners/Contractors/other Defendants through a cross-examination of the lien claimant on the contents of their lien by way of Section 40.

The purpose of a construction lien is to provide statutory protections to contractors and subcontractors for the services and materials they supply to subject properties. That being said – these protections are not cheap. In order to address these costs and allow “Access to Justice,” the Construction Act affords specific remedies to allow smaller lien claimants to either assign, piggy-back, or bundle up their lien.

Section 67(1)(a) of the Bankruptcy and Insolvency Act (the “BIA”) establishes that the property of a bankrupt divisible among his creditors shall not comprise property held by the bankrupt in trust for any other person. This means that, monies held in trust – such as the CLA imposed trust – would not be considered as property of the bankrupt for distribution amongst creditors.