Ontario proposes new regulations to complement pending Construction Act amendments: Key takeaways for industry and counsel

The Ontario government has released a set of draft regulations (the "Proposed Regulations")^[1] to accompany the pending Construction Act^[2] amendments introduced last fall through the Building Ontario For You Act (Budget Measures), 2024^[3], also known as Bill 216. Stakeholders have until September 24, 2025, to comment. It is projected that the Proposed Regulations would come into effect on the same day the statutory amendments are proclaimed; which, as of the date of this writing, has not yet been announced.

The Proposed Regulations provide some of the operational details necessary to implement the pending changes to the Construction Act, and are intended to work in conjunction with those amendments.

The Proposed Regulations focus primarily on changes to the interim adjudication scheme, and also address various regulatory and housekeeping matters.

Below are the highlights of each:

Expanded interim adjudication

Currently under the Construction Act, interim adjudication is limited to the disputes listed in section 13.5 of the Act; and parties are limited to adjudicators listed in the Ontario Dispute Adjudication for Construction Contract (ODACC) adjudicator registry. The pending changes to the Construction Act allow for expanding both the subject matter and adjudicators available for interim adjudication, but leave the specifics largely to be spelled out in the regulations. The Proposed Regulations now provide that detail.

Expanded scope

The question of what types of disputes can be adjudicated has been the source of uncertainty, with stakeholders reporting differing views among adjudicators as to the reach of their jurisdiction.

To address this uncertainty and also expand the availability of interim adjudication, the Proposed Regulations would prescribe an expanded list of matters that may be adjudicated. The Proposed Regulations would preserve the existing list of matters that may be adjudicated (currently listed section 13.5 of the Act), and would add:

• A dispute in respect of any of the following matters, if it is reasonably necessary to resolve a dispute respecting the matter in order to make a determination on any other matter that may be adjudicated:

• The scope of work required to be performed under the contract;
• A request for a change in the contract price;
• A request for an extension of time in the completion of work required to be performed under the contract.

The Proposed Regulations would also expand interim adjudication to include disputes between principal and surety regarding payment under labour and material bonds in certain circumstances.

Private adjudicators

The pending changes to the Construction Act permit parties to use private adjudicators; the Proposed Regulations set out in more detail how parties may engage private adjudicators and the fees to be charged by the adjudicators. These include:

• Private adjudicators would be required to charge a minimum fee of $1,000 per hour or more for all adjudications they perform, in order to ensure that they are only engaged on complex, higher-value disputes. ODACC's Administrative Fee will be capped at $30,000 per adjudication. Additionally, any adjudicator – whether private or on the registry – charging $1,000 per hour or more would pay ODACC a fixed fee of $350 per hour.
• Private adjudicators would not be permitted to also be on the ODACC roster as a "Registry" adjudicator;
• Private adjudicators must still be qualified and certified by ODACC and would be subject to the same code of conduct as registry adjudicators.
• Private adjudicators would be subject to reduced ODACC training requirements, reflecting the expectation that these adjudicators' skillset would be assessed by parties deciding whether the rate of $1,000 or more per hour is warranted.

Publishing adjudication decisions

Another noteworthy development is that the Proposed Regulations would require that adjudication decisions be published on the ODACC website, but that any identifying information, other than that of the adjudicator, be removed. If implemented, this requirement would provide greater transparency into the adjudication process and ability to assess potential adjudication outcomes, while giving comfort to parties wary of unwanted publicity surrounding disputes.

Additional regulatory matters

The main regulatory matters addressed in the Proposed Regulations are new and amended forms; a defined list of construction trade newspapers for publishing statutory notices; and transition provisions.

Forms

The main new and amended forms identified in the Proposed Regulations are:

• An amended Written Notice of Lien (Form 1) that would require lien claimants to indicate the amount claimed as holdback and non-holdback;
• A new Notice of Annual Release of Holdback form, which would include a statement indicating the amount of holdback released in accordance with the new annual release of holdback requirements;
• An amended Notice of Termination form (Form 8) that would specify that the contract is terminated on the date of publication of the notice;
• An amended Labour and Material Payment Bond form (Form 31) that would confirm a sub-subcontractor's right to claim under the bond, even if they do not preserve or perfect a lien.

Owners, contractors and subcontractors alike would be wise to monitor whether these new and amended forms are implemented, and to embed the correct template into their project workflows to deploy when the Proposed Regulations come into force. Failure to use the prescribed form may risk being unable to rely on the notice, or being considered in breach of statutory obligations, depending on the circumstance.

Publication in construction trade newspapers

In another move toward certainty, the Proposed Regulations would provide a list of "construction trade newspapers" in which statutory notices may be published, particularly:

• the Daily Commercial News
• Link2Build; and
• Ontario Construction News.

This regulation would provide some very welcome confidence for those searching for statutory notices that a notice in an obscure publication has not been missed.

Transition

The Proposed Regulations would apply to:

• Any contract procured on or after the proclamation date of the changes to the Construction Act (not yet set as of the date of writing); and
• Any subcontract under such a prime contract, even if the subcontract pre-dates proclamation.

Similar to the transition provisions under the pending changes to the Construction Act (and those under the previous 2017 changes to the Construction Act) the transition provisions would temporarily create a mixed regime until legacy contracts are completed. When the proclamation date is announced, owners with contemplated projects or open tenders may wish to consider whether to accelerate tender issuance to fall under the "old" rules or to defer until the new Regulations come into force.

Key takeaways

The Proposed Regulations do not alter the changes that will be introduced when the amendments to the Construction Act come into force; however, they do provide a clearer view of how the amended Act will function.

The expansion of adjudication, which is the primary focus of the Proposed Regulations, is consistent with the recommendation in the 2024 Ontario Construction Act Review report^[4] to enhance access to statutory adjudication and encourage its use.

Stakeholders considering whether to comment on the Proposed Regulations will want to consider their experience with interim adjudication and whether the expansions address their concerns with the existing adjudication system. Regardless of participation in the consultation, those in the industry will be well-served to monitor the final form of these regulations, as they will have a direct impact on dispute resolution strategy and risk management across the sector.

How Gowling WLG can help

Stakeholders have a limited window to consider the potential impact of the Proposed Regulations and submit comments. Gowling WLG has been deeply immersed in the construction law reform process across the country, and has extensive resources addressing the amendments to provincial construction laws, and similar changes that are coming across the country.

If you have questions about how the Proposed Regulations may affect your current or upcoming projects—or if you would like guidance on participating in the consultation process—please contact any member of our Infrastructure and Construction Industry Group.