On March 28, 2014, the Ontario government announced that it is launching an independent review of the Construction Lien Act to address concerns about prompt payment in the construction industry.
The review has been prompted by reactions to Bill 69, the Prompt Payment Act, 2013, a private member's bill which received first and second reading in the Ontario Legislature in May 2013 and has had public hearings before the Standing Committee on Regulations and Private Bills.
Based on the comments received on Bill 69 during the public hearings and the written submissions the committee has received, the province decided that a broader review of the issues with a broad consultative process was required. The review of the Construction Lien Act will "engage with the broad diversity of participants in the sector, including owners from the private and public sectors, architects, engineers, legal and other building professionals, the financial sector, the National Trade Contractors Coalition of Canada (NTCCC), the Ontario General Contractors Association (OGCA), large general contractors, the Council of Ontario Construction Associations (COCA), the Ontario Road Builders Association (ORBA), Infrastructure Ontario and the Provincial Building Trades."
The review will be led by an independent third party who has not yet been appointed, and will begin in spring 2014. It will focus on particular payment concerns raised by some in the construction industry, including:
- Reducing the financial risks companies face when they are not paid for services on time;
- Making sure payment risk is distributed fairly among all industry participants; and
- Finding ways to ensure that companies pay for services and supplies on time.
The Construction Lien Act was enacted in 1983, and sets out a complex system of rights and trust provisions to provide financial protection to construction suppliers, contractors and landowners, including construction lien rights.
Bill 69 focuses on 3 primary objectives:
- prohibit all holdbacks on a construction project other than those required under the Construction Lien Act,
- impose mandatory payment terms on construction parties, both in terms of timing and consequences of non-payment,
- establish new financial disclosure obligations on construction parties.
However, as noted in our December 2013 Construction Law Newsletter, the Bill is designed to remove the freedom and flexibility of construction parties to negotiate specific terms for particular projects and impact the allocation of project risks, and in doing so, it is not clear that the full impacts of the proposed law have been fully considered. This is no doubt why the Ontario government is undertaking an independent review of the issue with broad consultation.
The Ontario Bar Association has also provided commentary on many technical issues with Bill 69, as have various other groups and organizations.
Bill 69 is, currently, still scheduled for further hearings by the Standing Committee on Regulations and Private Bills, with a review of the bill clause-by-clause and of proposed amendments on Wednesday, April 2 and Wednesday, April 9. In the ordinary course, the committee would then recommend it for passage to the legislature if it chose to.
The Gowlings Construction Law Group has been following the course of Bill 69 and Construction Lien Act reform closely as it will have a direct and significant impact upon many of our clients and the industry as a whole.
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