Bill 216: Building Ontario For You Act (Budget Measures) has significantly amended Ontario's Construction Act ("the Act").1 The amendments, which are not yet in force, fall under three categories: payment of holdback, adjudication and a range of other miscellaneous matters.
You can access our article on the amendments relating to the payment of holdback here, and the amendments relating to adjudication here.
This article focuses on the third category: changes to the "proper invoice" provisions and other significant amendments to the Act.
Key Takeaways
- Owners should ensure that invoices are being reviewed within 7 days so they can be in a position to provide notice in writing to contractors if there are deficiencies in that invoice. Parties can no longer make retroactive challenges to contractor invoices in adjudications under the Act on the basis that the invoice in issue was not a "proper invoice" unless they raised those deficiencies within 7 days of receipt.
- Owners who retain holdbacks from design professionals should be prepared to field lien claims from those same professionals, who are now presumptively able to make lien claims for work done before the planned improvement has commenced.
All Invoices are Deemed to be Proper Invoices Subject to Owner's Notice Otherwise
The prompt payment obligations and deadlines for payment under the Act are triggered by the delivery of a "proper invoice" from the contractor to the owner. The Act contains prescribed elements that are required for an invoice to qualify as a "proper invoice," and also allows the contractor and owner to agree on additional requirements.
The Act has now been amended so that all invoices will be deemed to be "proper invoices" unless the owner not only notifies the contractor of the invoicing deficiency, but informs the contractor what is required to address the deficiency within 7 days of receiving the invoice.2 Given this short deadline, it is incumbent on owners to review invoice submissions promptly to avoid having deficient invoices deemed to be proper invoices within the meaning of the Act.
Proper Invoice Requirements under Section 6.1
Further clarifications as to what constitutes a proper invoice were included in the amendments. The requirements for a proper invoice pre- and post-amendment are set out below, including the addition of a new requirement under 6.1(6.1) that proper invoices include "Any other information that is necessary for the proper functioning of the owner's accounts payable system that the owner reasonably requests."3
Proper Invoice Requirements under Section 6.1 Table
|
Subsection |
Pre-Amendment |
Post-Amendment |
|
1. |
The contractor's name and address. |
No change. |
|
2. |
The date of the proper invoice and the period during which the services or materials were supplied. |
The date of the invoice and the period, milestone or other contractual payment entitlement to which the invoice relates. |
|
3. |
Information identifying the authority, whether in the contract or otherwise, under which the services or materials were supplied. |
Information identifying the contract or other authorization under which the services or materials were supplied, such as a contract number, contract line item number or purchase order number. |
|
4. |
A description, including quantity where appropriate, of the services or materials that were supplied. |
No change. |
|
5. |
The amount payable for the services or materials that were supplied, and the payment terms. |
No change. |
|
6. |
The name, title, telephone number and mailing address of the person to whom payment is to be sent. |
The name, title, mailing address and telephone number of the person to whom payment is to be sent or, if payment is to be sent to an office or department, its name, mailing address and telephone number. |
|
6.1 |
- |
Any other information that is necessary for the proper functioning of the owner's accounts payable system that the owner reasonably requests. |
|
7. |
Any other information prescribed. |
No change. |
To avoid invoice rejections, contractors should heed these new and amended requirements, in addition to any further requirements imposed in a given construction contract.
Other Amendments to the Act
Below are other significant amendments to the Act:
- Design professionals liens: Pursuant to the addition of a new subsection 14(4), the Act's lien provisions are deemed to apply to the supply of design services, including planning, drawing and specifications.4 Prior to the amendments, design professionals bore the burden of establishing their design services improved the property. The addition of 14(4) reverses this onus, by deeming lien provisions apply to design services unless the owner can prove the designs did not improve the value of the property. This change will not apply to any holdbacks retained by owners in respect of the supply of designs, plans, drawings or specifications before the Act amendments come into force.5
- Price: The definition of "price" in s. 1(1) of the Construction Act is amended by adding "except as otherwise provided by the regulations", indicating incoming changes to the current definition of "price" in construction agreements.6 The amendments permit regulations that prescribe amounts or methods of determining amounts that apply instead of the actual market value of the services or materials.7
- Written Notice of Lien: The definition of written notice of lien in s. 1(1) is also amended such that notice can now be satisfied by way of written notice in the prescribed form or by giving a copy of a registered lien claim itself.8
- Minor Errors or Irregularities: Placing the owner's name in the wrong portion of a lien claim is now included under s. 6(1), which identifies minor errors or irregularities that will not invalidate an otherwise valid lien.9
- Joinder: The amendments expressly provide for a joinder of a lien claim with another claim in an action.10 Theamendment makes it clear that the lien claim procedure then applies to both claims.
- Notice of Termination: Notice of termination must now be published no later than seven days after a contract is terminated. Notice must be published by either the owner or the contractor/other party whose lien is subject to expiry.11 If notice of termination is published in accordance with the seven day deadline, the date of contract termination is the effective date on which notice was published. Where there are multiple notices, the notice is effective as of the date of the first published notice. The current notice provisions continue to apply if valid notice was published before the day the Act amendments come into force.12 If a notice of adjudication with respect to a matter that is the subject of a lien was given before the day the Act amendments come into force, the current lien expiry and adjudication provision will apply.13
- Multiple Improvements: The approach to multiple improvements under a contract is clarified by amendments to the Act. If there are multiple improvements to be made under a single contract, but the improvements are to lands that are not "contiguous" (i.e. the improvements are on separate parcels without sharing any borders), then if provided for in the contract, each improvement is deemed to be under a separate contract for the purposes of the Act.14
More Changes and Clarification Expected with the Regulations
Before these amendments come into force, it is expected that regulations will be released to add context and additional nuance. Once in force, these amendments to the Act will make modest but significant changes to the way prompt payment and lien claims are resolved across the province. Construction stakeholders are well advised to stay informed of the changes as they continue to take shape.
Footnotes
1 RSO 1990, c C.30. Note, per Bill 216, Schedule 4, s. 31, the amendments do not apply with respect to contracts or procurement processes commenced or entered into before July 1, 2018.
2 Bill 216, Schedule 4, s.5(1) repeals and replaces the current s. 6.1, s. 5(2) adds a section to the current s. 6.1, s. 6(1) repeals and replaces the current s. 6.3.5(c), s. 6(2) amends the current s. 6.3.
3 Bill 216, Schedule 4, s. 5(2) adds a section to the current s. 6.1.
4 Bill 216, Schedule 4, s. 24 adds subsection (4) to the current s.14.
5 Bill 216, Schedule 4, s. 31(1).
6 Bill 216, Schedule 4, s. 1(1) amends the current s. 1(1)(a)(ii).
7 Bill 216, Schedule 4, s. 32(1) adds (b.1) to the current s. 88(1).
8 Bill 216, Schedule 4, s. 1(2) repeals and replaces the current s. 1(1).
9 Bill 216, Schedule 4, s. 4 repeals and replaces the current 6(2)(b).
10 Bill 216, Schedule 4, s. 30 adds subsection (4) to the current s. 50.
11 Bill 216, Schedule 4, s. 27 repeals and replaces the current s. 31(2)-(7), termination provisions will be s. 31(8)-(10).
12 Bill 216, Schedule 4, s. 31(6).
13 Bill 216, Schedule 4, s. 31(7)
14 Bill 216, Schedule 4, s. 3 adds subsection (5) to the current s. 1.
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