April 6, 2020 – Mississauga, ON – On March 20, 2020, the Ontario Lieutenant Governor in Council made an order under
s.7.1 of the Emergency Management and Civil Protection Act
suspending limitation periods in any legislation, regulation, order or by‐law. This suspension is retroactive to March 16, 2020 and continues for the “duration of the emergency.”
The order was issued with the best of intentions with the objective of protecting the public from the expiry of legal rights in circumstances where the COVID‐19 pandemic prevents parties from taking the steps necessary to preserve those rights. However, an unintended consequence of the measure directly impacts the operation of construction contractors who are finding that their holdback monies are being withheld by project owners, including government entities, who are now concerned about liens being filed on projects; even after the statutory lien period has expired.
The impact of not receiving holdback funds can be devastating to contractors, most of whom are small businesses. Holdback funds represent the vast majority, if not the entirety, of many company’s available operating capital. Losing access to these monies will result in many companies becoming illiquid very quickly. With fewer projects expected to come onto the market and with current broader economy stresses, this pool of readily available cash is critical to the ongoing viability of the affected construction businesses.
Steve Ness, the president of the Surety Association of Canada (SAC) shared the industry’s concerns about the impact that this oversight could have on construction firms, particularly the smaller enterprises. “We urge the government of Ontario to amend the order and to provide an exemption for the Construction Act of Ontario”, he said.
Ness was asked about the possibility of having contractors provide a Holdback Repayment Bond that would protect project owners against liens and allow them to release the holdback money as it became due. He confirmed that these bonds were a tool that could be used to assist contractors on projects where a performance and payment bond was in place. But he emphasized that relying on holdback bonds was a short‐
sighted approach that would come with its own set of problems. “We’ll do whatever we can to help our contractor clients and holdback bonds will provide relief in some circumstances. But they may not be available or applicable on all projects and to all parties working on projects”, he cautioned.