After a public consultation process in the spring and summer of 2024, Ontario is amending the Construction Act. The changes largely provide tweaks, fixes and updates to earlier amendments in 2018 and 2019, but many are significant.

In March 2024, the Ministry of the Attorney General retained Duncan Glaholt, a leading construction law expert, to conduct an independent review of the Act. Mr. Glaholt's final report will be available on the Ontario Construction Act Review website, but included priority recommendations that resulted in the proposed amendments.

The intent is to alleviate administrative burdens experienced within the construction industry associated with payment matters by encouraging timely payment and more efficient dispute resolution.

The proposed amendments fall under the following three key themes:

  1. Enhancing access to statutory adjudication. The province wants to encourage greater take-up of fast-track dispute resolution through adjudication.
  2. Mandatory annual release of holdback; simplifying payments. The province wants to mandate the release of holdback on an annual basis. Other amendments simplify the holdback regime to ensure cashflow down the construction pyramid (e.g., contractors, subcontractors, trades).
  3. Technical and housekeeping updates. The balance of the amendments can be characterized as making technical and housekeeping amendments in order to provide greater clarity and certainty to the construction industry.

The amendments to the Construction Act were introduced on October 30, 2024, as part of the omnibus budget bill, Bill 216, Building Ontario For You Act (Budget Measures), 2024.

Below is a summary of the key changes and their potential implications for the construction industry.

1. Update to holdback requirements and lien provisions

The proposed changes to holdback requirements are significant. First, unlike the existing scheme which allows but does not require annual payments, the new rules mandate that owners release holdback funds annually. In particular, each year, after the contract anniversary, owners would be required to give notice detailing the holdback amount to be paid and release it within a set timeframe if no liens are registered.  The ability to withhold holdback in specified circumstances would be removed.

Another key change would provide that liens arising from the supply of services or materials to an improvement that are included in an annual holdback notice will expire within 60 days after notice is published.

This is a significant departure form the current scheme which provides that lien rights are dependent on specific project milestones like substantial performance or contract completion. The amendments would provide for separate liens where supply is ongoing; that is, the expiry of a lien in respect of services or materials supplied on or before the annual holdback notice would not affect a lien for supply of services or materials after the annual holdback notice is published.

Other proposed amendments include a requirement that holdback for finishing work must be paid once all liens are resolved; and removal of the existing provision that extends the time to preserve lien rights for matters in interim adjudication.

2. Invoicing and prompt payment

Proposed amendments to the prompt payment provisions introduce a deeming provision that would allow an invoice to be considered a “proper invoice” if the owner does not give the contractor written notice within seven days of the deficiencies in the invoice and what is required to address them.

The proposed amendments would also update the definition of a “proper invoice” to also include “any other information that is necessary for the proper functioning of the owner’s accounts payable system that the owner reasonably requests.”

3. Changes to and expansion of interim adjudication

The proposed updates to the interim adjudication provisions would expand the scope of, and introduce increased flexibility to, interim adjudication.

For example, parties would not be limited to using adjudicators listed in the Authorized Nominating Authority’s adjudicator registry. Parties would be able to use private adjudicators, with fees negotiated between parties; however, private adjudicators must still be qualified by the Authority.

The range of issues that can be adjudicated is proposed to be prescribed in regulations; potentially expanding the range of issues that can be referred to interim adjudication. Under the proposed changes, these regulations are expressly permitted to include cross-contract disputes within the same project as issues that can be adjudicated. Any party involved in related disputes can also request adjudicators order consolidation of adjudications; the current provision only permits a contractor to request consolidation if the parties do not agree.

In addition to the amendments, the Act adds two new sections which will allow parties to object to an adjudicator’s jurisdiction or that an adjudicator has exceeded their jurisdiction; and to request corrections to decisions to correct errors or “amend the determination to correct an injustice caused by an oversight on the adjudicator’s part” within five days of the decision.

4. Updating definition of “price”

The updated Act would refine the definition of “price,” which currently provides that if no specific price has been agreed on between the parties to a contract or subcontract, the “price” is actual market value of the services or materials that have been supplied. In the updated Act, regulations may specify a price other than market value where the parties do not agree to a different price.

This addition may help reduce disputes over contract value; though parties will need to familiarize themselves with any pricing regulations if considering a contract without an agreed-upon price.

5. Updating definition of “written notice of a lien”

Another change in the definitions under the Construction Act would expand the “written notice of lien” definition to allow a copy of the claim for lien to be considered “written notice of lien,” which would reduce the documentation involved when pursuing a lien claim.

6. Transitional provisions

Final sections provide guidance on applying these amendments to current and future projects in the interim. While most of the amendments would apply immediately to improvements once the updated Act is in force, there are some exceptions for specific contract provisions, adjudication rules, or previously accrued holdbacks and lien rights on projects whose contracts were entered into before the amendments came into force.

Conclusion

It will be important for professionals on all sides of construction projects to understand these changes to Ontario’s Construction Act if they are signed into law; as rights and obligations could be significantly affected by these changes. Consulting with a legal professional specializing in construction law can help parties know what these changes mean for them.

How Gowling WLG can help

Gowling WLG has been deeply immersed in the construction law reform process across the country. We have held many events and published many articles since the introduction of the amendments to provincial construction laws, and similar changes that are coming across the country.

We would be happy to meet with you or your organization to discuss your questions and concerns about the amendments to the Construction Act or any other provincial construction laws. If you have any questions, please contact any member of our Infrastructure and Construction Industry Group.