On November 6, 2024, the Building Ontario For You Act (Bill 216) received royal assent. Bill 216 makes several changes to the Construction Act (Act) that will impact industry participants. While the changes are not yet in force — and it is not known when they will come into force — they change several key aspects of how construction projects are administered. These amendments follow and generally adopt an independent review of the Act issued in October and were quickly passed by Ontario’s Parliament.
The amendments to the Act fall into three key categories: interim adjudication, the administration and release of holdbacks, and definitions and deeming amendments.
Interim Adjudication
Bill 216 expands construction dispute interim adjudication to include disputes previously outside the regime’s scope. This is accomplished through several amendments.
1. Section 13.5(3) of the Act is amended such that parties will now have 90 days from the completion, abandonment or termination of a contract to commence an adjudication. Previously, interim adjudication was not available for completed contracts.
For subcontracts, the expiry period for commencing an adjudication includes the above period and the date on which the subcontract is certified complete or the date of the last supply of services or materials, whichever is earlier.
This change will significantly expand the number of disputes that may be referred to adjudication. It will also likely lead to more claims by contractors and subcontractors seeking payment of interim amounts, while contractual and lien disputes are resolved in the ordinary course.
2. Previously contained in section 13.5(1) of the Act, the categories of disputes that could be referred to adjudication by default have been repealed. These will now be replaced with regulations (yet to be drafted) that will prescribe the categories of disputes that may be referred to adjudication. Notably, the catch-all provision that allows parties to refer disputes on consent to adjudication remains.
The regulations will likely reflect the now repealed portions of section 13.5 while providing more flexibility to the Minister in determining which disputes may be referred to adjudication.
3. If provided by regulation, parties may now refer to adjudication disputes with other parties with contracts or subcontracts relating to the same improvement, irrespective of whether there is privity of contract between them.
This significantly expands the number of parties that may be subject to adjudication. It also means that owners and contractors may be subject to adjudication with lower-tier subcontractors despite having no contractual relationship with them.
Bill 216 also contains several ancillary amendments related to interim adjudication, giving parties more flexibility in selecting adjudicators, consolidating adjudications, increasing transparency on multiple adjudications, allowing amendments to determinations and clarifying the powers of an adjudicator. Notably, section 13.12.1 has now been introduced to provide a formal procedure for parties to dispute an adjudicator’s jurisdiction. Parties will be required to raise these grounds early because failure to do so may need to be justified if judicial review on this basis is subsequently sought.
Administration and Release of Holdbacks
Bill 216 significantly changes the payout of statutory holdbacks as it introduces an obligation to pay out accrued holdback amounts annually. New section 26 requires that an owner give notice of an annual release of holdback within 14 days of each anniversary date of the contract and then pay the accrued holdback within 14 days of the expiry of the 60-day lien period (more on that below). Where a lien is preserved or perfected and certain statutory conditions are met, an owner may not pay out the accrued holdback. Where such circumstances cease to exist, the owner must pay out the holdback within 14 days. To encourage the flow of funds down the construction pyramid, the ability for owners to refuse payment of holdback by the former section 27.1 has now been repealed. This annual payout of accrued holdback applies similarly to subsequent contractors and subcontractors in the construction pyramid.
Bill 216 also changes the lien provisions to accommodate the new annual payout of holdbacks. Liens arising from the supply of services or materials included in an annual release notice expire 60 days after the notice is published. Otherwise, they continue to expire as they would have under the pre-existing regime.
Several ancillary amendments clarify that certain amounts held as holdbacks are trust funds.
A new provision has also been introduced to allow those supplying designs, plans, drawings or specifications for a planned improvement that has not been commenced to place a lien on the real property to which their services were supplied, provided the owner retains a holdback.
Definitions and Deeming Amendments
Bill 216 changes several definitions that impact industry participants, with many recognizing that not all construction projects are administered the same way. Notably, the requirements of a “proper invoice” have been modified to require additional information that is beneficial to owners, including the contractual payment entitlement on which an invoice is based. A new provision has also been introduced that requires the provision of other reasonably requested information necessary to operate an owner’s accounts-payable system. Owners will likely include these requirements in a contract. The changes to a “proper invoice” also require the recipient of an invoice to dispute that it is “proper” within seven days, after which the invoice is deemed a proper invoice.
The definition of “price” has been amended so that where there is no agreement on price, it may now be specified by regulation and not merely market price. This is likely a recognition that the market price does not always reflect the value of services and materials under certain delivery models.
A new provision has also been introduced to provide that contracts involving multiple improvements for non-contiguous lands are deemed separate contracts for each improvement. Consequently, the provision allowing this to be agreed contractually has been repealed.
Conclusion
While various regulations are still necessary to understand the exact scope of the amendments, the legislative changes will undoubtedly impact the day-to-day administration of construction projects when they come into force. Their applicability will vary based on the transitional provisions, and industry participants will want to obtain advice on their specific situation.
For further information, please contact the authors of this bulletin or any member of our Construction Dispute Resolution group.
