Imagine a sunny beach, where someone is soaking up the rays, enjoying a relaxing and well-earned retirement from years in the construction business.
Suddenly, someone approaches them with a piece of paper and that retirement is shaken to pieces. They have been served papers for a lawsuit on a building they constructed almost 30 years ago.
Sound impossible? Not at all, says Council of Ontario Construction Associations (COCA) administration manager Stew Ferguson. These types of lawsuits stem from the Ontario Limitations Act.
“There were some pretty frivolous actions being taken,” says Ron Martin, executive director of the Sudbury Construction Association. “The threat was always there that a lawsuit could come out of a construction and sometimes the only company that is still in business from when that building was constructed is a painting company.”
Denis Alarie, president of Leo Alarie and Sons in Timmins says another problem involved owners taking advantage of a problem that starts out small, but is allowed to grow.
“Say you get a problem with seepage, and you get rot and mould setting in,” Alarie says. “The onus is on the owner to do something once they notice a problem, but they would sometimes sit on their hands and let the problem develop, thinking they’re going to go after the contractor.”
Construction companies were also facing legal action for design faults that had nothing to do with the work done by the construction contractor, says Alarie.
“As it currently stands, it’s infinity plus six years,” says Ferguson of the liability construction companies have to face. “In other words, contractors and builders are liable for any natural decay or damage (in a building) forever.
You can be retired and on a beach in Florida and, if a building you constructed 30 years ago suddenly develops a problem, you can be sued. So we’re changing that ASAP.”
Ferguson says companies were being held liable for simple wear and tear.
“Unfortunately, that issue of wear and tear had been mostly ignored (by the construction industry),” he says.
“Most companies don’t carry insurance for that long a period of time; certainly not if they want to stay in business. Premiums start to get a little steep after a while, especially at this juncture with the status of the insurance industry.”
He says the COCA has been lobbying for 25 years to have changes to the Ontario Limitations Act limiting the amount of time that a construction company can be held liable. They have been pushing for a two-year liability period, contending that deficiencies in construction would begin to show themselves by then.
Under the legislation changes that COCA was able to obtain, construction companies would be liable to a maximum of 15 years after the issuance of the ‘certificate of substantial performance’ on a project.
“It’s a good thing that (COCA) has been able to do,” says Martin. “I think the industry is willing to take 15 years to determine whether there has been a fault in construction.”
“At least it eliminates that chance of the guy sitting on the beach who’s been out of the company for 25 years suddenly being served papers,” says Ferguson.
Ferguson says the new legislation was passed in December 2002 and received Royal Assent. Proclamation of the new law is expected by January 1, 2004.
The only exception to the changes is if someone is physically harmed by a problem with a building, such as a brick falling off and striking someone.
“That is the only thing that persists. There’s obviously no way to change it, nor would we want to really,” says Ferguson. “Besides, it’s not a big issue.”
COCA has also been active in pushing for changes to the Construction Liens Act.
Ferguson says the industry has been lobbying for 10 years for changes to the act. It would require owners to set up separate trust accounts for “hold-back” funds that are supposed to ensure that sub-contractors are paid for work on a project during the 45-day lien period after the completion of a project.
“What we were finding, especially in the residential sector, was that developers were taking that money and using it to purchase more lots for the next phase of the subdivision or another housing project,” Ferguson says. “We even had some of them using it to fund their Christmas party instead of giving it to the people whose money that really was.
“Proposed changes have been circulated among government agencies, and it’s just in the process of consultation with the general public,” says Ferguson. “If there isn’t an election early in the fall, then we might be able to expect legislation to be introduced early in September.”
Harold Lindstrom, manager of the Construction Association of Thunder Bay, says the association is taking COCA’s lead on the changes. He says construction associations throughout Northern Ontario are going to have to see how the legislation will be structured. If there is any concern, it will be in how the trusts will be set up and how subcontractors in Northern Ontario will be notified of the completion of some projects.
Companies are required to post substantial completions in an industry newspaper, but the only one is in southern Ontario and often does not make its way north in a timely fashion, he says.
“We think it is a good move for the construction industry,” says Lindstrom.
“There’s always a balancing act you have to do in reaching limitations that are workable in a number of contexts,” says Brendan Crawley, spokesperson for the Ontario Ministry of the Attorney General. “We decided that two years for a basic limitation period and 15 years for an ultimate period balanced a number of interests in a single, workable limitation scheme."
