Proposed Amendments to the Construction Act
Regulation Number(s):
n/a
Instrument Type:
Act
Bill or Act:
Construction Act
Summary of Proposal:
The Construction Act (the Act) is a key piece of legislation that regulates how payments are made in the construction industry and provides reasonable certainty that those who have contributed services or materials to the improvement of real property will be paid for the contribution they have made.
In 2016, an expert report recommended a series of amendments to the Act following a comprehensive review and consultation process. In 2017, the Act was amended to modernize lien and holdback rules, introduce rules to ensure prompt payment and establish a new dispute resolution process. The expert report also recommended that a further independent review of the Act be conducted several years after the amendments came into force.
In March 2024, the Ministry of the Attorney General retained Duncan Glaholt, a leading construction law expert, to conduct an independent review of the Act. Mr. Glaholt's final report will be available on the Ontario Construction Act Review website.
The proposed amendments, which implement the priority recommendations from the 2024 independent review, fall under the following three key themes:
1.Enhancing access to statutory adjudication to encourage greater take-up of that process to resolve disputes more quickly and efficiently, without needing to rely on the court system, which tends to be lengthier and more onerous. This would include the following key changes:
2.Mandating the release of holdback on an annual basis and making other changes to simplify the holdback regime and to ensure cashflow down the construction pyramid (e.g., contractors, subcontractors, trades). This would involve the following key changes:
3.Providing greater clarity and certainty to the construction industry by making technical and housekeeping amendments. This would include:
Transition
Upon proclamation, most amendments would apply with immediate effect to all improvements in the province, including improvements that are the subject of contracts entered into prior to the effective date of the amendments. There would be a one-year transition period before annual release of holdback rules apply to contracts entered into prior to the effective date. This would not disturb existing transition rules related to the 2017 amendments.
In 2016, an expert report recommended a series of amendments to the Act following a comprehensive review and consultation process. In 2017, the Act was amended to modernize lien and holdback rules, introduce rules to ensure prompt payment and establish a new dispute resolution process. The expert report also recommended that a further independent review of the Act be conducted several years after the amendments came into force.
In March 2024, the Ministry of the Attorney General retained Duncan Glaholt, a leading construction law expert, to conduct an independent review of the Act. Mr. Glaholt's final report will be available on the Ontario Construction Act Review website.
The proposed amendments, which implement the priority recommendations from the 2024 independent review, fall under the following three key themes:
1.Enhancing access to statutory adjudication to encourage greater take-up of that process to resolve disputes more quickly and efficiently, without needing to rely on the court system, which tends to be lengthier and more onerous. This would include the following key changes:
2.Mandating the release of holdback on an annual basis and making other changes to simplify the holdback regime and to ensure cashflow down the construction pyramid (e.g., contractors, subcontractors, trades). This would involve the following key changes:
3.Providing greater clarity and certainty to the construction industry by making technical and housekeeping amendments. This would include:
Transition
Upon proclamation, most amendments would apply with immediate effect to all improvements in the province, including improvements that are the subject of contracts entered into prior to the effective date of the amendments. There would be a one-year transition period before annual release of holdback rules apply to contracts entered into prior to the effective date. This would not disturb existing transition rules related to the 2017 amendments.
Analysis of Regulatory Impact:
MAG anticipates that the proposed amendments would alleviate administrative burdens experienced within the construction industry associated with payment matters by encouraging timely payment and more efficient dispute resolution.
The proposed amendments would create the following benefits for Ontario's construction industry:
Improved access to and use of statutory adjudication to resolve disputes quickly and efficiently, while reducing reliance on the court system;
More timely payment for materials and services on construction projects, improved cashflow and a reduction in payment disputes, particularly with respect to holdback which would be paid on an annual basis; and
Greater certainty within the construction industry as it relates to payment by addressing potential areas of ambiguity in the Act to ensure rules and requirements are clear and can be followed.
The proposed amendments would create the following benefits for Ontario's construction industry:
Improved access to and use of statutory adjudication to resolve disputes quickly and efficiently, while reducing reliance on the court system;
More timely payment for materials and services on construction projects, improved cashflow and a reduction in payment disputes, particularly with respect to holdback which would be paid on an annual basis; and
Greater certainty within the construction industry as it relates to payment by addressing potential areas of ambiguity in the Act to ensure rules and requirements are clear and can be followed.
Further Information:
Proposal Number:
24-MAG010
Posting Date:
October 30, 2024
Comments Due Date:
November 30, 2024
Contact Address:
Ministry of the Attorney General
Policy Division
720 Bay Street, 3rd Floor
Toronto, ON M7A 2S9
Policy Division
720 Bay Street, 3rd Floor
Toronto, ON M7A 2S9
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