Ontario’s construction industry is undergoing significant changes with the recent passage of Bill 216 (the Building Ontario For You Act), which amends the Construction Act. This legislation introduces several fundamental changes that will profoundly impact how construction disputes are resolved in the province. In this blog post, we will explore the key changes brought about by Bill 216 and discuss their potential implications for the construction industry.
Key Changes Introduced by Bill 216
Expansion of Interim Adjudication
One of the most significant changes introduced by Bill 216 is the expansion of interim adjudication. This process allows parties to resolve disputes through a quick and informal process, rather than resorting to lengthy and costly litigation. Under the previous Construction Act, interim adjudication was limited to certain types of disputes set out under the Act itself. Bill 216 expands the scope of interim adjudication to those prescribed by regulation (to be drafted in the future).
Additionally, parties to a dispute now have 90 days from the completion, abandonment or termination of a construct to start the adjudication process. Under the older provisions of the Act, interim adjudication was not available for completed contracts. Subcontracts can commence an adjudication up to 90 days after the earliest of:
- The date on which the contract is completed, abandoned, or terminated (unless the parties agree otherwise);
- The date on which the subcontract is certified completed under the Act; and
- The date on which the subcontractor last supplies services or materials.
Annual Release of Holdbacks & Changes to Lien Provisions
Bill 216 also introduces a requirement for the annual payout of accrued holdback amounts. The new provisions require the owner to give 14 days notice before the contract’s anniversary date and then pay the holdback within 14 days of the lien expiry period (now 60 days). Owners may avoid paying out the holdback when a lien is perfected or preserved, or certain statutory conditions are satisfied. The paid-out holdback is to flow down to the contract’s contractors and subcontractors.
As referenced above, to complement the new annual payout of holdbacks, Bill 216 has amended the Construction Act to include a 60-day expiry period for liens related to the supply of services or materials. Further, contractors supplying designs, plans, drawings, or specifications for an unstarted planned improvement can place a lien on the real estate for which the services were provided. In these situations, the owner must still retain a holdback.
Benefits of Bill 216 for Ontario’s Construction Industry
The changes introduced by Bill 216 have significant implications for the construction industry in Ontario. Some of the critical implications include:
Increased Use of Interim Adjudication
The expansion of interim adjudication will likely lead to a significant increase in its use. Interim adjudication offers a faster, more cost-effective, and less formal way to resolve disputes, and it is expected that more parties will choose to use this process in the future. This is because interim adjudication can help avoid the delays and costs associated with traditional litigation. Expanding interim adjudication to a broader range of disputes means more parties can benefit from this process.
Improved Cash Flow for Contractors
The annual payout of holdback funds will significantly improve contractors’ cash flow. This will allow contractors to pay their suppliers and subcontractors more promptly and help reduce the risk of financial distress. Improved cash flow can lead to several benefits for contractors, including the ability to invest in their businesses, hire more workers, and take on new projects.
Previously, holdback funds were often withheld for extended periods, causing financial hardship for contractors. The new legislation mandates that holdback funds must be paid out annually, providing contractors with much-needed liquidity. This change could significantly improve contractors’ financial health, as it will allow them to access their funds more quickly and use them to pay for labour, materials, and other expenses.
Furthermore, the annual payout of holdback amounts will promote fair dealing and transparency in the construction industry. In the past, some project owners have been accused of withholding holdback funds for extended periods, even when there were no legitimate reasons for doing so. This practice can be harmful to contractors and can damage the reputation of the construction industry. By requiring the annual payout of holdback funds, Bill 216 will help to ensure that these funds are used for their intended purpose and that contractors are treated fairly.
Potential Challenges and Considerations for Bill 216
While Bill 216 is intended to improve the construction dispute resolution process, it also presents some potential challenges and considerations for the industry:
Increased Administrative Burden
Bill 216 will increase the administrative burden on construction project owners and contractors. Implementing effective systems and procedures is essential to comply with the new requirements. For example, project owners and contractors should develop a system for tracking holdback funds and ensuring they are paid annually. They should also train staff on the new requirements and procedures, update contracts and other documents to reflect the changes introduced by Bill 216, and implement new software or other tools to help manage the increased administrative burden.
Potential for Increased Litigation
While interim adjudication is intended to reduce the need for litigation, there is a risk that it could lead to an increase in disputes. This could occur if parties are dissatisfied with the outcome or choose to challenge the decision in court. It may also lead to additional claims by contractors or subcontractors seeking access to holdback funds.
Contact Campbell Litigation for Comprehensive Advice on Bill 216 & Construction Disputes in Kitchener-Waterloo
The changes introduced by Bill 216 are complex and have far-reaching implications for the construction industry. It is crucial for all parties involved in construction projects to seek legal advice to ensure compliance with the new legislation and to understand their rights and obligations.
At Campbell Litigation, our construction law team helps all professionals involved in the construction pyramid navigate the complexities of Bill 216 and any other changes impacting Ontario’s construction industry. We have extensive experience representing project owners, contractors, subcontractors, and suppliers and provide innovative legal solutions to protect their interests. To schedule a consultation, please call 519-886-1204 or contact us online.
