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News » Canada » Ontario passes legislation requiring prompt payment » published 7 Dec 2017

Ontario passes legislation requiring prompt payment

Ontario has passed new legislation designed to ensure that construction businesses and workers get paid on time.

Prompt Payment Ontario has been seeking change Above: Prompt Payment Ontario has been seeking change

Between 2002 and 2013, the average collection period in the province's construction sector went up from approximately 57 to 71 days.

The Construction Lien Amendment Act, 2017 also modernizes the lien and holdback process, helps protect creditors and set out a new adjudication process to resolve payment disputes faster.

"This legislation could not have been introduced at a better time, as higher interest rates will make delayed payment unbearable," said Ron Johnson, director of Prompt Payment Ontario. "We hope that this groundbreaking piece of legislation will set the stage for change across the country. We would like to thank the government for taking this issue seriously and hope that we will see the immediate proclamation of this important piece of legislation."

A construction lien is a charge or security on property that can be registered by anyone who has supplied services or materials to improve it. A holdback is a requirement that all contractors and subcontractors withhold 10% of the cost of the services or materials supplied on a project. This helps to ensure that there is enough money to satisfy any lien claims that may arise.

Key changes introduced by the legislation include:

  • providing more time for contractors and subcontractors to resolve their disputes outside of court by extending timelines to file liens and start court actions from 90 days to 150 days;
  • ensuring contractors and subcontractors know when to expect full payment by requiring holdback funds to be paid as soon as the deadline to file a lien passes;
  • protecting subcontractors and workers if the general contractor files for bankruptcy by requiring surety bonding on public sector projects above a certain amount;
  • allowing condominium unit owners to remove liens from their unit in relation to common elements such as corridors and lobbies;
  • referring construction lien claims under CA$25,000 to small claims court.
  • The Construction Lien Act was established in 1983 to regulate how payments are made so that workers who provide services or materials during a construction project are paid for their work.

In 2015, the first comprehensive review of Ontario’s construction laws in 34 years was carried out. The proposed legislation is based on the recommendations in the report and feedback from experts and industry groups.

The amendments to modernize the lien and holdback process will take effect first, with the prompt payment rules and the adjudication process following once the body responsible for appointing adjudicators is in place.

 

MPU

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This article was published on 7 Dec 2017 (last updated on 12 Dec 2017).

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