Bill 142: Ontario’s Amendment to the Construction Lien Act
In December of 2017, the Ontario government successfully voted into legislation Bill 142, modernizing the Construction Lien Act introduced in 1983. The Act, now called the Construction Act will significantly impact all stakeholders in Ontario’s construction sector.
The amendment introduced mandatory changes to the lien and holdback procedures, while introducing an adjudication process for contract dispute and new prompt payment rules. Following the recommendations offered by numerous construction associations and advisory boards, Bill 142 is highly favored and seen as a logical step forward in improving the efficiency of the construction sector in Ontario.
Most notably, the Construction Lien Amendment Act introduces:
- Requirements to provide surety bonds on all Ontario public sector projects over a specified amount.
- Construction Dispute Interim Adjudication to allow a mechanism for dispute resolution without having to stop work
- Modernizing the lien and holdback procedures currently in place
- Creating a prompt payment regime to establish more secure payment rules including timelines for payment down the contractor supply chain
Added protection for creditors
Although Bill 142 received Royal Assent on December 12th and is now law, only some minor amendments came into force immediately. The remainder of the Act is expected to come into force upon proclamation, which will follow a review for public feedback in February.
Update: December 1st, 2020
With some of the provisions of the new Construction Act having been in place for three years it is worth reflecting on how this new legislation has performed. The new contract surety bond forms prescribed by the act have now been issued on thousands of projects. Public construction project owners have had the opportunity to test the new performance bonds and they have proven to react more quickly and effectively in a the case of a contractor default.
In addition, mandatory labor and material payment bonds have proven to respond more quickly and in combination with the adjudication process have served to protect both project owners and sub-trades and suppliers. In addition, surety companies have now adapted hiring addition claims people to service claims appropriately and engage earlier when a potential default is about to take place. This has been a positive for the industry and has improved the way contract bonds respond to ensure that the terms of the contract are met, projects are completed and sub-trades and suppliers are protected.
In addition, the majority of contractors have adapted to the new legislation, payment timelines and how to effectively communicate the reasons for non-payment. These open channels and more concrete processes have made things more transparent and reduced issues on site.