Chapter 22: Transition

22.1 | How does the Act apply to an improvement that is only partially complete at the time the new Act comes into force?
Transition generally 

Commentary: this raises the issue of the transition from the old Act to the new. Guidance on transition is provided in section 48 of the Act. It describes the way that the Act applies to “transition projects.” In section 48(1), “transition project” is defined as an improvement for which the time for filing liens under the former Act has not yet expired.

The basic rule set out is that the new Builders Lien Act applies to a transition project unless all parties agree that the former Act continues to apply.

[See section 48(2)]

In practice, on a large project, the number of parties will be large and an agreement that the former Act continues to apply will be difficult to obtain. On smaller projects, such an agreement is a realistic possibility.

Other provisions of section 48 create some specific rules respecting the application of the Act to transition projects including certain exceptions to the basic transition rule.

A safety net of sorts is provided by an express provision that, on a transition project, nothing done in compliance of the former Act is invalidated by the basic transition rule.

[See section 48(6)]

22.2 | What about the owner’s holdback?
Owner’s holdback account not required

Commentary: on a transition project, the owner is not required to create or maintain a holdback account under section 5, even with respect to portions of the holdback retained after the new Act comes into force. [See section 48(3)]

22.3 | What about holdbacks by contractors and subcontractors?
Other holdbacks

Commentary: the former Act did not require that contractors or subcontractors retain holdbacks from the persons they engage. The new Act does impose that requirement where there is a possibility of further liens. The transition rules ensure that the holdback requirement is not imposed retroactively. Contractors and subcontractors are required only to retain holdbacks with respect to advances or payments made after the new Act comes into force.

[See section 48(4)]

Even though, on a transition project, holdbacks will not have been retained by contractors and subcontractors from the time work started, it is necessary for certain provisions of the Act to presume that they did. Section 23 defines the amount of money which must be paid into court to clear liens from the owner’s title. Section 34 defines the maximum aggregate amount that can be recovered by a class of lien claimants. In both of those sections, the relevant amount is calculated with reference to the “required holdback.”

Fairness to lien claimants requires that their claims should not be cleared from the title or limited with reference to the smaller amount actually held back. The Act therefore sets out a transition rule that provides that on a transition project, in a calculation under section 23 or 34, “required holdback” should be taken to mean the amount that would have been retained if the Act had applied to the transition project from the time the improvement was started. This will ensure that liens are not cleared or limited through the use of an inappropriately low figure.

[See section 48(5)]

22.4 | What about the purchaser’s holdback?
Purchaser’s holdback

Commentary: the purchaser of a transition project is entitled to retain a holdback under section 4(7) only where a binding agreement of purchase and sale had been entered into after the new Act comes into force. [See note at the beginning of chapter 15 and section 48(7)]

22.5 | What about money paid into court under the former Act?
Money in court

Commentary: the former Act provided for the clearing of liens in its section 33 by a procedure similar to that provided in section 24 of the new Act. Under that provision, money might be paid into court or to be some other form of security. [See paragraph 9.4]

Although section 33 of the former Act is analytically similar to section 24 of the new Act, functionally, it serves the same role as section 23. The transition rule set out in the Act, therefore, deems this money to have been paid into court under section 23 for the purposes of the new Act. Money paid into court under section 20(4) of the former Act is similarly characterized.

Security posted under the former Act which did not take the form of money paid into court is not affected by this transition provision.

[See section 48(8)]

22.6 | What if the parties cannot agree on the way the transition rules apply to a particular project?
Application to court

Commentary: parties to a dispute respecting a transition project may apply to the court for directions concerning the application of the transition rules to the dispute. [See section 48(9)]

22.7 | What if the transition rules do not appear to cover the circumstances of a particular case?
Regulation making power

Commentary: the Provincial government has a very broad power to make regulations in relation to transition issues. Section 47(3) provides:

47(3) The Lieutenant Governor in Council may make regulations the Lieutenant Governor in Council considers necessary or advisable for meeting or removing any difficulty arising out of the transition to this Act from the Act repealed by this Act and for preserving and giving effect to the rights of persons arising under the repealed Act except as those rights are expressly varied by this Act, and the regulations may be made to apply generally or to a particular case or class of cases.

Thus, regulations may emerge which provide further guidance on transition as experience may require.

There are also transition rules of general application that may assist the parties.

[See Interpretation Act, section 36]