The Construction Lien Act governs construction projects in Ontario. Amongst other recourses under this Act, service and material suppliers can register liens on the title of property where the work is performed in case of non-payment and seek compensation from amounts that must be retained by the owner, contractors and subcontractors to the project for this purpose (the holdback).
On May 31, 2017, the Ontario government introduced Bill 142, an Act to amend the Construction Lien Act (PDF). This bill follows a province-wide consultation to modernise the Act. Several amendments in this bill could have an important impact on the manner construction disputes are adjudicated and resolved in Ontario. Some notable amendments proposed in the bill include:
- Strict timelines for payments under a contract and subcontract to a construction project. The bill mandates that payments under contracts and subcontracts be made within a specified time period (generally, 28 days for payment by the owner and seven days for contractors and subcontractors, subject to some exceptions). Otherwise, interest would accrue at a specified rate.
- A new part would be added to the Construction Lien Act for interim adjudication of some disputes during the construction project (such as the valuation of services or materials or payments under the contract). Disputes under this process would be quickly resolved by adjudicators. A list of qualified adjudicators would be maintained for this purpose. The decision of the adjudicator under this process would be binding subject to a subsequent determination of the underlying matter by a court or an arbitrator.
- The time to register construction liens would be extended. Currently, parties must register their lien within a short period (45 days from the date of last supply or services or materials or the date of substantial performance, as the case may be). The bill would extend this deadline to 60 days. The time to perfect a lien (being the time to commence a court action and register a certificate of action) would also be extended to 90 days. This will allow more time for the parties to discuss (and hopefully resolve) payment disputes before a lien is registered and before courts proceedings are initiated.
- Contractors entering into construction contracts with public sector organizations, municipalities and the Crown in Ontario would now have to obtain labour and material payment bonds. Labour and material payment bonds are used to guarantee payments to subcontractors and material suppliers to construction projects (for example, in case of default or bankruptcy of the general contractor). While labour and material payment bonds are already common for many public sector projects, this amendment would ensure that all subcontractors and material suppliers to public construction projects benefit from them.
- Written notices of liens would have to be in a prescribed format and served in the same manner as an originating process in court (being, normally, by providing a copy of it in person). Written notices of liens are delivered when a party to a construction project alleges to not have been paid for the services or materials provided. It is often the first step to commence a litigious dispute related to a construction project. Currently, the Construction Lien Act does not specify an exclusive format for written notices of liens. This can cause confusion and serious problems in determining what truly constitutes a written notice of lien when parties start alleging not to have been paid. This amendment would provide greater clarity by forcing a person asserting a written notice of lien to formally serve a copy of such a notice in a prescribed format.
- Claims that are within the monetary jurisdiction of the Small Claims Court could now be determined by this court. Currently, claims for liens are determined by the Superior Court of Justice. This can create increased costs and delays for liens related to smaller amounts. Under the proposed amendments, claim for liens within the monetary jurisdiction of the small claims court (being $25,000) could now be referred to this court.
First reading of Bill 142 was carried on May 31, 2017. It remains to be seen how the bill will be modified before being enacted. Bill 142 provides new and clarifies existing mechanisms to resolve construction disputes in Ontario and promises to be a step in the right direction to make dispute resolution in the construction sector more efficient.