As we know, 2019 brought about significant changes to the Construction Act with the introduction of adjudication for payment disputes and a prompt payment regime along with others changes to mandatory release of holdbacks, leasehold interest and liens and so on. After five years, it was time for some tweaking of the Act.
On November 6, 2024, based on an independent review of the Act, the Ontario government passed royal assent to Bill 216, Building Ontario For You Act (Budget Measures), 2024 (“Bill 216”). Bill 216 introduced significant changes in three major areas: holdback, adjudication and administration. These changes aim to reduce administrative burdens, encourage timely payments, and improve dispute resolution, among other changes.Bill 216 introduces several amendments including, and we think these are the key ones:
Mandatory annual release of holdback
Once in effect, Bill 216 will require owners to release accrued holdback annually. Owners will need to publish a “notice of annual release of holdback” no later than 14 days after a contract’s anniversary date that outlines the amount of holdback the owner intends to pay. Within this same 14-day period, the owner must also pay the contractor all accrued holdback for services or materials provided within the previous year, unless there is an outstanding lien.
Additionally, a lien that arises from work that is included in a “notice of annual release of holdback,” will expire 60 days after the notice is published.
Removal of an owner’s right of set-off against holdback
Bill 216 will eliminate the phased holdback release regime and prevent payers from withholding holdback, for the purposes of set-off claims, back charges, liquidated damages, etc.
Broadened access to adjudication
Adjudication will now be permitted following contract completion or following the termination of a contract and will be permitted for any prescribed or mutually agreed upon matters, beyond issues of non-payment. With the new amendments, adjudication can commence within 90 days of contract completion, which exceeds the lien preservation period.
Parties will also be permitted to consolidate adjudications across multiple contracts for the same improvement, which will have the impact of avoiding contradictory findings in adjudication.
Additionally, private adjudicators can be retained, removing the requirement of using an adjudicator included in the Authorized Nominating Authority’s adjudicator registry. Fees that are payable to a private adjudicator are agreed to by the adjudicator and the parties to the adjudication. Fees payable for the appointment of a private adjudicator are to be governed by the regulations made under the Act.
Deemed lien for design services without improvement commencing
If an owner retains a holdback for the supply of a plan, design, drawing, or specification for a project that is not commenced, then the design service provider will have lien rights under the Act. These new lien rights will arise, unless the owner can prove that there was no enhancement of the owner’s interest in land, arising from the work completed by the design service provider.
Proper invoices and definition of “price”
The definition of “price” will be amended to specify a price for a contract or subcontract other than actual market value of the supplied services or materials, in the event that the parties do not agree to a price difference.
The Act will also make changes to the criteria that must be met in order for an invoice to be considered a “proper invoice” for the purposes of the prompt payment regime. An invoice that does not meet the requirements will be deemed to be a “proper invoice,” unless the owner notifies the contractor, in writing, no later than seven days after receiving the invoice, of the deficiency, and of what is required to address it.
Summary
While the above amendments are not yet in force and the date that these changes are set to take effect has not yet been determined, these changes will largely apply to all construction projects in Ontario, including those with contracts signed before the above amendments come into force. The regulations will further define transition rules and the details of how these new changes will be implemented.
If you are concerned about how these changes may impact your project or business, please contact us.
Dan Leduc is a partner at Soloway Wright with a practice in Construction Litigation. He regularly represents owners, contractors, and subcontractors navigating complex construction disputes.
Victoria Morvillo is an associate in the litigation group at Soloway Wright LLP with a general practice in Commercial Litigation and Construction Litigation. For construction related inquiries, please contact one of our litigation lawyers.
DISCLAIMER: This article is for general information purposes only and is not (and should not be construed as) legal advice. The information contained herein summarizes only certain aspects of the subject matter and is not a comprehensive review of applicable law. All of the foregoing is subject to legal and accounting advice based on the particular circumstances of each potential client.
[1] Bill 216, Building Ontario For You Act (Budget Measures), 2024, 1st Sess, 43rd Legis, Ontario, 2024: Bill 216, Building Ontario For You Act (Budget Measures), 2024 – Legislative Assembly of Ontario.
