Canadian prompt payment and construction law reforms

How recent developments are impacting the Canadian construction & infrastructure sector

Updated on: November 3, 2021

Construction Legislation

 

Prompt payment and mandatory adjudication legislation is being enacted across Canada in an effort to alleviate perceived payment delays down the construction pyramid. We have provided a brief overview covering the developments in each jurisdiction which we will continue to update with the latest news and useful insight, so check back regularly.  

  • In Ontario, the changes to the Construction Act (formerly the Construction Lien Act) introducing prompt payment and adjudication came into force on October 1, 2019. The prompt payment regime comprises swift payment deadlines, requiring the owner either to pay within 28 calendar days or dispute within 14 calendar days, describing the reasons for non-payment. In turn, the contractor must either pay its subcontractors within seven calendar days of receipt of payment or send notices of dispute within seven calendar days, as described in our previous Update. Introduced by the Construction Act, adjudication is a quick interim method to resolve disputes on a construction project. An adjudication must begin prior to completion of the contract or subcontract, unless the parties agree otherwise. The adjudication regime in Ontario is being administered and overseen by the Ontario Dispute Adjudication for Construction Contracts (ODACC), which has released its second Annual Report, as discussed in our previous blog post. Ontario is the first jurisdiction with a prompt payment and adjudication regime layered on top of an existing construction lien regime. While the interactions between this regime and liens have been considered, to a large degree, our team continues to uncover additional issues in practice and devise contractual solutions for our clients.
  • In Nova Scotia, the Builders’ Lien Act (amended) received royal assent on April 12, 2019, but is yet to come into force. Once in force, the current lien legislation will be renamed Builders’ Lien and Prompt Payment Act. Although the amendments introduce concepts from Ontario’s new prompt payment regime, it takes a narrower approach as regards availability of adjudication as it limits the availability of adjudication to disputes that are the “subject of a notice of non-payment.” Unless exempted by the regulations, the amendments are applicable to contracts and subcontracts made after the date of enactment. Our team is monitoring the progress, as we await regulations prescribing application of the amendment, payment timelines, adjudication procedures and details regarding notice of non-payment.
  • In SaskatchewanThe Builders’ Lien (Prompt Payment) Amendment Act, 2019 (Amendment Act) is scheduled to be proclaimed into force on March 1, 2022. On August 20, 2020The Builders’ Lien Amendment Regulations, 2020 (SR 92/2020) was filed to amend the existing regulations. The amendment regulations elaborate on the prompt payment and adjudication regime and will come into force on the same day as the Amendment Act. The Saskatchewan Construction Dispute Resolution Office (“SCDRO”), a new not-for-profit corporation, will act as the official adjudication authority and the ADR Institute of Saskatchewan Inc. will work with the SCDRO to provide adjudicators. Note that the prompt payment and adjudication regime will not apply to architects, engineers, land surveyors and persons providing services or materials for any improvement with respect to a mine or mineral resource (including any activities respecting exploration, development, production, decommissioning or reclamation) or an improvement related to infrastructure in connection with the generation, transmission or distribution of electrical energy.
  • In AlbertaBill 37 titled Builders’ Lien (Prompt Payment) Amendment Act, 2020 received royal assent on December 9, 2020, but is yet to come into force. Bill 37 focuses on major reforms to the Builders’ Lien Act (the Act) which include the introduction of prompt payment requirements, a new dispute resolution mechanism known as adjudication, an extension of lien registration periods, and renaming the Act as the Prompt Payment and Construction Lien Act. Unlike Ontario-style prompt payment, subject to the regulations, monthly billings are mandated through proper invoices issued at least every 31 days unless any contractual requirements for testing and commissioning are not met. Bill 37 also makes major lien fund and minor lien fund payments to the contractor mandatory if certain conditions are met, as detailed in our previous Update. In June 2021, Bill 62 titled Red Tape Reduction Implementation Act, 2021 received royal assent. Bill 62 further amends the Act to provide greater clarity regarding when the Act will apply, permit the electronic submission of certificates of substantial performance, create additional exceptions to the final and binding nature of adjudication, and establish additional bars to the use of adjudication.
  • In British Columbia, in July 2020, the British Columbia Law Institute published a Report on The Builders Lien Act [PDF] which offers 86 recommendations to simplify the Builders Lien Act and clarify the meaning of the more problematic provisions. According to the Report, prompt payment and adjudication pertain to general financial management of construction projects, whereas the lien legislation is concerned with security of payment. Hence, the Report does not address the merits of prompt payment or adjudication legislation.
  • In Manitoba, on November 19, 2018, the Manitoba Law Reform Commission released its final report titled The Builders’ Liens Act of Manitoba: A Modernized Approach [PDF], which recommends significant reforms to the existing lien legislation, including introduction of prompt payment and adjudication. In order to reflect changes to the legislation, the Report recommends renaming the legislation as The Construction Contract Remedies Act.
  • In New Brunswick, Law Reform Notes #42 [PDF] (July 2019) and #43 (April 2020), published by the Office of the Attorney General recommends that the reform of the Mechanics’ Lien Act and the introduction of prompt payment and adjudication in two phases. As a part of the first phase, the Construction Remedies Act (Act) and the General Regulation came into force on November 1, 2021. The Act repeals and modernizes the existing lien legislation by amending lien, holdback, trust, substantial performance and security bond provisions. As for the second phase, Law Reform Note #42 discusses stakeholder concerns regarding introduction of adjudication in a smaller jurisdiction like New Brunswick. Given the difficulty in finding adjudicators, the province is considering the possibility of co-operation with other jurisdictions and the option of referring claims under $20,000 to Small Claims Court.
  • In QuébecAn Act to facilitate oversight of public bodies’ contracts and to establish the Autorité des marchés publics, which received royal assent on December 1, 2017,  amended the Act respecting contracting by public bodies and allowed the Conseil du trésor to implement pilot projects to facilitate payments to enterprises which are parties to certain public contracts and subcontracts. In 2018, the Chair of the Conseil du trésor, by order, authorized the implementation of the Pilot project to facilitate payment to enterprises that are parties to public construction work contracts and related public subcontracts (Pilot Project). The Pilot Project prescribes the use of payment calendars and introduces dispute settlement by adjudicators. A public body whose contract is subject to the Pilot Project is required to state as such in the call for tenders. Initially, approximately fifty public construction projects were subject to the Pilot Project, which was established for a three-year term. Subsequently, An Act respecting the acceleration of certain infrastructure projects, extended the application of the Pilot Project to over 180 listed public infrastructures, “unless the manner in which the relevant contract or subcontract is to be carried out does not allow for the application of a monthly payment schedule”. Additionally, it provided that the terms and conditions prescribed in the Pilot Project “are applicable to a contract or subcontract until the infrastructure project from which it arises ends, provided the contract was entered into no later than 11 December 2024”.

At the federal level, the Federal Prompt Payment for Construction Work Act, which addresses the non-payment of contractors and subcontractors performing construction work for federal construction projects, was passed as part of a larger budget bill on June 21, 2019.  However, it is not yet in effect. Once in force, it surprisingly will not grandfather existing contracts; instead, it will provide for a one-year deferral period before it applies to existing contracts. At that point, it may be imagined that the sudden application mid-performance of the new law to existing contracts drafted before the Act came into effect may be quite disruptive to those contracts. The federal government may choose to exempt federal projects from the federal regime either individually or on a province-wide basis in cases where a reasonably similar provincial legislation has been adopted. We have discussed the federal prompt payment landscape in further detail in our previous Update.

Preparing your organization

By staying informed – and engaging legal experts with proven experience and know-how – industry participants can ensure that their existing projects are not disrupted mid-performance and new projects are structured in the most effective way.  This mitigates the risk of encountering serious issues after the fact and minimizing the potential of unforeseen delays and cost overruns.

Osler’s National Construction and Infrastructure Group comprising commercial and disputes lawyers, which is ranked Band 1 in Chambers Canada, advises stakeholders on how to best shape the transition to new prompt payment legislations across Canada, redesign internal processes to remain compliant, and revise existing contracts and contract templates, scaled from the smallest to the largest and most complex projects in Canada.

Osler is now offering the following services to clients through new and innovative alternative fee arrangements:

  1. Osler Review: An efficient and cost-effective review of your existing contracts or contract templates and updating them to comply with the amendments in your region;
  2. Osler DIY: Access to Osler’s online tools to assist your organization in self-managing issues of importance, such as identifying dates for payments and payment notices;
  3. Learn from Osler: Best practices training for your organization, such as the development of a “playbook,” to put your organization in the best possible position to manage the various forms of payment-related notices with an accelerated payment cycle as well as handling dispute resolution under the new adjudication regime;
  4. Osler Compare: Access to blacklined versions comparing the applicable provisions of the Construction Act of Ontario or the existing lien legislation of your region with the changes proposed by the amendments in your region; and
  5. Osler Support: Specific or comprehensive adjudication support, whether you are responding to or initiating an adjudication, which may eventually continue into arbitration, litigation and other alternative dispute resolution advice post-adjudication.

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Resources

Ontario Construction Act a “Comprehensive Scheme” – Claims for statutory breach of trust and unjust enrichment between subcontractor and owner dismissed

Osler, Hoskin & Harcourt LLP – February 3, 2021

The Ontario Divisional Court recently confirmed that the Ontario Construction Lien Act (now the Construction Act), which provides obligations and rights in addition to those provided by the common law, is a comprehensive scheme. This blog post explores the implications. Read more.


Amending Bill 37: Alberta’s prompt payment regime

Osler, Hoskin & Harcourt LLP – Nov 23, 2020

While Bill 37 passed second reading on October 28, 2020, the prompt payment requirements were recently and significantly amended in the Alberta Legislature on November 4, 2020. This Update provides an overview of those amendments. Read more.


Prompt payment and adjudication come to Alberta

Osler, Hoskin & Harcourt LLP – Nov 2, 2020

On October 21, 2020, the Government of Alberta tabled Bill 37: Builders’ Lien (Prompt Payment) Amendment Act, 2020 (Bill 37), which seeks to modernize and make substantial amendments to the Builders’ Lien Act (Alberta) for the first time in nearly two decades to address standing concerns within the construction industry. Read more.


Adjudication: ODACC releases first annual report

Osler, Hoskin & Harcourt LLP – Oct 8, 2020

On October 1, 2020, Ontario Dispute Adjudication for Construction Contracts (ODACC) issued its much-anticipated 1st Annual Report, covering its operations for the fiscal year 2020 (ending July 31, 2020) – including the first 10 months since the adjudication provisions of the Construction Act came into force on October 1, 2019. Read more.


So you received an adjudication determination: what comes next?

Osler, Hoskin & Harcourt LLP – Sep 11, 2020

In this post, we discuss six key considerations that parties to an adjudication will want to keep top of mind if they have received a determination from an adjudicator under the Construction Act. Read more.


Strategic considerations for new projects

Osler, Hoskin & Harcourt LLP – Jul 22, 2020

The unfortunate truth is that as some owners have already deferred or cancelled projects due to weakened economics, so too have supply chains experienced severe disruption and reduced productivity. We have seen labour shortages from illness or travel restrictions, the roll-out of COVID -19 related health and safety procedures, glimmers of contractor/subcontractor insolvencies, and increased pressures on overhead costs. This blog post considers how to address these issues efficiently and clearly in future competitive processes and contracts. Read more.


Should you be retaining lien holdback under your repair or maintenance contract?

Osler, Hoskin & Harcourt LLP - Dec 16, 2019

Stakeholders should pay close attention to the type of work under their maintenance or repair contracts, in order to determine if materials or services are being supplied to an improvement. This will impact a contractor's or supplier's right to a lien or an owner's obligation to retain legislative holdback. Read more.


Transitioning (again) into the Construction Act: Managing Compliance 

Osler, Hoskin & Harcourt LLP – Sep 24, 2019

As the flagship amendments to Ontario’s Construction Act come into effect on October 1, 2019, stakeholders in the construction sector are grappling with which version of the legislation will apply to their projects. Read more


Becoming an adjudicator under the Ontario Construction Act 

Osler, Hoskin & Harcourt LLP - Sep 13, 2019

The Authorized Nominating Authority under the Ontario Construction Act is now Ontario Dispute Adjudication for Construction Contracts (ODACC). ODACC is now inviting individuals to apply to serve as construction adjudicators. Read more.


Owner Payment Date Calculator 

Osler, Hoskin & Harcourt LLP – Aug 21, 2019

This calculator, developed in-house, allows you to determine the payment deadlines for your project under the prompt payment regime under the Construction Act of Ontario, effective October 1, 2019. Read more


Adjudication Authority selected 

Osler, Hoskin & Harcourt LLP – July 31, 2019

On July 18, 2019, the Ministry of the Attorney General of Ontario selected ADR Chambers to act as the Authorized Nominating Authority, which oversees the adjudication process, including training and qualification of adjudicators. Read more.


Ontario prompt payment and adjudication: The final countdown 

Osler, Hoskin & Harcourt LLP – July 10, 2019

On October 1, 2019, prompt payment and adjudication under the Construction Act will come into force and all eyes are on Ontario as it will be the first jurisdiction to have legislation that combines prompt payment and adjudication alongside traditional lien legislation. Read more.


Federal prompt payment legislation passed

Osler, Hoskin & Harcourt LLP – July 2, 2019

The Federal Prompt Payment for Construction Work Act (Federal Prompt Payment Act) sailed through as part of the larger federal budget Bill C-97 and became law on June 21, 2019. Read more.


Construction lien reform 

Canadian Lawyer – June 3, 2019

Osler partner Richard Wong tells Canadian Lawyer that it took “three tries” for Ontario to get its construction lien legislation in place. Read more


Prompt payment and adjudication for federal construction projects

Osler, Hoskin & Harcourt LLP – May 7, 2019

Bill C-97 (Budget Implementation Act, 2019, No. 1) received second reading in the House of Commons on April 30, 2019. Division 26 of Part 4 of the Bill proposes the Federal Prompt Payment for Construction Work Act to address the non-payment of contractors and subcontractors performing construction work for federal construction projects. In this Update, we briefly examine issues on the potential application and scope of the statute, initial differences with the Ontario legislation, and potential effects of the new legislation on existing construction contracts. Read more.


Laws to improve prompt payment about to take effect

Law Times – May 7, 2018

Osler partner Richard Wong says that legislative changes to improve prompt payment in the construction industry as part of the newly entitled Construction Act — stage one comes into force July 1, 2018 — will “keep the cash moving." Read more.


Construction Lien Act changes: A primer for real estate practitioners

Osler, Hoskin & Harcourt LLP – April 18, 2018

Ontario’s Construction Lien Act (the Act) has implications that extend far beyond the parties to a construction contract. Its influence on real property necessitates that real estate practitioners must have a working knowledge of how their clients’ assets and transactions can be impacted by construction liens. Read more.


Construction Act Near-Term Amendments

We prepared this PDF to isolate the amendments that came into force as of December 12, 2017 and, more importantly, the upcoming changes expected to come into force on July 1, 2018.  

The intent here is to assist you in developing and implementing changes to your documents and procedures in preparation for July 1, 2018.  

A separate incremental PDF will be prepared to illustrate the changes expected to take effect on October 1, 2019. Read more [PDF].


Update on BILL S-224 – Federal prompt payment legislation

Osler, Hoskin & Harcourt LLP – January 17, 2018

Bill S-224, which would implement federal prompt payment for the construction industry, was introduced in the Senate in April 2016 and passed third reading in early May, 2017. Notwithstanding this early progress, the Bill appears to have stalled between the Senate and the House of Commons, and it has not yet been introduced in the House seven months after Senate approval.

Senator Don Plett, who introduced Bill S-224 in the Senate, has expressed open frustration with the lack of progress and attributes it to politics at the expense of trade contractors. In October and November 2017, Senator Plett wrote open letters to MP Judy Sgro, asking that she advance the Bill in the House of Commons or remove herself as sponsor so that the Bill can be advanced by another MP.

By way of comparison, those Senate Bills currently before the House that have received first reading typically made the transition within two weeks (S-2, S-5, S-28, S-228 and S-232). In contrast, other Senate Bills that are still awaiting first reading in the House include those that passed in the Senate in 2015 and 2016 (S-205, S-215 and S-225). Caution must be exercised in drawing conclusions, but it does appear that federal prompt payment legislation is coming slowly, if it is coming at all in its current form. 


Ontario passes legislation to modernize construction laws

Government of Ontario - Dec 5, 2017

The Government of Ontario passed legislation to modernize construction laws with the Construction Lien Amendment Act, 2017, which includes new prompt payment rules and changes to the lien and holdback process. Read more.


Construction Lien Act reform: What it means for CIQS members

The Construction Economist - Nov 3, 2017

In this article, which originally appeared in The Construction Economist, Osler partner Richard Wong and associate Jeff St. Aubin discuss how the upcoming reform of the Construction Lien Act (expected to take place in the coming months) will fundamentally alter the dynamics of the construction industry in Ontario, and what this means for CIQS members. Read more.


Under construction

Canadian Lawyer - Sep 19, 2017

Osler partner Roger Gillott talks to Canadian Lawyer about the implications of the proposed changes to the Construction Lien Act, and what this means for the construction industry. Read more.


Major renovation: What Ontario’s proposed Construction Act means for projects and how to prepare (Webinar)

Osler, Hoskin & Harcourt LLP - Jul 10, 2017

With the Ontario government’s recent introduction of Bill 142 (the Bill) — that, if passed, would significantly amend the Construction Lien Act — the Canadian construction and infrastructure sector must be cognizant of the various commercial and legal implications of such a potential major overhaul to construction law. In this webinar, we provide a detailed overview of the Bill. Watch the webinar.


Ontario construction bill seen as ‘critical’ for industry

The Globe and Mail - Jun 18, 2017

The Ontario government’s introduction of Bill 142 (the Bill) is “critical” for the construction industry, Osler partner Richard Wong tells The Globe and Mail. Read more.
*Note: This article is only available to The Globe and Mail online subscribers.


Ontario government revamps Construction Lien Act: What you need to know about prompt payment, mandatory adjudication, and more

Osler, Hoskin & Harcourt LLP - Jun 6, 2017

Following extensive consultation with industry stakeholders, on May 31, 2017, the Ontario government introduced Bill 142 that, if passed, would significantly amend the Construction Lien Act to create a prompt payment regime, require the mandatory adjudication of certain construction disputes, and implement various additional amendments (including relating to AFP projects) to modernize the Act. Read more.


Modernizing Ontario’s Construction Laws

Government of Ontario - May 31, 2017

Ontario is modernizing provincial construction laws with a new legislation that would address key issues such as payment delay and improve the dispute resolution process. Read more.


Canada’s first prompt pay law moves forward

Engineering News-Record - May 17, 2017

Osler partner Richard Wong tells the Engineering News-Record that there are promising political signs for the prompt payment bill in Ontario. Read more.


Proposed changes to the Construction Lien Act: What do they mean for the construction industry?

Osler, Hoskin & Harcourt LLP - Nov 22, 2016

The long-awaited report (the Report) on potential amendments to the Construction Lien Act, which was commissioned by the Ontario Ministry of the Attorney General, has now been released. Among other things, the Report recommends the adoption of a prompt payment regime, mandatory speedy adjudication of construction disputes, and mandatory holdback release. Read more.


Proposed changes to Ontario’s Construction Lien Act — What does it mean for industry participants? (Webinar)

Osler, Hoskin & Harcourt LLP - Oct 18, 2016

This presentation offers an in-depth look at the proposed changes to the Construction Lien Act. Watch now.


Striking the Balance: Expert Review of Ontario's Construction Lien Act

Ministry of the Attorney General - Apr 30, 2016

This report was prepared for the Ministry of the Attorney General and the Ministry of Economic Development, Employment and Infrastructure. Read more.


New Amendments to the Construction Lien Act

Osler, Hoskin & Harcourt LLP - Nov 2, 2010

As a part of the Ontario Government’s “Open for Business” initiative, the Ontario Legislature passed the Open for Business Act, 2010. This Act included several noteworthy changes including amending the definition of “improvement,” and a requirement that an owner publish notice of the intended registration of a condominium, among other things. Read more.


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