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10 things to do if you are not getting paid on a construction project

If you are not getting paid on a construction project, there are a number of things you should do. They are:

  1. Write the owner and general contractor to see if there is a labour and material payment bond for the project, and get a copy of that bond.  Then make a claim on that bond.  If you are working on a federal project this may be your only remedy, besides suing for breach of contract;
  2. Register a claim for lien for amounts owed to you on the project—note that the time for doing so is being extended by amendment to the legislation;
  3. If the person who owes you money has been fully paid, but you have not, consider suing that company and its directors under the trust provisions of the Construction Lien Act.  You can find out how much has been paid, and is payable to, the person who owes you money by making a demand for information pursuant to s. 39 of the Construction Lien Act.  You can also sue for breach of contract;
  4. Getting your paperwork in order.  Have you properly claimed for changes to your contract?  Have you claimed for changes to the “contract time” as well as the “contract price” in those change orders?  Have you followed the proper procedure for asserting “progress draws” under your contract?  If not, better do so.
  5. Have you given written notice of your claim under the dispute resolution provisions of your contract, confirming you want to negotiate, mediate and arbitrate your claim?
  6. Has the amount of your work been certified as complete by the architect or engineer on the project?  If not, request in writing that this been done?
  7. Deal with the people who you owe money on the project?  Do you have “pay when paid” clauses in their contracts so you are not obliged to pay them? If you are obliged to pay them, will they wait to be paid, or will they lien?  If they lien, does your contract oblige you to post security into court to remove their lien? Do you have a “bonding” facility with an insurance company, or a “letter of credit” facility with a bank, that will allow you to remove their liens without paying cash into court?
  8. Have you delivered an “invoice” in the form required by the new “Construction Act” to trigger rights to “prompt payment” under that new Ontario legislation due to come into force soon? If not, do so. If so, submit dispute for “adjudication” by serving the appropriate written notice;
  9. Have you followed the proper procedure under your contract before you stop work?  Normally your contract requires you to give notice of non-payment before you stop work, and in response you will get a litany of reasons why you are not being paid (eg deficiencies in your work, or delays causing damages).  You should address each complaint seriously before you exercise your right to stop work by getting deficiencies certified as repaired, and delays addressed by change orders that extend the contract time;
  10. Consider the types of losses you have suffered when you assert claims (1) delays caused by others, (2) damages to your work, caused by others, (3) loss of profits damages caused by not being able to complete the work due to the other party’s breach of contract, and then consider mitigation of your damages by finding work elsewhere because work has stopped on this project.  Are you acting reasonably from a business point of view in leaving a backhoe on a job that has been shutdown instead of renting it elsewhere?

In looking at this list, some of you can do most of these things yourselves, others will require a lawyer to assist them. If so, give the lawyer the contract documents and notices on a thumb drive, and review this check list with them at your first meeting. Good luck!

David Debenham is certified as a Construction Law Specialist by the Law Society of Upper Canada. He is the former Chair of the Construction Law Section of the Ontario Bar Association and a Director of the Construction Law Section of the Canadian Bar Association.