Construction and design industry stakeholders need to be prepared for a major cultural shift with the implementation of Ontario’s new Construction Act, stated a recently assembled panel of experts who offered advice on what businesses can do to prepare themselves.
“There will be a significant change in the way we do things going forward,” commented Geza Banfai, counsel with McMillan LLP, during a panel discussion titled Changing the Business: Navigating the New Construction (Lien) Act hosted by the Construction and Design Alliance of Ontario May 14.
He added time will tell how the technical elements of the act play out.
“It’s a big change, it will take some time and there will be some turbulence.”
Bill 142, the Construction Lien Amendment Act, 2017, which achieved royal assent in December 2017, makes a number of amendments to the Construction Lien Act including the modernization of lien and holdback rules, prompt payment and the introduction of an adjudication system.
All of the substantive changes, regulations and forms will come into force July 1, while the prompt payment and adjudication provisions will come into force Oct. 1, 2019.
Ted Betts, a partner at Gowling WLG and a specialist in construction law, provided a Bill 142 modernization “to do” list for those in attendance.
Recommendations included reviewing and updating template contracts and supplementary conditions; reviewing and updating forms; setting up a trust account; implementing trust accounting/record keeping protocols; considering bondability for public projects and pricing models; and changing payment timelines for holdback.
There is going to be more scrutiny on our dealings with our general contractors
— Jerry Paglia
Region of York
Those on the panel agreed that before the act comes into effect, it’s important for all those involved in the contract process to recognize changes are going to need to be made to adapt.
“The new regime puts additional pressure on every contractor and every trade because there is more to be done, more administrative work, there are more serious consequences but unfortunately some of that additional work, some of that additional cost, is unavoidable and frankly it’s there to protect you,” said Eric Hoffstein, a partner at Minden Gross LLP.
“What will make things easier is to take advantage of this transition time to get organized. Prepare the standardized forms in advance so that when you need them they are ready to go.”
He suggested standardizing letters requesting information, response forms and invoices and making sure it meets all the requirements of a proper invoice under the act. It’s also going to be important to be diligent about rendering invoices and keeping records and documentation during every step in the process, he noted.
Paul Raboud of Bird Construction said the transition period over the next few years will be “tricky.”
“It’s not as simple as if you sign a contract after July 1 then the modernization elements of the act kick in — its more complicated than that,” explained Raboud, who was representing general contractors on the panel. “For example, if there are any activities such as prequalification that happens before July 1, even if the contractor signs after July 1, the old act still applies.
“My advice is if you’ve got contracts around this period of time take the time to try and figure out and keep records because a year from now, people are not going to remember what day the activity started.”
Failure to pay within 28 days of receipt of a proper invoice will trigger the prompt payment and adjudication process under the new act.
Glenn Ackerley, a partner at WeirFoulds LLP, said what will be needed is more time discussing the issues upfront to avoid disputes.
“What is probably going to happen is much more time spent sitting down with the contractor in advance of the proper invoice being submitted. That starts the clock running to work out what the amount is that the contractor is going to bill and making sure that amount is pretty much agreed upon, because if it goes in at the right amount then the system works,” he said.
“It’s only when the amount is in dispute that things start to go sideways.”
From the owners’ perspective Jerry Paglia, director of procurement at the Region of York, said the new act imposes strict timelines and owners are going to need to be more agile in dealing with other parties involved in the contract.
“There is going to have to be a lot of training for owners and it needs to extend to staff and all of the parties that support us like our consultants and other services,” said Paglia, adding the new act requires publishing public notices if parties are not paid or if they’re fired.
“There is going to be more scrutiny on our dealings with our general contractors…so that relationship that was a more private relationship is going to become more public.”