Canadian Lawyer InHouse

51 CANADIANLAWYERMAG.COM/INHOUSE SEPTEMBER 2017 A STATUTE THAT GOVERNS the construction industry in Ontario is set for a major overhaul for the fi rst time in nearly 35 years. The proposed changes to the Construction Lien Act, which could become law later this year, are an attempt to modernize the payment and dispute resolution systems in the industry and bring the statutory framework in line with jurisdictions in other countries. If successful, it could be a model for other provinces in Canada. At the same time, industry participants say these changes will require all sides to ensure that a comprehensive project management system is in place right from the start to minimize the chances of adverse rulings down the road. "These changes are needed," says Neil Abbott, part- ner and construction law specialist in the Toronto offi ce of Gowling WLG. "The Act has not been substantially updated since 1983. We are behind the world." The Construction Lien Amendment Act was intro- duced by the Ontario government into the provincial legislature in the spring. It has received fi rst reading and is expected to move through the legislature this fall. There are numerous changes in the bill to the ex- isting statute, including re-naming it The Construc- tion Act. Some of the most signifi cant pro- posed changes have to do with prompt payment requirements, a new adjudication system to deal with disputes while a project is ongoing, clarifying who is the "owner" in public-private part- nerships and longer time pe- riods for preserving and per- fecting liens. Sharon Vogel, who heads the national construction group at Borden Ladner Gervais LLP, says the chang- es are an attempt to benefi t all parties in a project. "The overall policy goal is to improve the effi ciency of the construction industry," she says. Vogel and Bruce Reynolds, chairman of the inter- national construction projects group at the fi rm, were retained by the Ontario government to conduct an extensive review of the existing legislation. Nearly all of the 100 recommendations in their report entitled "Striking the Balance" were adopted by the province. "The policy objective was to protect the most vulner- able in the construction pyramid," says Reynolds. Sub- contractors may benefi t the most from "an accelerated mode of resolution" in payment disputes, he suggests. New prompt payment requirements are aimed at as- sisting all levels of contractors in any project. Once an owner receives a "proper invoice" from a contractor, that amount must be paid within 28 days. If an owner has reasons for non-payment of any or all of this in- voice, it must give notice and reasons within 14 days. A contractor is also required to pay a sub-contractor within seven days of receiving payment from an owner. "There are minimum requirements," to fi t the defi ni- tion of a proper invoice, says Reynolds. "It is not par- ticularly onerous." Prompt payment legislation has been in place in the United Kingdom for several years. In the United States, there are similar rules in place in every state ex- cept New Hampshire. The review conducted by Vogel and Reynolds notes that the most common time period for payment in the U.S. is 30 days. The prompt payment timelines in the proposed On- tario legislation are a good idea, says Abbott. At the same time, he notes that for some types of owners, especially in the public sector where there may be more layers to the payment process, changes will have to be made. "You will need to be more nimble. You might have to hire more project consultants," says Abbott. He notes though that the amendments allow for some fl exibility for parties when they enter into a contract. "The Act sets I n d u s t r y S p o t l i g h t Under construction Changes to law in Ontario will demand comprehensive project management to avoid chances of adverse rulings down the road. BY SHANNON KARI

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