Canada: Ontario's Construction Act: The Construction Industry's New Reality

On December 12, 2017, Bill 142, the Construction Lien Amendment Act, 2017 (Ontario) received Royal Assent. The Bill, which implements substantive amendments to the current Construction Lien Act (Ontario) and the scheme for how construction projects will operate in Ontario, passed First Reading on May 31, 2017, Second Reading on October 4, 2017 and, following referral to the Standing Committee for review and comment, unanimously passed Third Reading on December 5, 2017. Although the Bill is now considered law, the most substantive amendments will not come into force until a date to be named by proclamation of the Lieutenant Governor (anticipated in early 2018, once the regulations and prescribed forms are drafted and approved).

On April 30, 2016, the Ministry of the Attorney General (MAG) released its report: "Striking the Balance: Expert Review of Ontario's Construction Lien Act" (the Report). Bill 142 adopted most of the amendments proposed by the Report. For an overview of the Report's recommendations, refer to our previous post on the Recommended Changes to Ontario's Construction Lien Act: Work in Progress.

For the time being, the statute is still known as the Construction Lien Act, but once the pending proclamations are made, the legislation will be renamed to the Construction Act. A selection of the key amendments being implemented by Bill 142 (but not yet in force) are set out below.

Prompt Payment

  • Prompt payment is being introduced as Part I.1 of the Construction Act, requiring adherence to timelines for amounts payable by owners to contractors, contractors to subcontractors, and subcontractors to subcontractors (sections 6.4, 6.5, and 6.6).
  • If these prompt payment timelines are ignored, interest will accrue at a specified rate, except where the payer provides notice of non-payment pursuant to the requirements of Part 1 and the related regulations (sections 6.9, 6.4(2), 6.5(6), 6.6(6)).

Adjudication

  • Adjudication is being introduced as Part II.1 of the Construction Act, which allows parties to a contract or subcontract to refer a dispute (as identified by section 13.5(1)) to adjudication. An adjudication may only address a single matter, unless the parties and the adjudicator agree otherwise (section 13.5(4)).
  • Within 30 days after receiving the documents required by section 13.3 of the Construction Act, the adjudicator shall make a determination on the matter. The decision of an adjudicator, who must be qualified by the Authorized Nominating Authority, will be binding on the parties (sections 13.9, 13.13).
  • Adjudication procedures are currently unknown, and are stated to be as set out in the contract or subcontract, provided they comply with Part II.1 (section 13.6(1)), else they will be governed by the procedures to be set out in pending regulations (section 13.6(2)).

Holdback

  • Holdback will no longer need to be retained in the form of monetary funds.  Instead, the Construction Act will permit holdback to be retained in the form of a letter of credit, a demand-worded holdback repayment bond, or any other form of security that may be prescribed (section 22(4)).
  • Payment of statutory holdback will become mandatory, rather than discretionary, with contractual options to provide for payment on an annual or a phased basis (sections 26, 26.1, 26.2, and 27).
  • Non-payment of statutory holdback will be permitted, but only on notice to the contractor and with publication of a formal notice in a prescribed form, specifying the amount of the holdback that the owner refuses to pay.  The contractor may, in turn, refuse to pay some or all of the holdback it owes to subcontractors, provided notice is given to subcontractors and the matter has been referred to the new adjudication process (section 27.1).

Preservation, Perfection and Expiry of Liens

  • The time period for the preservation of a lien has been extended from 45 to 60 calendar days (section 31(2)). 
  • The time period for the perfection of a lien has been extended from 45 to 90 calendar days (section 36(2)).
  • The termination of a (prime) contract will now become a statutory trigger for the expiry of lien rights of a contractor. The other existing lien expiration trigger dates will continue to be completion and abandonment of the contract and the publication of a certificate of substantial performance. Termination of a contract is not expressly included in the (still current) provisions of the Construction Lien Act (section 31(2)).

Leasehold Improvements

  • For improvements to leasehold properties, if payment for all or part of the improvement is accounted for under the lease terms (or any agreement to which the landlord is a party in connection with the lease), then a lien will attach to the interests of both the tenant named in the lease and the landlord, although the landlord's liability is limited to the extent of 10 percent of the amount of such payment (section 19(1)). It is, accordingly, no longer necessary for a contractor to provide the landlord with written notice prior to the commencement of work on the leasehold property.

Substantial Performance and Completion

  • The thresholds for deemed substantial performance and deemed completion of a contract are increased to when the improvement to be made under that contract is capable of completion or, where there is a known defect, correction, at a cost of not more than 3% of the first $1,000,000 of the contract price, plus 2% of the next $1,000,000, plus 1% of the balance of the contract price (section 2).
  • Specified examples of permissible "minor errors or irregularities" that will not invalidate a certificate, declaration or claim for lien are now included, and a requirement to demonstrate prejudice from errors or irregularities is also being introduced (section 6).
  • Certificates or declarations of substantial performance of a contract will now require a legal description of the premises both for projects where liens attach to the premises and those where liens do not attach to the premises.  For liens not attaching to the premises,  the name and address of the person or body to whom a copy of the claim for lien must be given will now also be required (section 32(2)).

Construction Trusts

  • A contractor or subcontractor who is a trustee under section 8 must comply with requirements respecting the depositing and record keeping of trust funds (section 8.1(1)).

Capital Repairs Lienable

  • Lienable repairs will need to be a "capital repair to the land" going forward, as opposed to only a "repair to the land." "Capital repair" will be a newly defined term, covering "any repair intended to extend the normal economic life of the land or of any building, structure or works on the land, or to improve the value or productivity of the land, building, structure or works, but not including maintenance work performed in order to prevent the normal deterioration of the land, building, structure or works, or to maintain the land, building, structure of works in a normal, functional state" (section 1(1.1)).

Summary Procedure for Lien Actions

  • Leave of the court will no longer be required to bring interlocutory motions within a lien action (section 67 is being repealed) or to commence third party claims (section 56 is being repealed). The procedure for lien actions is expected to be addressed in the regulations.
  • Joinder of lien claims and trust claims will also now be allowed (section 50 is being repealed).

Other Technical Amendments

  • The amount of security for costs required to vacate a lien has been increased from "the lesser of $50,000 or 25 per cent" of the lien, to the "lesser of $250,000 or 25 per cent" of the lien (section 44(1)(d)).
  • A letter of credit containing reference to an international commercial convention is acceptable as security as long as the convention text is written into the terms of the credit, the letter is unconditional, and accepted by a bank listed in Schedule 1 to the Bank Act operating in Ontario (section 44(5.1).
  • The court may on a motion order the discharge of a lien on the basis that the claim for lien is frivolous, vexatious or an abuse or process (section 47(1)).
  • Where a person preserves a claim for lien or gives written notice of a lien where the person knows or ought to know that the amount of the lien has been wilfully exaggerated or that the person knows that he or she does not have a lien, the court may on a motion order that the lien amount be reduced by the exaggerated portion (section 35).
  • Where a contractor enters into an agreement with the Crown, a municipality, or a broader public sector organization, a labour and material payment bond and performance bond will be required from the contractor where a contract price exceeds the amount prescribed for the applicable owner pursuant to the regulations (section 85.1). 

Although it has yet to be determined exactly how the revised legislation will impact the construction industry, these amendments and new requirements will, no doubt, have a significant impact on the way owners, contractors, and subcontractors conduct their business in relation to construction projects in Ontario. Specifically, the new requirements for prompt payment, adjudication, and the mandated release of statutory holdback are anticipated to have far reaching ramifications for all players involved in the construction pyramid.

While many of the amendments proposed by the Report were ultimately adopted by the legislature, a selection of proposed amendments not implemented by Bill 142 include the following:

  • The common elements in condominium buildings will not be required to have a single PIN to which liens could attach.
  • Condominium unit owners will not be entitled to post security proportionate to their unit share of a lien, to have the lien vacated from their premises.
  • Construction lien actions will not be case managed in all regions of Ontario.
  • Lien claims between $25,000.00 and $100,000.00 will not be dealt with by a simplified procedure (subject to any new procedures to be prescribed pending regulations, since section 50(2) refers to prescribed procedures).
  • When a mortgagee makes a loan for the purposes of financing both land acquisition and the construction of an improvement, the mortgagee is not required to identify in the mortgage documents the amount of the advance intended for the acquisition of land and the amount intended for the improvement.

Once the regulations are drafted, commented upon and approved, it is expected that the new provisions will be proclaimed. The regulations are currently expected to be released for review and comment sometime in February 2018.

The pending amendments can be viewed within the current Construction Lien Act, in greyed notations, here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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

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

Authors
Similar Articles
Relevancy Powered by MondaqAI
Goldman Sloan Nash & Haber LLP
Fogler, Rubinoff LLP
Goodmans LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Goldman Sloan Nash & Haber LLP
Fogler, Rubinoff LLP
Goodmans LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions