Construction Lien Act Changes Effective July 1, 2018

The Construction Lien Amendment Act, 2017 includes new prompt payment rules to ensure Ontario construction businesses and workers get paid on time for the work they do. The changes will also modernize the lien and holdback process, help protect creditors and set out a new adjudication process to resolve payment disputes faster.

• Providing more time for contractors and subcontractors to resolve their disputes outside of court by extending timelines to file liens and start court actions from 90 days to 150 days
• Ensuring contractors and subcontractors know when to expect full payment by requiring holdback funds to be paid as soon as the deadline to file a lien passes
• Protecting subcontractors and workers if the general contractor files for bankruptcy by requiring surety bonding on public sector projects above a certain amount
• Allowing condominium unit owners to remove liens from their unit in relation to common elements (e.g., corridors, lobbies, etc.)
• Referring construction lien claims under $25,000 to small claims court.

 

• The Construction Lien Act was established in 1983 to regulate how payments are made so that workers who provide services or materials during a construction project are paid for their work.
• In 2015, construction law experts Bruce Reynolds and Sharon Vogel of Borden Ladner Gervais LLP led the first thorough and comprehensive review of Ontario’s construction laws in 34 years. The proposed legislation is based on the recommendations in the report and feedback from experts and industry groups.
• Late payment is a common problem in all sectors of the construction industry. Between 2002 and 2013, the average collection period in construction went up from approximately 57 to 71 days.
• A construction lien is a charge or security on property that can be registered by anyone who has supplied services or materials to improve it. A holdback is a requirement that all contractors and subcontractors withhold 10 percent of the cost of the services or materials supplied on a project. This helps to ensure that there is enough money to satisfy any lien claims that may arise.
• The amendments to modernize the lien and holdback process will take effect first, with the prompt payment rules and the adjudication process following once the body responsible for appointing adjudicators is in place.
• The government is committed to providing appropriate notice to industry stakeholders before any changes are effective. In addition, stakeholders will have the opportunity to provide input on the supporting regulations. Details about Ontario’s next steps will be made available early in the New Year.