August 17, 2017 – In May, the Ontario government passed first reading of Bill 142 (2017), “An Act to amend the Construction Lien Act”, which reflects recommendations from “Striking the Balance: Expert Review of Ontario’s Construction Lien Act” a.k.a. the “Reynolds Report”.

To learn more about that review and report, check out EBMag’s coverage “Canada is watching Ontario’s Construction Lien Act review”, which includes an interview with “Striking the Balance” authors Bruce Reynolds and Sharon Vogel. Visit EBMag.com, direct link tinyurl.com/y9yb4zrp.

It’s difficult to summarize 35 pages of changes to an intricate piece of legislation that has been largely untouched since 1983, so my preliminary comments will be brief. Also, remember the Bill is not enacted as of yet; it must still go through a series of steps, including:

• Second Reading, which involves debate in the Legislature,
• Review by Committee, which allows for input via public hearings, and through which amendments can be considered,
• Report to the House, whereby the committee prepares a report that will include any amendments,
• Third Reading, where the bill is voted on for final approval and, finally
• Royal Assent, where the bill is signed into law by the Lieutenant Governor.

Essentially, Bill 142 simply carries through with the Reynolds Report’s recommendations. From a subcontractor process perspective, important changes include:

1. Extending the timeline for registering and perfecting (starting the lawsuit) claims for lien. Starting from whatever event triggers the claim, the 45-day period for registering has been extended to 60 days, and the 90-day period to commence your lawsuit has been extended to 150 days from the trigger date.

2. New provisions that make the payment of holdback mandatory at the end of the applicable time period. There is also a provision that permits the payment of holdback on an annual or phased basis for projects that may have an extended completion period (in excess of one year).

3. The registration of a lien will not be permitted as against property owned by a municipality; however, the lien process will apply to a municipality in the same matter as it applies to the Provincial Crown under the current version of the Act.

4. New rules regarding trust funds under Part II of the current Act will impose duties on contractors and subs to have monies received as trust funds (which are typically almost all funds received with respect to work performed) deposited into a specific bank account with mandatory written records to be maintained, detailing the amounts received in and out of that account.

5. All public sector projects will have mandatory labour and material payment Bonds and Performance Bonds.

6. A new section, Prompt Payment, sets out timelines for the payment of amounts payable under contracts to contractors (payable by owners) at 28 days, and under subs to subs (whether payable by contractors or other subs) at 7 days. Should a “payer” wish to dispute a portion of the payment, there are strict and short timelines for initiating that dispute process. (Generally, these are regarded as the provisions that Prompt Payment Ontario sought when they made their submissions to the Reynolds Report, and will be welcomed by all trade associations in Ontario.)

7. Another new part called Construction Dispute Interim Adjudication will be added, which establishes a right of parties to a contract or subcontract to require the determination of certain matters akin to an arbitration process, but with relatively short timelines, so that the whole process should take between 30 and 44 days. For example, when you initiate the process, you must provide the adjudicator (provided they’ve agreed to act in that position, or have been appointed) with the required documents within 5 days, and a requirement of payment of the decision made in the adjudication within 10 days of the decision being communicated to the parties.

Again, Bill 142 may bring on mixed emotions to those in the industry in Ontario, but neither those for nor against it should be surprised or shocked by its contents. Ω

Dan Leduc is a partner in the law firm Norton Rose Fulbright Canada LLP and practices almost exclusively in construction law. He is frequently called upon to advise and represent owners, engineers, subcontractors, suppliers and builders in such front-end services as contract review, tender issues and general construction matters, as well as in litigation and arbitration. Dan can be reached at 613-867-7171 or dan.leduc@nortonrosefulbright.com.

* This article also appears in the July-August 2017 edition of Electrical Business Magazine. Check out our ARCHIVE page for back issues.