Canadian prompt payment and construction law reforms

How recent developments are impacting the Canadian construction & infrastructure sector

Updated on: November 27, 2020

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.  A watershed moment came in 2019, when such legislation came into force in Ontario through amendments to the Construction Act (formerly the Construction Lien Act).

The prompt payment regime introduced swift payment deadlines. The owner must either 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 Update, “Ontario prompt payment and adjudication: The final countdown.”

The Construction Act also introduced adjudication, a quick interim method to resolve disputes on a construction project. The adjudication regime in Ontario is being administered and overseen by a new entity called the Ontario Dispute Adjudication for Construction Contracts (ODACC). Ontario is the first jurisdiction with a prompt payment and adjudication regime layered on top of an existing construction lien regime.

The development industry in Ontario is consumed with revising internal processes and re-drafting contracts to address the new rules, and will be grappling with the inevitable growing pains caused by the new legislation for some time.  In the meantime, a growing number of other jurisdictions in Canada, including the federal government, are following Ontario’s lead.

  • 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 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 received royal assent on May 15, 2019, but is yet to come into force. The Amendment Act 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 subject to the lien legislation as it read prior to the amendments taking effect. On August 20, 2020, The Builders’ Lien Amendment Regulations, 2020 (Sask. Reg. 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.
  • In British Columbia, in September 2019, the British Columbia Law Institute issued a consultation paper on the Builders Lien Act with 80 tentative recommendations and invited responses from the stakeholders by January 15, 2020. According to the consultation paper, prompt payment and adjudication are related to general financial management of construction projects, whereas the lien legislation is concerned with security of payment. Hence, the consultation paper does not address prompt payment or adjudication.
  • 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,  the Law Reform Notes #42 (July 2019) and #43 (April 2020) published by the Office of the Attorney General recommended that the reform of the Mechanics’ Lien Act and introduction of prompt payment and adjudication be done in two phases. As a part of the first phase, Bill 12 [PDF] (the Construction Remedies Act) was introduced on November 18, 2020, and passed second reading on November 20, 2020. Bill 12 proposed to repeal and modernize 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 cooperation with other jurisdictions and the option of referring claims under $20,000 to Small Claims Court.
  • In QuébecBill 108, 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 under Pilot project to facilitate payment to enterprises that are parties to public construction work contracts and related public subcontracts (Pilot Project). The Pilot Project prescribed the use of payment calendars and introduced 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.
  • In Alberta, starting in March 2016, Alberta Infrastructure began implementing prompt payment clauses in its various contracts. In December 2019, the Ministry of Service Alberta circulated a Stakeholder Information Package on Review of Prompt Payment and Adjudication in the Construction Industry, as a guide for discussion. Following stakeholder consultations, Bill 37 titled Builders’ Lien (Prompt Payment) Amendment Act, 2020 was introduced on October 21, 2020, and passed third reading on November 26, 2020. Bill 37 proposes to amend the existing lien legislation by extending lien deadlines and introducing prompt payment and adjudication.

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 discussed the federal prompt payment landscape in further detail in our previous Update, “Prompt payment and adjudication for federal projects.”

The Canadian construction and infrastructure sector should be keeping a watchful eye on developments in 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

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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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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