Key changes to the Construction Act: what owners, contractors, and subcontractors need to know

On November 6, 2024, the Ontario government gave royal assent to Bill 216, Building Ontario For You Act (the “Bill”), following consultation with construction industry stakeholders. The Bill includes numerous changes to the Construction Act (the “Act”), five years after adjudication and prompt payment were introduced.

Some of the most significant changes introduced by the Bill are detailed in this article.

Mandatory annual holdback release, removal of set-off rights, and new lien expiry deadlines

The Bill will eliminate phased holdback provision under the Act, which will instead provide for a mandatory annual release of holdback by the owner, for all contracts. Owners will need to publish a “notice of annual release of holdback” within 14 days after a contract’s anniversary date. This notice will detail the holdback amount to be paid and intended payment date.

The upcoming changes will also prevent payers from withholding holdback for the purposes of set-off claims, back-charges, liquidated damages, etc.

Note that these amendments accordingly provide for a new lien expiry deadline: liens arising from the supply of labour, services or materials subject to an annual holdback notice will expire within 60 days after the notice is published.

Deemed “proper invoice”

The list of information that must be included for an invoice to be considered a “proper invoice”, triggering prompt payment obligations, will be amended. Furthermore, an invoice that does not meet the formal requirements for a “proper invoice” will be deemed to be a “proper invoice” unless the owner, within 7 days after receiving it, notifies the contractor of the deficiency in the invoice and what is required to address it.

Broadened access to adjudication

Amendments introduced by the Bill also broaden the availability of adjudication. The Act will no longer limit the matters which can be referred to adjudication to payment-related items, but will instead allow adjudication of any prescribed matter or any matter agreed to by the parties. The Act’s regulations will determine what will form part of the amended list of matters that may be adjudicated. Additionally, any party will be able to seek consolidation of adjudications, including between parties to different contracts or subcontracts on the same project.

The amendments will also clarify when adjudication will become unavailable, and allow commencement of an adjudication within 90 days after the date on which the contract is completed, abandoned, or terminated, unless the parties agree otherwise. In the case of a subcontract, adjudication will be available 90 days after the subcontract is certified complete or the date of last supply.

As a result, the adjudication period will now be longer than the deadline to preserve a lien, allowing parties to pursue adjudication as a potential remedy where their lien rights may have expired.

Finally, the Act will now allow parties to retain a private adjudicator, in addition to the ability to choose an arbitrator from ODACC’s registry. Both types of adjudicator will need to be qualified by ODACC, and the fee for a  private adjudicator is to be agreed upon by the adjudicator and the parties.

Takeaways

The amendments to the Act are not yet in force, and the date that these changes will take effect has not been determined. However, these amendments will have a significant impact on construction contracts in Ontario, and will apply immediately upon coming into force to construction project, except as otherwise provided in the transition provisions.

We would be happy to assist stakeholders in understanding if and how the changes to the Construction Act may affect their construction project, and to prepare for these changes.

This publication is intended as a general discussion of certain legal issues and/or developments and should not be relied upon as legal advice. Should you require legal advice, please kindly contact a member of our law firm.