Andrew Wood, Gionet Fairley Wood LLP
Ontario’s Construction Act is undergoing important amendments that will impact construction projects across the province. On October 30, 2024, Ontario’s Budget Bill (Bill 216) introduced future amendments to the Construction Act. These amendments received royal assent and became law on November 6, 2024. They will come into force on a future date to be determined by the government.
In March 2024, Ontario Attorney General Doug Downey retained Duncan Glaholt, a leading construction lawyer, to review the Act and report to the government. The amendments are based on Mr. Glaholt’s recommendations, following a public consultation process. They aim to improve payment systems, expedite dispute resolution, and manage holdbacks more efficiently.
The overarching goal is to alleviate administrative burdens in the industry. As the sector prepares for these changes, contractors and owners must stay informed, as the amendments will affect future contracts. This article summarizes key amendments.
Clarifying the definition of “Price” in contracts
Currently, the “price” of a contract is deemed to be the market value of services or materials provided. The amendments refine this definition, allowing regulations to specify a different price—especially when parties haven’t agreed on one. This is intended to reduce contract value disputes. Contractors and owners will need to monitor new pricing regulations.
Prompt Payment: Amendments to “Proper Invoice”
The definition of “proper invoice” will be updated to include additional information that owners may request for their accounts payable systems. This is expected to improve payment processing efficiency.
Additionally, if an invoice is submitted but does not conform with the Act, the owner must reject it in writing within seven days. Otherwise, it will automatically be deemed a “proper invoice.”
Adjudication: Key changes
Amendments to interim adjudication aim to make dispute resolution faster and more flexible:
- Flexibility in choosing adjudicators
Currently, adjudicators must be selected from a registry maintained by the Ontario Dispute Adjudication for Construction Contracts (ODACC). The amendments will allow parties to choose private adjudicators if they meet ODACC qualifications. Fees will be negotiated between the parties.
2. Expanded scope of adjudication
The current Act limits the matters eligible for adjudication. Future regulations will define additional eligible disputes, including cross-contract issues within the same project. This will enable faster resolution of a wider range of matters.
3. Consolidation of multiple adjudications
Presently, only contractors can request consolidation if others don’t agree. The amendments allow any party to request consolidation of related adjudications, reducing delays and costs.
4. Challenges and corrections to adjudicator decisions
Parties will be able to challenge or request corrections to adjudicator decisions for errors. Challenges must be submitted within five days, ensuring fair and timely resolution.
Holdbacks and liens
Under the current Act, annual holdback payments are optional. The amendments will require annual holdback releases. Owners must notify contractors of the amount to be paid after each contract anniversary and release funds within a defined period, provided no liens are registered. This requirement extends down the construction pyramid to subcontractors and trades.
This marks a shift from the current model, where lien rights relate to milestones like substantial performance or contract completion. Under the new rules, separate lien periods will apply to ongoing work. Liens for work done before the annual notice won’t be affected by work performed afterward.
Additional lien-related changes include:
- Annual expiry of lien rights – Liens for materials or services in the annual holdback notice will expire 60 days after the notice is issued.
- Mandatory release for finishing work – Holdback funds must be released once all liens are resolved.
- Removal of extended lien periods due to adjudication – The provision extending lien preservation during adjudication will be eliminated.
The amendments simplify lien claims by allowing the claim for lien to also serve as the notice of lien, reducing documentation requirements. The expanded definition of “written notice of lien” will allow lien claimants to join their claims with other types of claims, such as trust claims under Part II of the Act. It is anticipated that lien and trust claims may proceed as part of a single legal proceeding. Contractors and owners should watch for further regulations.
Transitional provisions
Bill 216 includes transitional provisions to clarify how the amendments will apply to ongoing projects. Most changes will apply to new projects as soon as the amendments come into force. Some provisions, particularly related to adjudication and accrued lien rights, will include exceptions for pre-existing contracts.
These amendments aim to reduce administrative burdens and improve efficiency in Ontario’s construction sector. Even with this goal in mind, contractors and subcontractors must understand their rights and obligations—or seek advice from a qualified construction lawyer.
The construction law team at Gionet Fairley Wood LLP is equipped with the experience and resources to meet client needs with a tailored approach.
Disclaimer: The information in this article is general and subject to change. It does not constitute legal advice. For legal assistance, consult a qualified lawyer.