Ontario’s new Construction Act opens the door to several claim paths for contractors but understanding what they are and the best avenues to reduce the time and cost is not that straightforward.
Breaking down some of the new rules was Jerry Genge, an ADR Canada-qualified arbitrator and mediator, at a dinner meeting of the Ontario Building Envelope Council in Toronto recently.
Genge, principal of Genge Construction Adjudications, told the audience new timelines under the act passed in 2018 “are very tight and largely ignored (by the industry), but they are the blunt instrument that can be used to get the money.”
Examples of claims include construction deficiencies, condominium performance audits, negligence claims against professionals and payment claims for extras.
Proper invoices must be paid by the owner in 28 days which triggers a payment deadline by the contractor to subcontractor of seven days. Sub to sub payments also must meet a seven-day period.
In non-payment disputes, the owner has to provide a notice with reasons for non-payment to the contractor within seven days. Subcontractors can demand to know why there is a non-payment issue at the prime contract, Genge pointed out.
The 10 per cent holdback — often abused by owners under the old act — cannot to be applied by a payor for substitution of services or materials if a contractor is in default. The holdback also can’t be used as payment for a claim against a contractor in default until all of the liens have been discharged.
Once the lien had expired without a claim (45 days) under the old act, the holdback often became unpaid contract funds “used as a piggy bank,” he told the seminar.
“If you had a $10 million job and you were getting to the end and nobody had liened it they sometimes just didn’t bother paying, which plugged up the lien courts.”
The new act stipulates that liens expire after 60 days and are “perfected” 90 days later. This is up from the 45-and-45 formula in 2018. Now, a person being liened gets to review the lien complaint outside of court with a written notice of seven days.
Genge said the rule is important because it ensures the owner has an opportunity to understand the claim and it also eliminates “willy-nilly lien claims” being made in the past.
“It’s particularly important if you have a lien claim that ought to be a trust claim,” he added, noting a case where six subs doing improvements to a building liened an owner even though the owner had paid the prime contractor.
Instead of paying the subs, the prime had invested the money in other properties.
Amendments to the construction lien and holdback rules went into effect in 2018 but new prompt payment and adjudication processes, and amendments related to liens against municipalities, went into effect the following year.
Since then there has been only one application for appeal which was rejected by the court, the adjudicator said.
Cases go through the Ontario Dispute Adjudication for Construction Contracts, which is comprised of 60 adjudicators.