Canada: The New Construction Act: Let's Get Ready!

Co-author Radha Lamba (student-at-law)

It's been a year since the first set of amendments to Ontario's Construction Lien Act (renamed Construction Act) came into effect. Prompt payment and adjudication are scheduled to come into force this fall.

Momentum is building.

On July 18, 2019, the Attorney General of Ontario, Doug Downey, announced that ADR Chambers has been chosen to serve as the Authorized Nominating Authority to oversee the adjudication process.

Here are highlights of what's in force today and what's to come later this year.

Key Dates

There are two keys dates, with transition rules:

July 1, 2018: amendments came into force, except for prompt payment and adjudication

October 1, 2019: prompt payment and adjudication scheduled to come into force

Transition Rules: What Amendments Apply?

Contracts entered into before July 1, 2018: The old Construction Lien Act applies

Contracts entered into on or after July 1, 2018: the July 1, 2018 amendments apply, except if:

  • the procurement process began before July 1, 2018
  • a lease, where a contract for improvement was entered into or "procurement process" began between July 1, 2018, and December 5, 2018

Contracts entered into on or after October 1, 2019: prompt payment and adjudication will apply, except if:

  • he procurement process began before October 1, 2019

Highlights of the July 1, 2018 Amendments: Longer Deadlines, Higher Thresholds, New Forms

  1. Longer lien periods:
    1. 60 days to preserve a lien (up from 45)
    2. 90 days to perfect a lien (up from 45)
    3. Must publish notice of contract termination (using a prescribed form).
  2. Holdbacks
    1. Mandatory release, unless the payor publishes notice disputing payment (using a prescribed form)
    2. Annual or phased holdbacks for certain contracts of $10 million or more
    3. Holdback can be a letter of credit or holdback release bond (using a prescribed form)
    4. Landlord required to hold back 10% from payment for an "improvement accounted for" in a lease, renewal, or other agreement with the landlord as a party
    5. The landlord notice and disclaimer process under the old Act are gone; there will no longer be anything to prevent a landlord from being an "owner" if it meets the definition
  3. Right to Information
    1. Landlords must respond within 21 days to a written request for information including "state of accounts" between the landlord and the tenant
  4. Higher Substantial Performance and Completion Thresholds
    1. "Substantial performance" threshold increased to $1 million from $500,000:
      1. 3% of the first $1 million of the contract price
      2. 2% of the next $1 million, and
      3. 1% of the balance
    2. Completion is deemed achieved when the cost to complete is the lesser of 1% of the contract price and $5,000
  5. Multiple Improvements
    1. Multiple improvements in a contract can be deemed under separate contracts if the contract so provides and the improvements are on non-contiguous lands
  6. . Bonds
    1. Public contracts of $500,000 or more require a labour & material payment bond and a performance bond with coverage of at least 50% of the contract price.
  7. Condominiums
    1. Unit owners can vacate a lien registered against the common elements of a condominium by paying into court or posting security in the amount of the proportionate share of the unit owner's interest in the common elements.
  8. Capital Repairs are now an "improvement"
    1. Clarifies when a repair is construction vs maintenance:
      1. Definition now includes a repair intended to extend the normal economic life or to improve the value or productivity.
      2. Specifically excludes maintenance work to prevent deterioration or to maintain in a normal, functional state.

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