Update: Bill 142 – The Construction Lien Act

After successfully voting in Bill 142 back in December, the Ontario government has now released new information regarding the Amendment to the Construction Lien Act. This comes as the government works to develop the regulation’s specifics – relying on input from a wide array of industry stakeholders before a final presentation to the cabinet on March 15th.

As of February 9th, the government posted the first of the proposed regulations to the website of the Ontario Regulatory Registry, beginning the consultation process. Although the postings thus far have focused on template forms, adjudication and procedures for action, there are a number of revisions sure to have a significant impact on the industry.

Mandatory Surety Bonding on Public Works

One of the most notable revisions was the establishment of the minimum threshold for mandatory surety bonds on public works – set at a value of $500,000. Which means those contracts over the threshold amount will now be required to provide performance and payment bonds on all contracts they enter into. These contract surety bonds will now be issued on standardized forms.

Other Notable Changes and Revisions

In addition to the $500,000 minimum threshold for providing bonds, there are a number of key revisions worth noting. These include;

• Fixed timelines in both the performance and payment bonds with respect to a sureties’ response to a claim, submitting a claim and reducing unnecessary delays – more closely relating to a head start performance bond
• New, standardized forms incorporating pre and post-default meetings along with Protective and Mitigation Work stipulations
• Removal of the “trustee” provisions under a payment bond, broadening the definition of a “claimant” while offering protection to 2nd tier claimants similar to the federal government bond form

What’s Next and What to Look Out For

Upon presentation to the cabinet on March 15th, we expect to receive more updates on the changes to the Bill and its specifics. With the bond, lien and holdback requirements coming into effect July 1st of this year, its crucial those in the industry consider how they may be affected.

We will continually post our updates as they are made available with an emphasis on how the changes will affect our construction partners. Should you have any questions regarding Bill 142, please don’t hesitate to contact our team here at FCA.

Update: 2020-12-03

Phase 1 of the new Construction Lien Act in Ontario has now been in place since July 1st, 2018 with Phase 2 being in place since Oct 1st, 2019. We are now just over a year since all of the provisions of the new Construction Lien Act have been in place. The sentiment in the construction industry seems to be that while the new provisions required some adaptation, contractors have now become comfortable with the prompt payment guidelines, adjudication procedures, requirements for a proper invoice, etc.

Surety companies did have some concern that the new bonds forms and their enhancements may lead to additional claims. However, claims activity has remained at historical levels and in fact, the procedures in place seem to have allowed for construction disputes to be resolved more quickly during the course of the project.

There remains a significant onus on the various stakeholders in the industry including associations, lawyers and the surety industry to continue to help educate contractors and project owners on the provisions of the new Act, as we continue to see some owners requiring old bonds in the specifications or not requiring bonds at all.