Introduction
On November 6, 2024, Bill 216, Building Ontario For You Act (Budget Measures) (the “Bill”) received Royal Assent, ushering in a series of amendments to Ontario’s Construction Act (the “Act”).[1]
The amendments align with three key priorities that the Ministry of the Attorney General identified in a recent independent review of the Act, including:
- Enhancing access to statutory adjudication to encourage parties to resolve their disputes without relying on the court system.
- Mandating the release of holdback on an annual basis and simplifying the holdback regime.
- Providing certainty and clarity to the construction industry through several technical updates.
This bulletin highlights some of the key amendments to the Act and the consequences those amendments may have for businesses operating in the construction industry.
Changes to the Holdback Regime
The changes to the holdback regime are likely the most impactful for owners and contractors alike. While historically the Act has not required owners to release holdback amounts within a statutorily prescribed timeframe, owners will now be required to release holdback amounts annually.[2]
The scenarios in which owners can withhold statutorily mandated holdback amounts have been narrowed. An owner will not be obligated to release the holdback amount if a lien has been preserved or perfected in respect of the contract, and certain additional requirements have been met which differ depending on whether or not the lien attaches to a premises.[3] Owners should be aware that this will be the only reprieve they have under the Act for the non-payment of holdback amounts, as the provisions of the Act which permitted non-payment in specific circumstances have been repealed and not replaced.[4]
Expiry of Liens
In support of the new annual holdback regime, the Bill amends the provisions that govern the expiry of the lien period. The Act now provides that liens will expire 60-days after notice of annual release of holdback is provided by an owner, without affecting any lien that the person may have for supply of services after that date.[5]
Collectively, the amendments to the expiry of lien provisions and the separation of liens for ongoing supply in the context of the new holdback regime support prompt payment over the course of an improvement; liens are separated out and attached to annual holdback periods without impacting the release of holdback amounts payable under a different annual holdback period.
The Bill also introduces several other provisions related to liens. It expands the definition of “written notice of a lien” to include a claim for lien registered pursuant to the Act, it adds a requirement that holdback for finishing work must be paid once all liens are resolved, and it removes possibilities for parties to extend the lien period for the purpose of interim adjudication.[6]
Availability of Adjudication
The Bill repeals the provisions of the Act that list the type of disputes that may be referred to adjudication and the powers of an adjudicator. These matters are now to be prescribed by the regulations.[7] Although the relevant regulations have not yet been released, they could expand the range of issues that can be referred to adjudication, and grant adjudicators more latitude to hear and resolve disputes.
The timeframe in which a dispute may be referred to adjudication has also been extended. The Act now permits a party to refer a dispute to adjudication so long as the notice of adjudication is given within 90 days of the date on which the contract was completed, abandoned, or terminated, unless the parties agree otherwise.[8] These extended time frames grant owners, contractors, and subcontractors an opportunity to bring forward disputes regarding issues that may be discovered after a contract is performed, and to resolve disputes bilaterally prior to resorting to adjudication.
The Bill also introduces the option for a party to request that an adjudicator consolidate multiple disputes regarding the same improvement even if the other party to the dispute objects to the consolidation, as well as various other changes to the adjudication provisions under the Act.[9]
Deemed Proper Invoice
The Bill establishes an updated list of information that must be included in a proper invoice. It also introduces a deeming provision, which provides that if an invoice fails to include all the prescribed information, the invoice will still be deemed a proper invoice despite that deficiency, unless the owner notifies the contractor in writing of the deficiency and what is required of the contractor to address it in no later than seven days after receiving the invoice.[10] This will grant some relief to contractors as it limits the burden of administrative errors, but it will also place greater operational pressures on owners, forcing them to process invoices diligently and expeditiously.
Transition
The Bill includes transition provisions which address when the amendments to the Act take effect. Generally, most of the amendments take effect once the Bill comes into force. However, there are a few exceptions. Notably, for contracts executed prior to these amendments coming into force, the new annual holdback regime will still apply. However, annual holdback notice need only be provided, and the holdback amount need only be released, upon the second anniversary of the day the contract was executed. In this case, the first anniversary is deemed to be the first anniversary date of the contract that follows the date the Bill comes into force. The first holdback amount payable under the new regime will include the payment of any holdback amount accrued up until that point for the previous year(s).[11]
Next Steps
We have outlined many of the more consequential amendments to the Act above.
