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To understand it, it is essential to keep in mind that the chain of contracts might be very long, from owner, to contractor, to sub-contractor, to sub-sub-contractor, etc. This Act permits those below, to claim against any or all of those above.
Anyone who does work on the land, even if the owner has no direct agreement with them, may claim against the trust if they are not paid. The right to claim against this trust expires after a year unless a court action is begun. The trust will be divided according to priorities set out in the Act.
The trust can be paid out 40 days after the job is done or abandoned provided there were no notices of claim and no liens registered.
The holdback is intended to protect contractors 'down the chain' of contractors where someone above them in the chain fails to pay. If the proper holdback is not kept, the payer will become personally responsible to those below him in the chain.
If you ever work for a contractor, and not directly for the owner, be sure to get me to put a lien on the property before 40 days are up! That ensures that the owner pays you if any of the contractors 'above' you don't pay. However, sometimes this will interfere with financing of the project or be contrary to your contract. In these cases, good legal and financial judgment is crucial.
If you are paying for work, you should get me to check the title before you make final payment whenever your sub-contractors hire further sub-contractors! Otherwise, their sub-contractors might force you to pay them even if you've already paid the sub-contractors you actually hired.
Again, there are exceptions. See your lawyer.
It lasts until the owner delivers a Request to the Registrar to Lapse to the Land Titles Office Registrar, who then lets the lien-holder know that if he doesn't start a court action against the owner within a certain number of days the lien comes off. Once the court action is started, it must be set down for trial within two years or the lien holder automatically loses the lien. The lien will not protect a claim for interest.
Some cases say that you must start the court action within a certain period of time. See your lawyer.
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