The passage of the Open for Business Act, 2010 introduced several key amendments to the Construction Lien Act ("CLA"). For condominium developers, the most important change to the CLA is the addition of section 33.1 which requires developers to adhere to strict notice requirements when registering a condominium. Section 33.1 came into force on July 1, 2011.
The New Notice Requirements
As a result of the introduction of section 33.1 into the CLA, developers are now required to publish notice of their intention to register condominium lands in accordance with the Condominium Act, 1998 (the "Condo Act"). The notice must be published in a construction trade newspaper between five and 15 days (excluding weekends and holidays) prior to submitting the condominium's description for approval to the relevant municipal authority under subsection 9(3) of the Condo Act.
The notice must include the following three pieces of critical information:
- The developer's name and address for service;
- A concise overview of the land described in the description (including reference to the lot and plan number and the parcel number(s) of the land); and
- To the best of the developer's knowledge, information, and belief, the name and address of any contractor that supplied services or materials to improve the land in the preceding 90 days from the day that the description is submitted for approval.
The prescribed form of notice is Form 24 and is provided in Ontario Regulation 175, R.R.O. 1990.
A developer is liable to any person entitled to a construction lien who suffers damages as a result of the developer's failure to comply with this new notice requirement.
A Benefit for Contractors
Contractors and other potential lien claimants can register construction liens against condominium lands both before and after the condominium has been registered. A lien registered prior to the registration of the condominium may be enforced against the property as a whole. In contrast, once a condominium is registered and its units have been created as separate parcels in Ontario's land registration system, contractors must conduct a search of each individual unit and then assert separate liens only on those units still held by the developer (liens cannot be registered against units that have been sold to a "home buyer").
Registering construction liens after the condominium has been registered is a complicated, costly, and time‐consuming process for contractors. To address these problems, section 33.1 ensures that contractors will be given advance notice of a condominium registration which, in turn, provides them with a window of opportunity to preserve their lien rights against the property as whole. Since registering a lien against the entire property is a simpler, more efficient, and cost‐effective method of asserting a lien, contractors are undoubtedly welcoming the benefits they receive from this new amendment.
A Burden for Developers
Section 33.1 does not offer any benefit or added protection for developers. Instead, it has the effect of creating an additional administrative burden that developers must satisfy in order to avoid exposing themselves to liability.
This amendment also introduces an unwelcome dose of ambiguity into the lives of condominium developers. For example, the following important questions are left unanswered by the legislation:
- What if a developer fails to include a contractor's name in the notice? Does this render the entire notice ineffective?
- Are developers obligated to make active inquires to determine contractors' contact information? If so, what type of inquiries should be made?
Without answers to these and other questions, it will be difficult for developers to properly and fully comply with the new notice requirements ushered in by the recent amendments to the CLA. Despite these difficulties, developers are encouraged to make every reasonable effort required to satisfy the burden placed upon them by section 33.1.
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