“Coles notes” of what you need to know.
It’s been 35 years since any major revisions of the Construction Lien Act. Let’s welcome Bill 142: Construction Act. The primary goals are to positively influence contractor cash flow and minimize expensive and lengthy dispute resolutions.
*Changes will affect public, Private, and PPP sector projects.
Prompt Payment Regime in Ontario:
- Owners have 28 days to pay contractors following proper invoice
- Owners have 14 days to deliver a notice of non-payment or approve the request for payment
- Contractors have 7 days to pay Sub-Contractors following payment from Owner
- Subcontractors are required to pay sub-subcontractor within 7 days of receiving payment…and so on
- Or, deliver a notice of non-payment (35 days following contractors invoice to the owner)
- If the contractor is delivered a non-payment notice by Client they have 2 choices:
- Commence Adjudication/dispute resolution against Owner
- Pay Sub-contractors or deliver a notice of non-payment
Resolving a Dispute:
- The goal is to resolve/make a decision in 30 days
- The party receiving notice of adjudication will have 2 days to agree with the proposed adjudicator.
- 5 days later, the claimant must provide a referral notice, a notice of adjudication and back-up documents for Adjudicator.
- If a decision to pay is disregarded, the claimant can suspend work and or terminate the contract.
- Lien registration is extended from 45 to 60 days
- Timeline to perfect a lien is extended from 45 to 90 days
- Lien claims less than $25,000 are referred to small claims court
- Remains at 10% of “improvement” value
- Security can now be offered in a form of bond or letter of credit, in lieu of Cash
- The release of Holdback takes place on 61st day following the substantial performance
- The owner must publish a notice of non-payment/set off by the 40th day following a substantial performance if they choose to set-off or withhold security
- Substantial Performance financial threshold is now $1M vs. $500,000
- Based on Total Contract Value (1-3% progress remaining)
- Holdbacks can be phased to completion of various scopes of work
- Public projects with contract prices above $500,000 will require a mandatory 50% performance bond and 50% labour and material payment bond
- Substantial Performance = less than 1% or $5000 remaining
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