On November 6, 2024, Bill 216, Building Ontario For You Act (Budget Measures) (“Bill 216”) received Royal Assent, resulting in changes to the Construction Act (the “Act”) in Ontario. 

The Act is significant legislation which governs, among other things, how payment disputes are handled in the construction industry in the Province of Ontario. It provides significant rights and relief not available to other professions or industries and, accordingly, these new changes to the Act have significant implications for construction professionals. 

The following is a list of the key changes: 

Access to Statutory Adjudication Broadened 
Under the current version of the Act, interim adjudication via ODACC is limited to certain types of disputes with all others falling outside the jurisdiction of an adjudicator. Presently it includes issues surrounding the valuation of services, payments under the contract, set-off, and holdback issues. Anything outside those bounds can only be sent to ODACC if the parties have agreed to do so. 

The Bill 216 amendments broaden the availability of adjudication. Bill 216 repeals the provisions of the Act that list the types of disputes that may be referred to adjudication. Now, the Act permits adjudication of any prescribed matter, or any matter agreed to by the parties to adjudication. These new matters are to be prescribed by the regulations, which are still set to be released. Given the purpose of the Bill, the prescribed matters will likely be more varied than the current Act.

Bill 216 also changes the availability of adjudication from being available solely before the “completion” of the underlying contract. The new Act will allow parties to commence adjudication so long as the notice of adjudication is given within 90 days of the date on which the contract was completed, abandoned, or terminated, unless the parties agree otherwise. This allows parties to commence adjudication even after a contract is fully performed and allows sufficient time to try to resolve a dispute before resorting to adjudication. It is also important to note that the adjudication deadline is 30 days longer than the deadline to preserve a lien, which is 60 days. This allows parties to pursue adjudication even if their rights to a lien have expired.

Mandatory Annual Release of Holdback
The most significant change is the introduction of a mandatory annual holdback release. Previously, the Act has not allowed owners to release holdback amounts within a statutorily prescribed timeframe unless they met certain thresholds, the most daunting being the need for the price of the contract to exceed $10,000,000, and even then, only if the parties agreed to a phased or annual release. 

The new changes now make mandatory that owners release holdback amounts annually on the anniversary of the commencement of the contract and without a right of set-off. The new Section 26(4) of the Act states that an owner shall make payment to the contractor of all the accrued holdback in respect of services or materials supplied by the contractor during the year immediately preceding the anniversary, unless a lien has been preserved or perfected in respect of the contract and not discharged, satisfied or vacated. 

It is important to note that for contracts executed prior to the date that the amendments will take effect, the new mandatory annual release of holdback rules will apply on the second anniversary of the day the contract was executed. In this case, the first holdback payable will be any holdback accumulated up until that point for the previous years.  

The annual release of basic holdback also flows down to contractors and subcontractors, meaning all basic holdback received by a contractor or subcontractor must be paid to those from whom the holdback was kept within 14 days of receiving payment from the owner.  

Notices of the annual release of holdback must be issued by owners no later than 14 days after the anniversary date. 

The new amendments to the Act also now provide that liens will expire 60 days after notice of annual release of holdback is provided by an owner, and this does not affect any lien that person may have for supply of services after that date. As such, there is now a distinction between lien rights for supply of services before or after an annual notice of release of holdback. 

Improper Invoices and Definition of “Price” 
Bill 216 sets out what must be included in a proper invoice, which was not set out in the Act previously and owners had broad discretion to indicate what must be included. The previous version of the Act was fairly specific on what must be included to meet the definition of “proper invoice”. The new amendments provide that if an invoice does not include all of the prescribed information, the invoice is still deemed a proper invoice despite that deficiency, unless the owner notifies the contractor in writing within seven days, indicating what is required. This places greater pressure on owners to ensure that invoices are reviewed expeditiously to determine whether they are deficient. 

Also, the amendments expand the definition of “price.” Previously, where a contract or subcontract did not state a price, the price was deemed to be the fair market value for the supplied services or materials. The definition of “price” is amended to permit regulations to specify a price for a contract or subcontract where the parties fail to agree on one, other than the actual market value of supplied services or materials.

Transitional Rules and Next Steps 
It remains to be seen how the Court will interpret and handle these changes. After the 2018 changes to the Act, many members of the bar believed they understood the meaning and impact of those changes as well. The Court, however, sometimes surprises litigators with differing viewpoints. For example, see Devlan Construction Ltd. v SRK Woodworking Inc., 2023 ONSC 3035 where the Divisional Court struck down the ability to join lien claims with breach of trust claims despite the 2018 amendments making it appear as though that was now possible.

The amendments to the Act will take effect upon the proclamation of Bill 216 and will apply to all contracts entered into in the Province of Ontario prior to the date that the amendments take effect. However, there are a few exceptions as noted above. Most notably, contracts that are executed prior to the amendments taking effect will have the new mandatory annual release of holdback rules apply, but only upon the second anniversary of the contract. Overall, Bill 216 and the amendments to the Act mean that owners, contractors and subcontractors all need to be cognizant of their new obligations under the Act once the amendments take effect.