Ontario Construction News staff writer
Significant updates to Ontario’s Construction Act, aimed at streamlining payments, expanding lien rights for design and engineering professional services, and refining dispute resolution, are on the horizon, though their official proclamation date remains uncertain, legal experts told an industry audience last Wednesday (April 16).
Speaking at the Ottawa Construction Association (OCA) symposium, construction lawyers Dan Leduc of Soloway Wright and Andrew Ferguson of MBC Law detailed a raft of amendments awaiting proclamation, emphasizing the ongoing evolution of the legislation since major reforms began in 2017.
“As if things weren’t complicated enough, they just got a whole lot more complicated,” Ferguson remarked, highlighting the learning curve the industry faces with these impending changes.
The lawyers, using a lighthearted Jeopardy game format to navigate the complex legal updates, focused on several key areas expected to impact contractors, owners, suppliers, and design professionals.
Proper Invoices and prompt payment
The rules governing “proper invoices,” the crucial trigger for payment deadlines under the Act’s prompt payment regime, are set for refinement. New requirements provide greater specificity, allowing invoices to reference milestones or specific contractual payment markers. Invoices must also clearly state the authority under which work was performed, such as a contract or purchase order number.
A significant shift introduces a presumption: an invoice submitted by a contractor is deemed “proper” unless the owner objects within seven days. This reverses the previous onus, preventing owners from delaying payment by raising technical objections to an invoice weeks after receiving it.
“The onus is flipped back on the owner to say, now if you don’t like it, or if you think there’s something missing, speak up or forever hold your peace,” Ferguson explained. Leduc added that this change aims to eliminate procedural “sideshows” that previously bogged down payment disputes. This seven-day rule, however, applies only to the primary proper invoice between the contractor and the owner, not subsequent invoices down the contractual chain.
Expanded rights for design services
Architects and engineers will see their rights significantly bolstered under the new amendments. The changes clarify and expand the definition of “improvement” to more explicitly include design services, solidifying their eligibility for lien rights, prompt payment, and adjudication
Crucially, these rights will apply even if the planned physical construction never commences, provided the design work can be tied to a specific piece of land.
“If you can tie that work back, even if there’s no project that comes out of the ground, then you will have lien rights,” Leduc said. The requirement remains that services must be attributable to an identifiable property.
An unusual provision allows an owner to potentially defeat a designer’s lien claim by proving the services did not enhance the land’s value, though the lawyers questioned how this could practically be established.
Uniquely, the changes related to design service lien rights will apply retroactively once proclaimed, potentially covering services provided before the official enactment date if the project itself proceeds later. This recognizes that design work often significantly predates construction.
Holdback release and notice publication
The handling of holdback funds will undergo mandatory changes. The current 10% basic holdback must now be released annually on projects lasting longer than one year, irrespective of whether the contract specifies it. Previously, annual release was only required if stipulated in the contract.
“The whole idea is that system capital,” Leduc said, referencing studies showing the construction industry suffers from slow payment cycles. This change aims to improve cash flow, particularly for trades involved early in long projects.
However, Ferguson cautioned this introduces significant administrative burdens. Both the existing Certificate of Substantial Performance (CSP) and these new annual holdback releases will require the publication of official notices.
Ferguson noted these notices need to be published in designated construction news outlets including Ontario Construction News.
This publication requirement forces subcontractors to vigilantly track project timelines and monitor these notices across three platforms to protect their lien rights for holdback amounts.
He mentioned finding a website that claims to search all three main notice sources concurrently but cautioned it comes with a disclaimer regarding accuracy. “It’s just more work for all of you, right? That’s all this envisages,” he said.
(He was referring to Certificatesubstantialperformance.com, published by 2650547 Ontario Ltd., which also publishes Ontario Construction News.)
Furthermore, the practice of owners withholding statutory holdback funds to cover project deficiencies will be explicitly prohibited. “Holdback is not performance security. It’s not a deficiency hold back,” Leduc said. Its release becomes mandatory following the expiry of lien periods. Parties seeking security for deficiencies would need separate contractual provisions, such as a specific deficiency holdback distinct from the statutory amount.
Adjudication scope broadened
The Act’s adjudication process, designed for rapid dispute resolution, is being expanded. Amendments clarify that adjudication can be initiated even after a contract is completed, provided it’s done within 90 days of completion.
The scope of issues eligible for adjudication will also widen significantly, moving away from previous restrictions that led to jurisdictional challenges. “They’ve really expanded the scope of what can be adjudicated, so you’re going to have much more ability to trigger an adjudication pretty much on any dispute now,” Leduc said. However, some matters, like challenging unrelated back charges, may still fall outside its scope.
Parties can now agree to adjudicate matters not explicitly listed in the Act, though Ferguson questioned the value compared to private arbitration if parties are already cooperating. The process for handling multiple distinct issues within a single adjudication will also be clarified to ensure separate treatment.
Decisions rendered by adjudicators remain binding even if the project ends, enforceable as court orders. While not binding precedent in subsequent litigation or arbitration, they carry significant weight. A new requirement will see anonymized adjudication decisions published, creating a resource for industry and adjudicators on emerging trends and interpretations.
Price definition and lien amounts
The Act’s definition of “price” is being clarified to explicitly include cost-plus arrangements and encompass approved extras, change orders, and cash allowances
However, recent case law, exemplified by one of the lawyerโs own experience on a specific case, has narrowed what costs can be included when calculating the amount of a construction lien. The amendments align with this trend, confirming that claims for damages, such as delay costs or lost productivity, generally cannot be included in the lien amount itself , although they can still be pursued through other legal avenues.
Implementation timeline
While the amendments passed third reading in the Ontario legislature in November 2024, they have not yet been proclaimed into force, a delay potentially linked to the provincial election cycle. Most changes will apply only to contracts entered into after proclamation, with the key exception being the retroactive application for design service liens. This could lead to scenarios where a prime contract operates under the old rules while subcontracts on the same project fall under the new ones.
The lawyers concluded by emphasizing that while intended to improve fairness and efficiency, the changes add layers of complexity requiring careful attention from all industry players.