Changes to the Construction Act of Ontario and its regulations this spring will impact contractors, designers and others in the building industry.
The most significant change is that the 10 per cent holdback (retained from payments within a project) will be required to be released annually, according to Glenn Ackerley, a partner in Toronto-based law firm WeirFoulds LLP.
Over the past 35 or so years since holdbacks have been in place, they were released at the end of a project, if no one filed a lien or made a claim.
“This is going to be a really significant change for contractors, a major milestone, because it has never, in all these years, until now been the case that the owner has had to pay it (holdback) without exception or qualification.”
The change is based on the anniversary date of the start of a contract and every subsequent anniversary date, says Ackerley, who has been instrumental in bringing forth many of the changes that have received royal assent under the act.
Another change will be that the “phased release” of the holdback (for multi-phased projects) will be eliminated from the act.
While most of the revisions will come into force right away, the release of the holdback on every anniversary date will have a one-year transition or grace period before becoming law.
Ackerley has recommended the new holdback release system be adopted in a similar fashion to the prompt payment system which was legislated five years ago in Ontario.
It will require that an owner “must pay” the full holdback to the contractor within 14 days after the 60-day lien period has passed.
The same release requirements would apply to contractors and their subcontractor, he says.
“In the past there was no requirement to tell subcontractors that this is about to happen.”
For subtrades, it means their lien rights for work done in a year will expire after that year and be renewed for additional work they do on the project in the next year, he explains.
“They won’t have to wait until the end of a multi-year project to get their holdback money.”
A notable change to the regulations expected soon broadens the scope of adjudication to allow for a wider range of disputes, says Ackerley.
To meet the increased demand additional qualified private adjudicators will be available outside the pool of about 60 adjudicators registered through the Ontario Dispute Adjudication for Construction Contracts (ODACC).
The move offers claimants a wider choice of adjudicators, Ackerley points out.
That change was initiated by Duncan Glaholt, the founder of Glaholt Bowles LLP, a construction law firm in Canada.
Glaholt was appointed by the province’s Ministry of the Attorney General (MAG) in February 2024 to conduct a review of the Ontario Construction Act and advise MAG on changes, many of which were put forth by Ackerley over 18 months of work prior to Glaholt’s appointment.
Designers also have something to gain from changes to the Construction Act.
As an example, if an owner retains the holdback from the designer prior to the start of planned construction then design work is presumed to enhance value and the designer has lien rights, unless the owner proves otherwise.
“They (designers) will even have lien rights for a drawing of a building where the building itself doesn’t get started,” Ackerley says.
Under the old rules architects did not have any legal recourse (lien rights) for design drawings of projects that didn’t go ahead, although the act did allow an architect lien rights if the drawings were deemed to have value, even if construction had not commenced, he says.
Ackerley expects the industry will see a number of educational seminars and courses by various associations and groups to bring the industry up to speed on the new regulations this spring.
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