In late 2024, Bill 216, the Building Ontario For You Act (the “Bill“), which amends the Construction Act (the “Act“) received royal assent.
The amendments originate from a report commissioned by the Ministry of Attorney General entitled “The 2024 Independent Review: Updating the Construction Act” (the “Report“), authored by Duncan Glaholt, a construction law expert and arbitrator. Following extensive consultation with stakeholders in the construction industry including engineers, lawyers, owners, contractors, government entities, and various organizations and councils, the Report proposed various amendments to the Act. The key recommendations included:
- Mandatory annual release of holdback and simplification of the holdback regime;
- Broadening access to interim dispute adjudication in order to encourage parties to resolve their disputes without relying on the court system; and
- Providing certainty and clarity to the construction industry through several technical updates.
Changes to the Holdback Regime
One of the most significant amendments to the Act is the requirement to release holdback on an annual basis. Currently, the annual release of holdback is only available for contracts with a price in excess of $10 Million. There will also no longer be an option for phased release of holdback.
The amendments require each owner to publish notice, within 14 days of the anniversary of the date the contract was entered into, specifying the amount of holdback to be released and the intended payment date. Further, unless a lien has been preserved or perfected and has not been discharged or vacated, the owner must release all holdback accrued to the anniversary date within 14 days after the expiry of the lien period. This separates holdback release from substantial performance and involves a new lien expiry period (discussed below).
The amendments also address holdback retained by an owner for the supply of design services for an improvement that has not “commenced”. Under the new provisions, where an owner retains such holdback, the designer is deemed to have provided lienable services unless the owner can prove that the value of its interest in the lands has not been enhanced.
This new regime will apply to all levels of the construction pyramid.
No right of Set-Off Against the Holdback
The provision permitting non-payment of the holdback in specific circumstances has been repealed, meaning that annual holdback release is now mandatory without any right of set-off.
Lien Periods
The amendments also stipulate that liens arising from the supply of services or materials covered by an annual holdback notice will expire within 60 days after publication of the notice.
Enhancing Access to Adjudication
The amendments expand both the timing and scope of adjudication, addressing stakeholder concerns that adjudication was not available following completion of a construction contract.
Notably, the amendments permit the commencement of adjudication within 90 days after the construction contract has been “completed, abandoned or terminated unless parties to the adjudication agree otherwise“. For disputes involving subcontractors, a party may commence an adjudication up to 90 days following (i) the date on which the subcontract is certified complete, or (ii) the date of last supply of services or materials under the subcontract.
The adjudication period is now 30 days longer than the deadline to preserve a lien. However, the provision which extended the date for expiry of a lien where a matter was subject to adjudication, has been repealed.
The Act will no longer limit adjudication to payment-related matters. Pursuant to the new provisions “a party to a contract or subcontract may refer a dispute with the other party to the contract or subcontract respecting any prescribed matter or any matter agreed to by the parties to adjudication“.
Categories of disputes that can be referred to adjudication will be outlined by regulation (which have yet to be enacted), but the parties will continue to be able to agree upon additional matters that may be submitted to adjudication.
Parties are now able to request that an adjudicator consolidate multiple disputes relating to the same improvement. Previously only a contractor could require consolidation. Parties may also seek consolidation of adjudications between parties to different contracts or subcontracts where those agreements pertain to the same improvement.
The Act will also now permit parties to retain a private adjudicator as opposed to being obligated to select an adjudicator from the ODACC registry.
Deemed Proper Invoice
The Bill also includes the addition of a deeming provision which deems a non-compliant invoice to be a “proper invoice” unless the owner notifies the contractor in writing of the non-compliance within seven (7) days of receipt and specifies the deficiency and what is required to address it.
Owners will need to be especially vigilant and expedient when reviewing invoices received from contractors and be prepared to provide written notice of any alleged deficiencies within seven (7) days of receipt of the invoice.
Transition
The majority of the amendments will take effect after proclamation by the Lieutenant Governor. However, the most significant changes will be transitioned into the Act in order to allow the industry to adapt accordingly. The transition measures are outlined at section 87.4.
Notably, the new annual holdback regime will apply for contracts executed prior to the amendments coming into force. In those cases, the first anniversary date for the mandatory release of holdback under the new rules will be the second anniversary of the contract following the enactment of the amendments. The requirement to make holdback payment will include all holdback accrued prior to that date.
Next Steps
While the amendments outlined above are not yet in force, industry stakeholders should familiarize themselves with the changes and the impacts they will undoubtedly have on their construction projects and businesses.
If you would like to discuss how the amendments may impact your construction projects or how to best protect your business, please do not hesitate to reach out to the author.
This publication is intended for general information purposes only and should not be relied upon as legal advice.
