Ontario’s New Construction Act


Published on: 08/06/2018

July 1, 2018: Amendments to the lien and holdback rules come into effect

October 1, 2019: Prompt payment and adjudication come into effect

Lien preservation extended from 45 days to 60 days

Lien perfection extended from 45 days to 90 days

Prompt Payment

• Specified dates refer to calendar days
• Owner shall pay GC within 28 days or give "notice of non-payment" within 14 days of receiving proper invoice
• If owner gives "notice of non-payment" - GC shall pay subs or give "notice of non-payment" within 7 days and commence adjudication within 21 days
• If contractor gives notice of non-payment – subs shall pay sub-subcontractor or deliver "notice of non-payment" within 7 days & start adjudication within 21 days

Notice of termination is an additional trigger for a contractor's lien rights 

Holdback Rules

Mandatory release of holdback once all liens that may be claimed against that holdback have expired (61st day after substantial performance)

Owner can withhold from holdbacks for contracts entered into after July 1, 2018 (s.27.1); Contractor can access payment suspension for HB non-payment by owner after October 1, 2019 (s.27.1.1)

15-month zone of unequal owner-contractor powers

Release of holdbacks will be permitted on a phased and annual basis 

Transition Rules 
The old legislation will only apply to a contract if: (a) entered into before amendment (regardless of when the subcontract was entered into); (b) a procurement process for the improvement was commenced before the amendment; or (c) the premise is subject to a leasehold interest which was entered into before amendment.

• If a Prime Contract was signed before the amendments, however a sub-contract was not entered into until after the amendments, the sub-contract still follows old legislation.

It is important for entities with long standing Master Service Agreements, AFPs or multi-year contracts to review when the Prime Contract, or the procurement process, was initiated.

Proper Invoice 

Amended Act sets out minimum proper invoice requirements in s.6.1(1)-(6), however the owner has discretion to include (7) "any other information that may be prescribed" in their requirement for a proper invoice, except for provisions that makes the giving of a proper invoice conditional on the prior certification of a payment certifier or on the owner's prior approval.

• Can no longer make the giving of a proper invoice conditional on the prior certification of a payment certifier therefore owners will likely add particularly onerous conditions to their Proper Invoice requirements and add conditions that fall just short of certification

Change Orders & Adjudication

A party to a contract may refer to adjudication a dispute with the other party to the contract in respect of: payment under the contract, including in respect of a change order, whether approved or not, or a proposed change order (s.13.5 (2))

• A request for a change order triggers adjudication and if at any point a party to the contract is unhappy with the process it can refer the matter to adjudication

Mandatory bonding & Trust Rules

Mandatory 50% performance bond and 50% labour & material payment bond on public projects where contract price is $500,000 or greater. Owners are free to address tender security as before.

Imposing new trust obligations – s. 8.1(1): trust funds must be deposited in trust account and trustee must follow trust accounting rules: need to set up a trust account; single trust account is acceptable; no need for separate trust account for every project; trust funds to be segregated and traceable, as much as possible

If you have any questions about the amendments to the Construction Lien Act, please contact Krisha Ruchlewicz (905-629-0587 ext. 226 or krisha.ruchlewicz@gtswca.org)

download Download Prompt Payment Flow Chart
download Download Trigger for Lien Rights Termination
download Download Non-Payment of Holdback
download Download Phased and Annual Holdback
download Download Transition Rules
download Download Proper Invoice

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