Lenders on a construction project operate far from the work site, but are often at the centre of the action when it comes to cash flow and prompt payments. Lenders are typically involved in monitoring progress on the project, certifying such progress, and releasing the financing draws that flow down to contractors and subcontractors.
Inherent in the lender’s role is ensuring that proper amounts are held as holdbacks. These amounts, including initial holdbacks and finishing holdbacks, are statutorily required to be kept for a specific amount of time, and are then required to be released. If a lender fails to abide by these rules, the lender itself could be exposed to liability to the extent of the holdback. Liability could also result from a failure to properly account for various monies, which are often deemed to be trusts by the Construction Act.
Lenders must therefore be cautious and informed about the rules and timelines. Our experienced team is available to assist lenders with questions big or small relating to the rules, or their interpretation in complex situations.