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Prompt payment movement hits Canadian construction and infrastructure sector

Author(s): Yan A. Besner, Roger Gillott, Paul Ivanoff, Paula Olexiuk, Richard Wong, Jagriti Singh

Dec 13, 2019

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 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 number of other jurisdictions in Canada, including the federal government, are following Ontario’s lead.

What changed on October 1, 2019 in Ontario?

Mandatory Prompt Payment

The prompt payment regime introduces swift payment deadlines that were inspired by similar reforms introduced over 20 years ago in the United Kingdom. The clock starts ticking once the owner receives a “proper invoice” from its general contractor, either on a monthly basis or as otherwise agreed in the contract. The owner must either pay within 28 calendar days (Figure 1) or dispute within 14 calendar days, describing the reasons for non-payment (Figure 2). In turn, the contractor must either pay its subcontractors within seven calendar days of receipt of payment (Figure 1) or send notices of dispute within seven calendar days (Figure 2)...