Canada: Hospital Construction - The Devil is in the Legislative Detail

With the assistance of Jonathan Hood (Student-at-Law)

Construction or renovation projects are notorious for causing headaches for all parties involved. Seldom do they come in 'under budget' or 'on schedule'. Additional and unique challenges arise when the construction or renovation project relates to a hospital. Hospitals face serious budget and financing constraints, the public scrutinizes the board's choices and decisions, and the construction process itself, is often quite political.

Hospitals face further challenges because they must comply with a myriad of statutes, regulations and standards like the Building Code Act, the Fire Protection and Prevention Act, the Electricity Act, the Public Hospitals Act, the Environmental Protection Act, the Construction Lien Act, the Occupational Health and Safety Act and many more.

Unfortunately, those parties most typically involved in construction projects, such as construction managers, general contractors and architects, are unfamiliar with the legal requirements imposed by these statutes. Failure to comply with the provisions in these statutes could result in hospitals, including their directors and officers, incurring hefty fines. Even worse, a hospital's failure to comply could result in the construction project being brought to a halt indefinitely or in substantial change orders being issued to bring the project 'up to code'.

Below, we briefly outline three statues that significantly affect hospital construction projects: The Public Hospitals Act, the Building Code Act and the Construction Lien Act.

Public Hospitals Act

The Public Hospitals Act is the primary statute governing public hospitals in Ontario and its provisions directly impact hospital construction projects. The Act is administered and enforced by the Minister of Health and Long-Term Care, who is given broad discretionary powers to provide approvals to and financial assistance for hospital construction projects.

The Act provides that hospitals are not permitted to embark on construction projects until and unless the Minister approves the hospital's construction plans. Even after approval has been granted, the Act gives the Minister the power to revoke or suspend the approval if it is in the "public interest to do so".

The Act also authorizes the Minister to provide financial assistance, by way of grant or loan, in respect of hospital construction projects. Under the regulations, the Minister is permitted to authorize payment of up to two-thirds of the costs of the hospital construction project.1 Again, the Minister is given the discretionary power to revoke or suspend financial assistance and further, may reduce the grant or loan if it is "in the public interest to do so".

Every person (which includes directors and officers) who contravenes any provision of the Act or its corresponding regulations is guilty of an offence and could be liable to a fine of up to $1,000. Further and more significantly, the Minister has the power to cease construction altogether.

Building Code Act

The Building Code Act is essentially a set of minimum provisions for the safety of buildings with reference to public health, fire protection and structural sufficiency. Its primary purpose is the promotion of public safety through the application of building standards throughout Ontario.

The Act contains several complex provisions dealing specifically with hospitals. Under the Act, hospitals are categorized as "Group B, Division 2" buildings. As part of this category, hospitals must use specific types of insulation, piping, fire alarms, ventilation systems and electrical wiring throughout the hospital facility. Hospitals are also required to construct its walls, stairs, sleeping areas, elevators, washrooms and wards in very precise ways. For example:

  • Corridors serving patients must be at least 2400 mm wide

  • The floor area containing patients' or residents' sleeping rooms must be divided into not less than two fire compartments

  • There must be minimum regular lighting of 50 lx and minimum emergency lighting of 10 lx in corridors serving patients or residents

  • Doors that divide a corridor must swing on a vertical axis in the direction of travel to the exit

  • The maximum vertical rise of stairs between floors is 2400 mm

Hospitals must also comply with several "standards" which are set out under the Act. For example:

  • CSA Standard CAN/CSA-Z317.1-99: "Special requirements for plumbing installations in health care facilities"

  • CSA Standard CAN/CSA-Z317.2-01: "Special requirements for heating, ventilation and air conditioning (HVAC) systems in health care facilities"

  • CSA Standard CAN/CSA-Z317.10-01: "Handling of waste materials in health care facilities and veterinary health care facilities"

  • CSA Standard CAN/CSA-Z32.4-M: "Essential Electrical Systems for Hospitals"

  • CSA Standard CSA Z32.1: "Code for Prevention of Explosions or Electrical Shock in Hospital Operating Rooms"

The contravention of any provision of the Building Code Act or the regulations constitutes an offence and a person (which includes directors and officers) could be liable for a fine of up to $50,000, while a corporation could be liable for a fine up to $100,000. Again, and possibly more disastrous, the hospital's building permit could be revoked and construction brought to a halt indefinitely.

Construction Lien Act

The Construction Lien Act is complex legislation established to provide financial protection for those parties who have supplied services or materials to a construction project, thereby improving the land. The Act provides financial protection to those parties who have not been paid for such services or materials and who are not entitled to assert a direct claim against the owner of the construction project because they do not have a contract with the owner. There are two separate kinds of protection established by the Act - the "holdback" and the "trust fund".

During hospital construction projects, a hospital is an "owner" as defined under the Construction Lien Act and as such, has specific legal obligations to its contractors and the sub-contractors involved. Specifically, hospitals are required to hold back 10% of the value of the services or materials actually supplied for a period specified by the Act. In Ontario, this is 45 days from the last date services or materials were supplied. The Act provides guidance as to the proper procedure for the release of holdback funds. A person who supplies services or materials to an "improvement" has a lien for the price of those services or materials upon the interest of the hospital in the premises improved. The lien is also a charge against the holdback. So long as a hospital holds back 10%, the sub-contractors' (or "lien claimants") claims will be limited to the amount of such holdback.

Under the Construction Lien Act, all monies received by a hospital for financing of the improvement constitute a trust fund for the benefit of the contractor. The hospital's trust obligation is limited to the amounts owed to its contractor. Until all amounts owing to the contractor are paid, the hospital cannot appropriate the funds or use them for some purpose that is inconsistent with the trust. Notably, the Construction Lien Act imposes personal liability on directors, officers, employees or agents of the hospital for breach of trust. All that need be proved is that the person participated in, assented to or acquiesced in the breach of trust.


When it comes to hospital construction or renovation, the devil is, indeed, in the legislative detail. Hospitals face enough challenges and barriers without having to worry about the numerous complicated legal requirements that govern every construction project. Using knowledgeable legal counsel before, during and after the construction process will simplify the construction process for all those involved and assist in avoiding potential legal pitfalls. 


1. Note that there may be exceptional circumstances where the Minister is able to provide even further financial assistance.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2004 McMillan Binch LLP

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.