Canada: Proposed Replacement To The New Brunswick Mechanics Lien Act Introduced In The Legislature

The New Brunswick Office of the Attorney General has recently submitted a proposed replacement to the current Mechanics Lien Act, SNB 1973, c.M-6. The new Act, called the Construction Remedies Act, was introduced in the provincial legislature for first reading on June 9, 2020.

The proposal is to repeal the current Mechanics Lien Act and replace it with the new Construction Remedies Act. The new Act will largely follow the same structure and key elements of the Mechanics Lien Act, but will modernize both the language and the substance of the Act to better suit the present state of the construction industry.

Highlights of the Proposed Changes

. Application to the Crown: The new Act will apply to the Crown. Claims for lien may be advanced against the Crown, which will attach to holdback funds, rather than to land, and it will not be possible to enforce a claim for lien against the Crown by obtaining an order for sale of lands. The Crown Construction Contracts Act will also be amended to be consistent with the new Act.

. Alternative Financing and Procurement: The new Act will include specific provisions addressing public private partnerships.

. Construction Trusts: the new Act will update the language on trust provisions, and will better explain how construction funds may be used without resulting in a breach of trust.

. Holdbacks: Owners will be required to retain a 10% holdback on all projects. The Crown may only be required to maintain a 5% holdback in certain circumstances, with surety bonds in place. New provisions will be included for phased or annual releases of holdbacks in certain cases, and for alternate forms of holdbacks, such as letters of credit. Owners will be required to establish a trust account to deposit holdback funds into trust.

. Substantial Completion: The current concept of substantial completion will be referred to as substantial performance of contract. Substantial performance will occur when the improvement is being used or is ready for use for its intended purposes, and may also be determined on the basis of a percentage of the remaining work to be performed. The new Act will allow for the use of certificates of substantial performance and certificates of completion of subcontracts, to allow for earlier release of holdback funds.

. Changes to Lien claims: The deadline for registering a claim for lien will be harmonized at 60 days for all claims. There will be a minimum amount of money at issue in order to register a lien claim, which will be set by regulation.

Next Steps

The proposed Construction Remedies Act is the first phase of a two-phase approach to modernizing construction statutes in New Brunswick. The second phase will be an examination of prompt payment and adjudication legislation, similar to statutes passed in other jurisdictions, such as Ontario.

It will likely be some time before the proposed Construction Remedies Act is passed into law and comes into effect. The proposed Act must first be passed after two more readings by the Legislative Assembly. The proposal also recommends that lead time be provided for industry to plan for its implementation, and for the necessary regulations to be prepared.

We welcome the modernization of construction legislation in New Brunswick. We will provide further updates as the passage and implementation of the new Construction Remedies Act approaches.

The current legislative status of the proposed Construction Remedies Act, and a full text version of the proposed Act, can be found here.