If the Ontario government’s Bill 142 passes, it will significantly change the Construction Lien Act — including shortening the name to Construction Act. The Bill makes numerous amendments to the Construction Lien Act in response to the report titled “Striking the Balance: Expert Review of Ontario’s Construction Lien Act”, prepared for the province’s Ministry of the Attorney General and the Ministry of Economic Development, Employment and Infrastructure and delivered on April 30, 2016.
As noted on Osler Hoskin Harcourt LLP’s Construction and Infrastructure group blog, “the Bill contains several key provisions for industry participants. In addition to creating a prompt payment regime, the proposed amendments would require the mandatory adjudication of certain construction disputes, and implement various other additional amendments to modernize the Act.”
Bruce Reynolds and Sharon Vogel of Borden Ladner Gervais LLP worked extensively with government and industry groups on the Report and on the subsequent Bill 142. The firm’s website summary of the amendments is as follows:
“The amendments proposed in Bill 142 include 98 of the 101 recommendations Bruce Reynolds and Sharon Vogel had presented in their Report.
“In particular Bill 142 reflects the three key objectives identified in the Report:
1) modernization of the construction lien, holdback and trust rules;
2) introduction of a prompt payment regime; and
3) introduction of an adjudication regime for the expedient resolution of construction disputes.
The modernization of the construction lien, holdback and trust rules includes the following amendments:
Express provision for the application of these rules to public-private partnerships;
Liens would no longer attach to municipal lands but rather would have to be preserved in the same manner as liens relating to projects located on Crown lands;
Where a landlord agrees to pay for all or part of an improvement to leased premises, the landlord’s interest would be subject to a lien to a maximum of 10% of such payment;
New rules providing for the payment of holdback on an annual, phased, or segmented basis;
The mandatory release of holdback funds once all liens have expired if no liens are preserved and the owner has not delivered a notice of intention to set off;
The extension of the deadline for the preservation of liens from 45 days to 60 days;
The extension of the deadline for the perfection of liens from 90 days to 150 days;
New statutory trust funds bookkeeping requirements; and
Mandatory bonding on public and broader public sector projects where the contract price exceeds a prescribed amount.
“The proposed new prompt payment regime is intended to ensure that contractors, subcontractors and workers benefit from shorter payment cycles and increased certainty related to payment for work and materials supplied. Practically speaking, owners would be required to pay general contractors within 28 days after the receipt of a proper invoice, contractors would be required to pay their subcontractors within 7 days after receiving payment, and subcontractors would be required to pay other subcontractors within 7 days after receiving payment. Unless a payer delivers a notice of non-payment within 14 days of receipt of an invoice, the invoice would be considered proper and the related payment mandatory.”
As Richard Wong and Roger Gillott of Osler write: “However, Ontario isn’t the only jurisdiction undergoing construction law reform; other Canadian jurisdictions are considering prompt payment regimes as well and are potentially considering aspects of the Bill in the context of their own jurisdictions:
“In Québec, finance minister Carlos Leitão confirmed that the province would be introducing new prompt payment rules to apply to public sector projects by the spring of 2017. The impetus of these rules differs from those in Ontario and stems from a recommendation from the Charbonneau Commission investigating corruption in the construction industry in Québec. The lack of prompt payment was seen to create a greater temptation for corruption to occur for several reasons, including disadvantaged cash flow to smaller contractors and abuses of power in holding up progress payments.
In Alberta, starting in April of 2016, Alberta Infrastructure began implementing prompt payment clauses in its various contracts.
In British Columbia, the BC Law Institute is currently undertaking a review of the Builders Lien Act to generate a report containing balanced recommendations for reform.
Finally, at the federal level, there are several initiatives.”