NS to Allow Early Release of Holdback
May 8, 2013
By John Kulik, QC, at McInnes Cooper
Note: On April 24, 2017, the N.S. Government issued regulations that will finally effect Builders’ Lien Act amendments permitting early release of holdback to subcontractors to take effect June 30, 2017.
On May 6, 2013, the NS Government presented Bill 81 for first reading in the Legislature. If enacted, Bill 81 would amend the NS Builders’ Lien Act to allow owners to release subcontractor’s holdbacks early – with benefits to owners, general contractors and subcontractors:
- Instead of the current requirement to hold 10% of the project value to the end of the project, owners would be able to reduce their 10% holdback obligation from time to time as subcontractors complete their work.
- General Contractors. In addition to reducing their holdback obligations, general contractors could potentially reduce their project administration costs, especially at the end of a project.
- Instead of receiving their share of the project holdback 60 days after substantial completion of the project, subcontractors who complete their work at an early stage of a project would be able to receive their share of the project holdback 60 days after completion of their work.
Bill 81 appears to be the Government’s response to the recommendations the NS Law Reform Commission made in its March 2013 Report. The Advisory Committee for this Report consisted of representatives from the NS Construction Association, the NS Home Builders’ Association and a number of construction lawyers. Click here to read the NS Law Reform Commission’s March 2013 Report.
The NS Legislature has not yet passed Bill 81 and even once passed, it will not come into force until specifically proclaimed; a date has not yet been set. If enacted, Bill 81 will change the way in which owners release holdbacks to subcontractors:
- Completion Certification. Under Bill 81, when a subcontractor’s work is complete, it can ask the project consultant, or if there is not one then the owner and general contractor (acting jointly), for a completion certificate. If anyone wrongfully refuses to certify completion, the subcontractor can pursue the issue in the courts.
- Notice of Intention of Early Release. It appears there will be Regulations requiring the owner to give notice of his intention to release a subcontractor’s holdback early, but the form and manner of notice has not yet been defined.
- Project Holdback Reduction. Under the existing Act, the owner must hold 10% of the project value throughout the entire project. However, under Bill 81, the owner can release the portion of the 10% project holdback related to the subcontractor’s work after:
- completion is certified;
- 60 days have passed so all lien rights respecting the subcontractor’s work have expired; and
- the owner ensures any registered liens respecting the subcontractor’s work have been satisfied or discharged.
- Finishing Holdback Reduced. Under the current Act, the owner must continue to hold a “finishing holdback” – 2.5% of the project value – even after releasing the 10% project holdback. Under Bill 81, the owner is to release the entirety of the 10% holdback 60 days after substantial performance; however, the owner is to deduct a 10% holdback from any further invoices submitted with respect to completion of the project, and to hold that final holdback until 60 days after the project is 100% complete.
- No Small Claims Court. Bill 81 does not reflect all of the Commission’s recommendations; in particular, Bill 81 does not include any proposed amendments with respect to determining certain lien issues in Small Claims Court.
Click here to read Bill 81.
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Construction Law Team to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
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