Ontario Construction News staff writers
In addition to changes in adjudication processes and rules, recently introduced updates to the Ontario Construction Act include several other enhancements, including new annual holdback release requirements for longer projects.
As well, the new rules remove the owner’s right to set-off against holdback, and redefine the provisions relating to “proper invoices” to overcome delays if there are errors in the invoice.
In a commentary about the new rules implemented with the Nov. 6 Royal Assent of Bill 216, (Building Ontario For You Act), Dentons lawyers Karen Goulx and Dragana Cerovina say the new holdback rules make annual holdback releases mandatory, rather than optional.
“Under the new section 26, the owner is required to publish a ‘notice’ of annual release of holdback (Annual Notice) in the prescribed form no later than 14 days after the anniversary date on which the contract was entered into,” the lawyers write. “If there are no preserved or perfected liens after the lien period expires (60 days after the notice is published), the owner must release the holdback within 14 days after the expiry of the lien period.”
There are transition provisions regarding the new annual holdback payment requirements, so they won’t go into immediate effect. While all existing contracts will need to play by the new rules, “the ‘first anniversary’ date for mandatory release of holdback will be the second anniversary of the dater the contract was entered into that follows the date of enactment of the amendments.” Since the new rules received Royal Assent on Nov. 6, this means it will be more than two years before the first expedited annual holdback payments will be paid.
New “proper invoice” rules refine the rules with a new provision “which deems a non-compliant invoice,” namely one that doesn’t include all the specific information requirements specified by the Construction Act, to be a “proper invoice” unless “the owner notifies the contractor in writing of the non-compliance within seven days of receiving the invoice and specifies the deficiency and what is required to address it,” Groulx and Cerovina write.
“This change helps to address the anomaly of the situation where the contractor has failed to comply with the requirements for delivery of a proper invoice, the delivery of which triggers the prompt payment obligations and notice of non-payment obligations set out in the Act, which has a direct impact on the ability of subcontractors and suppliers to enforce the prompt payment provisions,” they say.
“These changes will certainly bring challenges to those administering contracts, as well as contractors and sub contractors who will now be subject to multiple lien expiry dates, but it appears there may be some time before the changes will be in force,” they write.
“Parties to construction contracts should begin to consider how these changes will impact their project and internal contract management and administration practices and how best to address these changes, Groulx and Cerovina write.