AMENDING THE CONSTRUCTION LIEN ACT - BILL 142
by Brume Jabuoma
It’s construction season again! Yea, it’s time for those longer hours in traffic too. For lawyers who practice in this area of law, there is no better time to take a look at the upcoming legislative changes that will affect the way the construction industry does its business.
The Construction Lien Act (the "Act") is being amended by Bill 142 (the "Bill") pursuant to the recommendations by Bruce Reynolds and Sharon Vogel in “Striking the Balance: Expert Review of Ontario’s Construction Lien Act” (Reynolds-Vogel Report) published in April 2016.
If passed, the amended Act (re-christened The Construction Act) will create a more secure environment for contractors and subcontractors to receive payment for work done. The Bill also introduces a new adjudication process that will see construction disputes resolved in a timelier manner. As well, it will change the way lien rights are preserved and perfected.
Prompt Payment
The Bill substantially adopts the payment regime proposed in the Reynolds-Vogel report by introducing a new Part I.1. This Part would create a trickle down obligation to pay promptly along the construction pyramid i.e. between owners and contractors; between contractors and subcontractors, and so on. The highlights of this Part are:
•Parties are free to negotiate invoicing dates but failure to do so implies delivery of a proper invoice on a monthly basis. The meaning of “proper invoice” is provided in this Part;
•The owner must, within 28 days of receiving a proper invoice, pay the invoiced amount in full to the contractor. If, however, the owner disputes all or any amount on the proper invoice, such owner must, within 14 days of receiving the invoice, give the contractor a notice of nonpayment detailing the amount not being paid, and the reasons for nonpayment;
•Similarly, a contractor has seven days after receiving full prompt payment to pay all subcontractors who supplied services or materials that were included in the proper invoice;
•Where only a partial payment is made due to a dispute, the contractor shall pay all other subcontractors for supplied services or materials not implicated in the dispute in full, and pay those affected on a rateable basis. In any other case, all subcontractors under the proper invoice must be paid on a rateable basis;
•In either case, the contractor must pay the interested subcontractors within 35 days of delivery of the proper invoice unless the contractor delivers a Notice of non-payment to a subcontractor with an undertaking to pursue adjudication within 14 days of the notice;
•The rules are the same among subcontractors;
•All unpaid amounts under this regime accrue interest at the higher of the rates as determined under the Courts of Justice Act or as stipulated by the contract of the parties.
3 BLawyerisH/July, 2017