Scribd
Upload
27 views

Cash Flow and The Construction Lien Act: - Expenses Can Be Shown As Regular Costs or As Cumulative Costs

Cash flow and the construction lien act are important considerations for construction projects. The construction lien act entitles suppliers of services or materials to register a lien on a property if not paid. Holdbacks of 10% are standard in Ontario and help protect owners from liens. Contractors must understand cash flow, considering revenue from invoices, payment delays, and holdbacks to ensure they can cover expenses throughout a project.

Uploaded by

晓春王
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
27 views

Cash Flow and The Construction Lien Act: - Expenses Can Be Shown As Regular Costs or As Cumulative Costs

Cash flow and the construction lien act are important considerations for construction projects. The construction lien act entitles suppliers of services or materials to register a lien on a property if not paid. Holdbacks of 10% are standard in Ontario and help protect owners from liens. Contractors must understand cash flow, considering revenue from invoices, payment delays, and holdbacks to ensure they can cover expenses throughout a project.

Uploaded by

晓春王
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 6

Cash Flow and the

Construction Lien Act

Cash flow - Expenses


•  Expenses can be shown as regular costs or as
cumulative costs
20000
18000

16000
14000
12000
Weekly
10000
Cumulative
8000
6000
4000
2000
0
1 2 3 4 5 6 7 8 9 10 11

1
Revenue
•  Revenue stream is initiated when
contractor invoices client
•  Frequency of invoices depends on
contract conditions
•  90 day delay from invoice submission to
payment
•  Also, holdback is applied (10% in Ontario)

Adding Revenue to Cash Flow


•  When adding revenue, document:
–  When invoice was submitted
–  When payment expected
–  If invoice is $10,000, how much will the
payment be?
–  Lien Act for Construction
–  See excel spreadsheet for example

2
Construction Lien Act
•  Entitles anyone who supplies services or
materials to and improvement for an owner,
contractor, or subcontractor to register a lien.
•  A lien is a legal claim on another’s property as
security against the payment of a debt.
•  If the owner is the Crown (federal government)
or if the property is a street or highway or a
railway right of way, liens are not possible.

•  Holdback is a percentage amount that is


deducted from a contractor’s invoice. This
amount is paid to the contractor after a specified
time.
•  In Ontario, holdback is 10%
•  Specified time is 45 days after substantial
completion

3
Registering a Claim of Lien
•  within 45 days after issuance of certificate of
substantial performance for:
–  the entire project, or,
–  subcontract work
–  generally, from the date of last supply
•  Caution: If the contract is to supply in the early
stages of a job, then to return at the end, lien
rights would remain alive for the duration. Supply
of labour or materials at distinct points in time
could be viewed as separate contracts, with lien
rights under the early contract expiring first.
7

Claims can be for:


•  unpaid contract amounts
•  wages
•  rentals
•  supply of materials
•  improvement of value
•  engineering services
•  Excluded:
•  loss of profit
•  architects’ claims
•  federal projects

4
Engineers
•  Engineers have lien rights if the value of the land
was enhanced. For example, design work
related to roads and site services are site
specific and cannot be transformed to another
location as a building design can.
•  Caution: Architects do not have lien rights. The
architect may argue that the owner should not
retain holdback of architectural services,
consideration must be made for the possibility of
claims by subconsultants (e.g. mechanical
engineer).

Holdbacks
•  First or basic holdback: for work or services
performed before it is certified that the contract
is substantially performed
•  Second or finishing holdback: to give finishing
trades claim for work done between substantial
completion and project or contract completion
•  Holdback must be held in trust by owner

10

5
Certificate of Substantial
Performance
•  when the improvement to be made under that
contract or a substantial part thereof is ready for
use or is being used for the purposes intended,
and,
•  when the improvement to be made under that
contract is capable of completion, or, where
there is a known defect, correction at a cost of
not more than:
•  3% of the first $500,000 of the contract price
•  2% of the next $500,000
•  1% of the balance

11

Contract is complete
•  when the price of completion, correction or last
supply is not more than the lesser of
•  1% of the contract price, and
•  $1000
•  The certifier must give copy of certificate to
owner and contractor within 7 days of
certification. The contractor must publish a copy
of certificate in a construction trade newspaper
(Daily Commercial News). The court may
declare substantial performance if so applied.

12

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy