Navigating Construction Projects in Ontario: Bonds and Government Properties

a large government construction project, the type that would require performance bonds.

Disclaimer: This article is intended for the purpose of providing information on performance bonds and construction liens in Ontario and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive. 

If you are a contractor or subcontractor, you are probably all too familiar with the importance of construction liens. After all, construction liens play a crucial role in securing payment for your services and materials in the construction industry. These legal tools provide you with a way to protect your interests and ensure that you receive the compensation you are owed for your work.

However, do you always have that option? Can you lien government property? If not, what options are available to you? 

In this article, we will provide the answers to those questions. We will also note how this will affect you if you are a sub-contractor on a government or public contract. 

Construction Liens: The Usual Process

In Ontario, the process for construction liens is governed by the Construction Lien Act. A construction lien is a legal claim that attaches to the premises. The lien claimant, the person entitled to a lien (such as a contractor or subcontractor), must take specific actions to preserve and enforce the lien.  

The process usually starts when someone has the right to put a lien on a construction project. This happens when they take legal action to make sure they get paid for their work. Often, they start this process by saying that they’ve done most of the work, which is called a “declaration of substantial performance.” This step is really important in making the lien stronger. After that, they need to register a certificate of action, which makes their claim official and keeps it valid throughout the whole construction project.

Can You Lien a Government Property?

Generally speaking, no. You cannot register a lien on title against a property owned by the Crown.  The Crown, or government, typically has immunity from certain legal actions, including the ability to place a lien on their property.

Does that mean you have no legal options to ensure you are paid? Of course not. That is where bonds come into play. 

Bonds Required under the Construction Act

Section 85.1 of the Construction Act and section 12 of the General Regulation state a contractor must provide both a performance bond and a labor and materials bond for any “public contracts” with a contract value equal to or exceeding $500,000. These bonds must be in the specified formats required under they Act. They must offer coverage that is at least 50% of the contract price.

The Act defines a “public contract” refers to an agreement where the contracting party is either:

  • the Crown,
  • a municipality,
  • or a broader public sector organization.

It’s important to note that this provision does not apply to contracts involving architects or engineers as contractors. Consequently, this requirement is designed to encompass all government-awarded construction contracts with a contract value of $500,000 or more. 

A Note for Ontario Subcontractors

As subcontractors and suppliers, it is crucial to understand the role of bonds, especially when dealing with government properties. While construction liens may not be available for government-owned properties, performance bonds step in to provide payment protection.

When working on a government contract, it is essential to ask the contractor for proof of a performance bond. This bond provides payment protection for subcontractors and suppliers in case they encounter issues with non-payment by the contractor. With a performance bond in place, subcontractors and suppliers have recourse to file a claim against the bond to recover payment if they are not paid by the contractor.

By requesting proof of a performance bond before starting work on a government contract, subcontractors and suppliers ensure that they have a safety net in case of non-payment. This bond serves as an additional layer of protection and offers peace of mind to those involved in construction projects on government properties. 

The Importance of a Strong Contract

A strong contract not only clarifies project scope, schedules, and costs but also addresses crucial issues like liability, risk allocation, and dispute resolution mechanisms. Moreover, it provides a clear pathway for recourse if any party fails to fulfill their obligations. In essence, a well-crafted contract serves as a project’s guiding document, offering security and peace of mind to all parties involved.

Engaging a lawyer to review and, if necessary, revise contracts ensures the agreement is effectiven and fair. Legal professionals can make sure the contract complies with relevant laws and regulations. This is especially important in industries with complex regulatory environments.

Lawyers can help identify and mitigate risks, draft precise language to protect their client’s interests. We can also suggest dispute resolution mechanisms that are fair and efficient. In essence, legal review adds an extra layer of security, reducing the chances of costly disputes and legal entanglements while ensuring that the contract accurately reflects the intentions and expectations of all parties involved.

Building a stronger business with Beeksma Law

Looking for exceptional legal support for your business needs? Look no further than Beeksma Law. We specialize in both the transactional and litigation aspects of business law . As entrepreneurs ourselves, we truly comprehend the significance of your business operations. Whether you require us to review your contracts, assist with non-payment issues, or something else, we have the expertise and dedication to protect your business.

Contact Beeksma Law today to ensure your business’s legal needs are met with precision and care. 

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