Construction Law Reform: Prompt payment, adjudication, and modernization

What you need to know

On December 12, 2017, Bill 142, the Construction Lien Act Amendment Act, 2017, received Royal Assent and is now law, renaming the Construction Lien Act to the Construction Act. Reform of Ontario's construction laws is here.

These changes have already had a profound impact on every part of the construction industry in Ontario. From liens, to holdbacks, to payment timing, to dispute resolution, the Act altered all of them dramatically. So much so that the amendments virtually create a new Act in Ontario.

Do the changes apply to my contract?

The amendments came into force in two stages. Some of the substantive changes – the so-called "modernization" changes – came into force on July 1, 2018, and the prompt payment and adjudication changes came into force on October 1, 2019.

Bill 142 included somewhat complicated "grandfathering" transition provisions. It is important to pay very close attention to these rules and how they apply to your construction contract and your project. It matters when the contract between the owner and the contractor were entered into, or when the procurement process for that contract was started, or, in the case of a lease with tenant improvements, when the lease was entered into. That date will determine whether the rules from before July 1, 2019 apply, or whether only the July 1, 2018 amendments apply, or whether the July 1, 2018 and the October 1, 2019 amendments apply.

Impacts of these amendments

The amendments are very broad and impact all construction work and projects in Ontario, including P3/infrastructure, energy, mining, real estate developments, and even home renovations.

Some of the key changes:

• Modernization of the construction lien timelines – 60 days to preserve and 90 days to perfect
• Modernization of holdback rules – mandatory payment of holdback at end of lien period
• Applying accounting rules to construction trust funds
• Modernization of claims procedures
• Introduction of a prompt payment regime for all construction projects – 28 days for owners to pay
• Implementation of adjudication as a new process to speed up dispute resolution – resolve disputes within 45 days

In our many Building Brief articles, we summarize the key changes that you need to know and the impacts on your projects.

• In "New Construction Act takes effect," we provide an overall summary of the key changes of Bill 142
• In "Sooner than you think: Getting ready for prompt payment", we take a closer look at prompt payment in Ontario
• In "Adjudication coming to a construction project near you – lessons learned from the English experience" we provide some insights from over two decades of adjudication in the UK
• We also put together a series of videos on prompt payment, adjudication and some of the modernization amendments

Also of particular interest to different sectors:

• In "The Impact of Construction Lien Act Amendments On PPP/Infrastructure Projects"
• In "Mind the gaps: What lenders need to know about the new Construction Act," we provide a summary of some of the key impacts on project finance

Gowling WLG has written up many other Building Brief summaries and analyses of some of the key changes and impacts of the amendments which you can read by visiting our "Related Resources" page.

Where can I get a copy of the new Act?

If you would like a consolidated copy of the Construction Act, redlined to show changes brought in by the Bill 142 amendments, please let us know and we can send you a copy.

More?

Please do not hesitate to contact anyone in the Gowling WLG Construction & Engineering Group if you have any questions or would like to know more about the Construction Act amendments or any other construction or project-related matter. We would be more than happy to assist.