More Changes to the Construction Lien Act Are Coming in 2019 Ontario’s new Construction Lien Amendment Act (the “Act”) has significantly overhauled Ontario’s construction law rules. While the first set of the amendments have already come into force (see our previous blog here), the second set of changes with respect to prompt payment, a new adjudication process and procedural rules are set to come into force on October 1, 2019. Prompt Payment The Act imposes some tight timelines for payments to contractors and subcontractors in situations involving both public and private contracts. Under the Act, outstanding amounts between an owner and contractor must be paid within 28 days of a proper invoice. Subsequent payments to subcontractors must be paid within 7 days that the contractor receives the payment from the owner. If the contractor was not paid within the 28 day period, the contractor can either pay out its subcontractors anyways or issue a notice of non-payment in the prescribed form. If the owner disputes a portion of the funds, the owner must still pay out the undisputed amount within 28 days. If the contractor only receives partial payment from the owner, it must still distribute the funds to its subcontractors within 7 days, either in full or rateably. The sending of a proper invoice triggers these timelines and payment cannot be made contingent upon certification or the prior approval of the invoice by the owner. The owner is required to comply with these timelines or provide a notice of non-payment within 14 days. The contractor must give a notice of non-payment within 7 days after receiving a notice of non-payment from the owner or, if the owner has not issued said notice, within 35 days from the date of delivery of a proper invoice. Any payments made outside of the timelines will have interest accrue at a specified interest rate (as per the Courts of Justice Act, s.127(2)). As an invoice triggers these timelines, the Act sets out what is contained in a proper invoice: the contractor’s name and address; the date of the proper invoice and the period during which services or materials were supplied; information identifying the authority (typically the contract) under which services or materials were supplied; description, including quantity, of the services or materials supplied; the amount payable for services or materials supplied and payment terms; the name, title, telephone number, and mailing address of the person to whom payment is to be sent; and any other information that may be prescribed by the contract. New Adjudication Process In an effort to facilitate the quick resolution of construction issues, the Act introduces a new interim adjudication process. The intention of the adjudication process is to allow parties to resolve issues while still pursuing the preservation/perfection of a lien under the Act. Parties are free to agree on any adjudication terms to be added to their agreement. Several types of disputes can be referred to adjudication, including, but not limited to, delays, set-offs, deductions, security, proper invoicing and the valuation of work, services and materials. The scope of the availability of adjudication is broad and includes “any other matter that the parties to the adjudication agree to.” Adjudicators are appointed from a Authorized Nominating Authority registry. Adjudicators cannot be appointed in advance and must be nominated only when a dispute has arisen. Delivering a Notice of Adjudication commences the process. Within 30 days of the Notice, the adjudicator must provide a written determination of his or her decision, with reasons. Adjudication decisions are binding in the interim and enforceable. As such, payment must be made as per the adjudicator’s determination within 10 days of the decision or else the amount is subject to non-waivable interest. The Act allows a party to suspend work as per an adjudicator’s determination but does not allow for the suspension of work until the adjudication is complete. Any decisions rendered outside 30 days are of no force or effect. If a party does not agree with the adjudicator’s determination, they are allowed to appeal it to the courts or an arbitrator as well as negotiate a written agreement varying the terms. Jurisdiction and Procedure As the Act will have an adjudication process, several provisions relating to jurisdiction and procedure will be repealed. For instance, leave for interlocutory steps is will no longer be required, lien and trust claims will be brought in a single action, and the requirement that a lien action must be commenced in the jurisdiction where the land is located will be removed. What this Means The laws with respect to construction in Ontario and elsewhere are changing. It is very important to consult an experienced construction law lawyer with respect to vetting your organization’s invoices, contracts and general practices. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Construction LawDecember 6, 2019June 16, 2020
Part 1: The Construction Act – Proposed Changes to the Construction Lien Act Part 1: The Construction Act – Proposed Changes to the Construction Lien Act This is Part 1 of a continuing blog series on the proposed changes to the Construction Lien Act and generally, the enactment of Ontario’s new Construction Act. Background The Construction Lien Act (“CLA”), introduced in 1983, grants special protections to people involved in the construction industry. The CLA recognizes the special nature of the construction business. This year, the Construction Act will come into force, ushering in a new era for the construction industry in Ontario with new rules and processes that the industry will have to get used to. The New Rules and the Proposed Changes Bill 142 was introduced in order to improve efficiency and competitiveness for construction businesses. Below is a discussion of a few of the key amendments that have been proposed. 1) Prompt Payment A prompt payment regime has been proposed. Several jurisdictions throughout the world have enacted similar initiatives. The prompt payment provisions have prescribed timelines for payment to contractors and subcontractors. The proposed amendment is intended to speed up the payment process. 2) Special Adjudication Currently, the only recourse that contractors and subcontractors have relating to improvements is with the courts. Bill 142 has introduced an interim, binding dispute resolution system, whereby any party can refer a dispute to a registered adjudicator during the course of a project. The proposed interim dispute resolution process provides quick decisions relating to disputes, which will minimize disruptions to projects. 3) Timelines Related to Liens Bill 142 proposes extended preservation and perfection periods. Currently, a lien is only preserved if it is registered within 45 days. The amendments seek to extend the preservation period to 60 days. Under the present CLA, a lien claimant has 45 days to perfect the lien. Bill 142 seeks to extend the perfection period to 90 days from the last day on which the lien could have been preserved. The Potential Effects The prompt payment regime and new interim adjudication system will likely reduce time and money spent on litigation in the construction industry. This will hopefully translate to fewer disruptions in the course of a project. Devry Smith Frank LLP is a full service law firm located in Don Mills. If you require representation or have any questions, please contact Devry Smith Frank LLP today. You may contact one of the many experienced lawyers on our website or call us directly at 416-449-1400. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Construction LawMay 9, 2018June 16, 2020