Canadian Prompt Payment and Construction Law Reforms

How recent developments are impacting the Canadian construction & infrastructure sector

Updated on: June 14, 2019

Construction Legislation

 

The prompt payment movement is spreading throughout Canada, and it is critical for players in the Canadian construction and infrastructure sector – including owners, developers, contractors, sub-contractors, lenders, construction managers, architects and engineers – to be aware of ongoing developments and the related implications so they can prepare and respond effectively.

As many know, on December 12, 2017, Ontario’s Bill 142 introduced sweeping reforms to the Construction Lien Act. Based on the recommendations of an in-depth report  commissioned by the Ontario government in 2015 and released in 2016, the reforms included a prompt payment regime, adjudication of construction disputes, and implementation of various technical amendments to modernize the Act. The changing nature of the legislation, expanding beyond traditional construction liens, was also reflected in its new name: the Construction Act.

In order to provide industry participants with sufficient time to prepare for the changes, the Ontario government staggered the implementation, with the technical amendments coming into force on July 1, 2018, while prompt payment and mandatory adjudication will come into force on October 1, 2019. Further, the amendments include transitional provisions pursuant to which certain contracts will be “grandfathered” and subject to the Construction Lien Act as it read prior to the amendments taking effect.

Prompt payment and adjudication has gained significant momentum in Canada as other provinces as well as the federal government have considered various aspects of Ontario’s new Construction Act, in the context of their own jurisdictions:

  • In Nova Scotia, the Builders’ Lien Act was amended by Bill 119, which received royal assent on April 12, 2019. The Act was renamed Builders’ Lien and Prompt Payment Act. Although the Bill introduces concepts from Ontario’s new prompt payment regime, it seems to take a narrower approach as regards availability of adjudication. The amendment limits availability of adjudication to disputes that are “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 Saskatchewan, Bill 152 to amend the Builders’ Lien Act was introduced on November 20, 2018, and received royal assent on May 15, 2019. The Bill introduces a prompt payment and adjudication regime similar to Ontario. Further, the amendments include transition provisions pursuant to which certain contracts will be “grandfathered” and be subject to the Act as it read prior to the amendments taking effect.
  • In New Brunswick, the Legislative Services Branch of the Office of the Attorney General published two sets of Law Reform Notes proposing the replacement of Mechanics’ Lien Act with a modernized Construction Act largely based on the Ontario reforms. Law Reform Notes #40 [PDF] released in December 2017 dealt with modernization of structure of language. Law Reform Notes #41 [PDF] released in May 2018 addresses prompt payment and adjudication. While Note #41 recommends adopting a prompt payment scheme similar to Ontario and agrees that a prompt payment scheme must be accompanied by an expedited dispute resolution mechanism, given the GDP of the construction industry in New Brunswick, it is unsure whether Ontario’s adjudication scheme is appropriate for New Brunswick.
  • In Manitoba, an independent prompt payment regime was proposed by Bill 218, which passed first and second reading in April 2018, but died in November 2018. 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 recommended the introduction of a prompt payment and adjudication regime among others. A private member's Bill 245 titled The Prompt Payments in the Construction Industry Act was introduced on June 3, 2019.
  • In QuébecBill 108, which received royal assent on December 1, 2017, authorizes the implementation of pilot projects aimed at testing various construction law reforms for public contracts and subcontracts. The measures to be tested include a prompt payment regime, adjudication and accountability reporting measures.  
  • In Alberta, starting in April 2016, Alberta Infrastructure began implementing prompt payment clauses in its various contracts.
  • In British Columbia, the B.C. Law Institute is currently undertaking a review of the Builders Lien Act.  A final report containing recommendations is forthcoming. Meanwhile, on May 28, 2019, Bill M223, titled the Prompt Payment (Builders Lien) Act, was introduced to the Legislative Assembly of British Columbia. 

At the federal level, the government introduced Bill C-97 (Budget Implementation Act, 2019, No. 1) on April 8, 2019, in the House of Commons, which comprises the Federal Prompt Payment for Construction Work Act. The Bill received third reading in the House of Commons on June 6, 2019, and second reading in the Senate on June 10, 2019. The proposed legislation is surprisingly distinct from the Ontario legislation as regards its transition provisions. Construction contracts existing before the enactment of new legislation are not grandfathered; rather they will also be subject to new legislation from one year of its enactment. In addressing stakeholders’ concerns regarding consistency and legislative alignment, under the new legislation, the Governor in Council may exempt designated provinces from application of the proposed legislation. In granting exemption, the Governor will take into account whether a province has a prompt payment or adjudication regime “reasonably similar” to the federal legislation. This may disrupt existing contracts mid-performance to provide for contractual clarity or compliance with the new legislation. We have discussed the federal prompt payment landscape in further detail in our previous post.

Accordingly, the Canadian construction and infrastructure sector should be keeping a watchful eye on developments in their individual provinces and federally. By staying informed – and engaging legal experts with proven experience and know-how – industry participants can ensure that their projects are structured in the most effective way while mitigating the risk of encountering serious issues and minimizing the potential of unforeseen delays and cost overruns.   

Osler’s National Construction and Infrastructure Group advises organizations how to best manage the internal and external changes and shape the transition to the Ontario Construction Act and other prompt payment legislation in Canada. Our well-respected group works with Canadian, American and international clients to help ensure the success of their projects. Our dedicated team of lawyers has deep experience in large, complex projects and provides our clients with expert advice throughout the full life cycle of their construction and infrastructure projects. As new developments unfold, we will continue to update this page with the latest news and useful insight, so check back regularly.   

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Resources

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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Key Contacts

Richard Wong

Richard Wong
Partner, Commercial
rwong@osler.com
416.862.6467

Roger Gillott

Roger Gillott
Partner, Litigation
rgillott@osler.com
416.862.6818

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