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Industry differs on lien act review and prompt payment

Richard Gilbert
Industry differs on lien act review and prompt payment

Ontario construction leaders agree there is a need for the provincial government to pass prompt payment legislation, but there is no consensus on whether or not this initiative should be linked to a review of the Construction Lien Act.

"The OGCA (Ontario General Contractors Association) fully endorses the plan that came out of the legislative committee when Bill 69 was presented back in April (2014), which is to have a full review of prompt payment in light of the Construction Lien Act," said David Frame,  OGCA government relations director.

"So, this is looking at the prompt payment proposal and a review of the Construction Lien Act to see how well it is performing and if it needs to be updated. "

The OGCA is advocating for new prompt payment legislation, which is linked to a review of the Construction Lien Act.  According to Frame, the provincial government has identified someone to lead the review and is preparing to launch it anytime now.

Other construction industry leaders disagree with the approach supported by the OGCA.

"The Construction Lien Act review is already set up in two phases," said Eryl Roberts, president of a newly created non-profit organization called Prompt Payment Ontario (PPO).

"Our position is simple, let’s bifurcate the issue. Let’s deal with phase one and look at prompt payment and the fair distribution of risk on its own."

Twenty-five construction leaders attended the inaugural meeting of PPO on Oct. 14. The members were unanimous in their position that prompt payment legislation must be separated from the Construction Lien Act.

"Although prompt payment legislation and the Construction Lien Act dovetail and come together in their intent at some point, they are really serving two different purposes, from our perspective," said Roberts, who is also the executive vice president of the Electrical Contractors Association of Ontario.

"The Construction Lien Act provides security for unpaid payment obligations. Prompt payment is designed to stop those things from happening in the first place."

The PPO represents trade contractors in the non-residential and residential construction sectors, as well as labour unions and benefit plan administrators.

Roberts said the trades agree the Construction Lien Act is slow, legalistic, inaccessible and an expensive way to receive payment at the end of a project. He said the history of the Act has been unsatisfactory and reveals it is not the appropriate vehicle for examining prompt payment.

"We do not support the status quo and do not want to be sucked into the black hole, which the Construction Lien Act represents to the trades and other downstream service providers," said Roberts.

"The members at the first PPO meeting unanimously supported this view and are not prepared to wait 30 years to get prompt payment and fair distribution of risk through a review of the Lien Act."

In sharp contrast, Frame sees this as a great opportunity to advocate for prompt payment, as well as discuss what is deficient and needs to be updated in the Construction Lien Act.

"This is the first review of the Construction Lien Act in close to 40 years since it came in. So, that’s huge," he said. "It shows a level of commitment to looking at the act and getting it done. The timing is perfect. We are early in the mandate of a majority government. It’s a good time to study things and move them forward into legislation."

Roberts said some construction industry stakeholders are suspicious that the real reason for combining Prompt Payment Legislation and the Construction Lien Act was to slow it down to the point that it would eventually die.

He believes delinking Prompt Payment Legislation from the Construction Lien Act will allow the former to be moved into law very quickly.

"Bill 69 got us 90 per cent of the way there, so much of the work has already been done," said Roberts. "We need to see if we can get some capital out of the 90 per cent that has already been done. The issue is the last 10 per cent that is really all that is outstanding."

Frame argues Prompt Payment Legislation can’t be passed quickly, because there is so much overlap with the Construction Lien Act.

"The legislation we saw ran into some significant opposition from the owner community," he said. "You are going to have to deal with that opposition from the owner community, before you can move forward. It’s going to take a while to get it right. That’s all there is to it."

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