2024 Amendments to the Construction Act
Authors: Julia Tremblay and Andrew Wood
Ontario’s Construction Act is undergoing important amendments that will impact construction projects across the province. Driven by a public consultation process, the amendments address several key concerns, including: the need for improving the way payments are handled, the need to facilitate faster dispute resolution, and the management/release of holdbacks. The overarching goal of these amendments is to alleviate administrative burdens within the construction industry.
The amendments were introduced in Ontario’s 2024 Budget Bill (Bill 216) on October 30, 2024, and were passed into law on November 6, 2024. They will not come into force until a later date that the government will determine. The amendments are based on the recommendations of a leading construction lawyer, Duncan Glaholt, who was retained by Ontario Attorney General, Doug Downey, in March 2024, to independently review the Construction Act and provide a report to the government. Mr. Glaholt’s report can be found at https://ontarioconstructionactreview.ca/final-report/. This article will summarize a number of the pivotal amendments to the Construction Act.
Changes to Liens and Holdbacks
Under the current regime, which permits but does not require annual holdback payments, would be replaced with a mandatory annual release of holdbacks. Once the legislation comes into force, owners will be required to notify contractors of the holdback amount to be paid after the anniversary of the contract each year, and they must release the funds within a defined period, provided no liens have been registered. This will also apply to contractors, subcontractors, and trades down the construction pyramid who are maintaining holdbacks.
Those familiar with the current holdback requirements will acknowledge that is a departure from the existing model, where lien rights depend on major milestones such as substantial performance or contract completion. The amendments introduce separate lien periods for ongoing work, meaning that liens for materials or services provided before the annual holdback notice will not be affected by work done after that notice is issued.
In addition, the amendments also introduce:
Annual expiry of lien rights – Liens arising from materials or services included in the annual holdback notice will expire 60 days after the notice is issued.
Mandatory holdback release for finishing work – Holdback funds for finishing work must be released once all liens are resolved.
Elimination of extended lien periods due to adjudication – The current provision that extends lien preservation during interim adjudications will be removed.
Changes to Invoicing and Prompt Payment
The prompt payment system also sees notable changes. Invoices that are submitted to an owner, but do not conform with the Act and that are not rejected within seven days, will automatically be deemed "proper invoices." This change is intended to expedite payment processing and reduce unnecessary delays caused by invoice disputes.
The definition of a "proper invoice" will also be updated to include any additional information that the owner reasonably requests for their accounts payable system. This will help ensure that payments are processed more efficiently and in accordance with both parties' expectations.
Interim Adjudication: Key Changes
The amendments to interim adjudication introduce several important updates, offering greater flexibility and efficiency for resolving disputes:
a. Flexibility in Choosing Adjudicators
Under the current system, parties are limited to using adjudicators from an official registry maintained by the Ontario Dispute Adjudication for Construction Contracts (ODACC). The amendments, however, will allow parties to select private adjudicators, provided they meet the qualifications set by ODACC. Fees for these private adjudicators will be negotiated between the parties, providing greater flexibility to adapt to specific project needs.
b. Expanded Scope for Adjudication
The range of issues eligible for adjudication will also be broadened. Future regulations will define additional matters that can be referred to interim adjudication, including cross-contract disputes within the same project. This expansion ensures that more types of disputes can be resolved quickly without waiting for the entire project to reach completion.
c. Consolidation of Multiple Adjudications
Previously, only contractors could request the consolidation of multiple adjudications if other parties could not agree. Under the amendments, any party involved in related disputes will be able to request the consolidation of adjudications. This provision aims to streamline the process when multiple disputes are linked, reducing costs and delays.
d. Challenge and Correction of Adjudicator Decisions
The amendments also introduce provisions that allow parties to challenge an adjudicator’s jurisdiction or request corrections to decisions based on errors or oversights. If an adjudicator’s determination is disputed, parties must submit a challenge within five days of the decision. This added layer of oversight ensures that any mistakes can be addressed quickly and fairly.
Clarification of "Price" in Contracts
The amendments will refine the definition of "price," particularly in situations where parties have not agreed on a specific price for services or materials. Currently, the price is deemed to be the market value of the services or materials provided. The amendments will allow regulations to specify a different price when the parties fail to agree on a set price. This clarification aims to reduce disputes around contract values, though contractors and owners will need to stay informed about any new pricing regulations.
Easier Process for Lien Claims and Joinder of Other Claims
The definition of "written notice of lien" will be expanded, allowing a claim for lien to serve as the notice of lien itself. This change is intended to simplify the process of pursuing a lien, reducing paperwork and documentation requirements for those filing lien claims.
The amendments now will explicitly permit the lien claimants to be joined with other types of claims, which would include trust claims under Part II of the Construction Act. While we will need to wait to see what the regulations will state, it is anticipated that this will allow lien and trust claims to proceed as part of one legal proceeding.
Transitional Provisions
Finally, the amendments include transitional provisions to clarify how the amendments will apply to ongoing projects. Most of the changes will apply immediately to new contracts once the amendments come in effect, but certain provisions—such as those related to adjudication and accrued lien rights—will be subject to exceptions for contracts entered into before the amendments take effect.
Final Thoughts
The amendments to Ontario’s Construction Act aim to improve efficiency and streamline the construction process in Ontario. However, despite aiming to reduce administrative burdens, contractors and subcontracts should ensure they understand their rights and obligations or seek counsel from a qualified construction lawyer in Ontario. The constructions law team at Gionet Fairley Wood LLP has the resources and experience to approach client needs with a tailored approach.
Disclaimer: the information provided in this article is general, is intended to inform, and is subject to change. Its content does not provide legal (or any other) advice and should not be construed as providing such by readers. If you require legal assistance, it is strongly recommended that you speak with a competent lawyer who can provide you with advice tailored to your specific situation.