Lexpert Special Editions

Special Edition on Infrastructure 2017

The Lexpert Special Editions profiles selected Lexpert-ranked lawyers whose focus is in Corporate, Infrastructure, Energy and Litigation law and relevant practices. It also includes feature articles on legal aspects of Canadian business issues.

Issue link: https://digital.carswellmedia.com/i/862503

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Page 8 of 39

WWW.LEXPERT.CA | 2017 | LEXPERT 9 On May 31, 2017, the Attorney General introduced for first read- ing the long awaited first set of substantial amendments in 34 years to Ontario's Construction Lien Act. Bill 142, An Act to amend the Construction Lien Act, provides the construction industry with its first look at the legislative amendments that are intended to work together to provide prompt payment of invoices, a quick summa- ry procedure to resolve disputes, including non-payment, and to modernize the Act. is article focuses on the five most critical proposed amendments. 1. Prompt Payment e Bill introduces a new prompt payment regime. An owner is required to pay a "proper invoice" from a contractor no later than 28 days aer receiving the invoice. e Bill sets out the elements of a "proper invoice" and includes any requirements specified in a contract. e contractor is then required to pay a subcontractor within seven days of receiving payment. Where the amount that will be paid is less than the invoiced amount, the owner must pro- vide a notice of non-payment to the contractor who, in turn, will provide a similar notice to the subcontractors. It remains to be seen whether requirements specified in a contract will affect the extent to which payment is made promptly. 2. Adjudication of Issues e amendments introduce mandatory adjudication as an interim binding dispute resolution process. Adjudication applies to "dis- putes" related to the valuation of services or materials provided under a contract, payment and non-payment, amounts set-off, non-payment of holdback or any other matter that the parties agree to adjudicate. Adjudication also extends to disputes be- tween contractor and subcontractor. Adjudication is intended to be summary, with the adjudicator's determination to be delivered within 30 days aer the adjudicator receives the notice of dispute and documents that the party relies on. Where the adjudicator de- termines an amount for payment, it must be paid within 10 days, failing which the party can suspend work and apply to the court to enforce payment. e determination is binding for the duration of the project, and a party can litigate or arbitrate the decision upon completion of the project. Similar longstanding legislation in the United Kingdom has resulted in very little litigation aer project completion on matters previously adjudicated. 3. Mandatory Payment of Basic Holdback Under the current regime, getting holdback paid was difficult as the payer may pay the basic holdback aer all liens that may be claimed against the holdback are addressed. Bill 142 makes pay- ment of basic holdback mandatory as payers shall pay the basic John Margie jm@glaholt.com | (416) 368-8280 Ext: 211 > Mr. Margie is a construction lawyer at Glaholt LLP with 22 years of experience practising exclusively in construction law. He is a Certified Specialist in Construction Law by the Law Society of Upper Canada and a Fellow and Governor of the Canadian College of Construction Lawyers. He is a regular speaker and author of several articles. Mr. Margie is grateful for Katherine Thornton's assistance with the preparation of this article. holdback aer all liens are addressed. Where a payer refuses to pay the entire amount of holdback, it must deliver a written notice specifying the amount the payer refuses to pay within 40 days of the date on which the holdback is payable. 4. Accounting of Trust Funds e Bill introduces new accounting requirements. e trustee must deposit project funds into an account in its own name and must maintain written records detailing amounts received and paid. Funds deposited into the account form separate trusts and are deemed traceable. Time will tell whether these amendments will address insolvency issues whereas project trust accounts would have been more effective at ensuring payment to trades, including in the event of an insolvency. 5. Lien Modernization e well-known 45-day period for preserving a lien is amended to 60 days and then another 90 days to start the action. e timing to preserve liens is consistent with the period within which a payer gives a notice of non-payment of all or part of the holdback. Another aspect of modernization relates to the amount of secu- rity posted to vacate a lien. Under the current regime, a party posts 25 per cent of the lien value to a maximum of $50,000 as security for costs. e amendments would require security for costs to a maximum of $250,000. Payment of security may now be a consid- eration in deciding whether a party posts security, settles the lien or at least pays what it owes to reduce the lien value. e extent to which these reforms will be adopted remains to be seen. However, these are much-needed improvements and reforms to the current legislation. TOP FIVE PROPOSED AMENDMENTS TO THE CONSTRUCTION LIEN ACT

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