Managers must quickly adapt to the new changes to Ontario’s Construction Act which address four key priorities: mandating the annual release of holdback amounts, expiry of liens, new information required for a “proper invoice” and a new system for access to adjudication.

On November 6, 2024, Bill 216, Building Ontario For You Act (Budget Measures) amended Ontario’s Construction Act and was proclaimed into law on November 6, 2024.

Key Amendments:

1.    Holdback Regime:

• A condo should holdback 10% of the cost of construction services and materials from each invoiced payment, or else face personal liability to pay a contractor, including a general contractor, subcontractor, materials supplier or their employee who has registered a proper construction lien on time on the property.  The holdback may be retained by the condo in cash or protected by a letter of credit or a bond in a prescribed form.
• Owners must now release holdbacks annually as of the anniversary of the date any new contract was entered into (being the “Contract Anniversary Date”).  Previously, no set timeframe existed. 
• The condo must publish a “Notice of Annual Release of Accrued Holdback” within 14 days after the Contract Anniversary Date, in a prescribed form which specifies the amount of the holdback payment and its due date.  Any valid lien expires 60 days after publication of that notice.  The condo must pay the holdback amount 14 days after that 60-day lien period has expired – but not if a valid lien has been “preserved and perfected”, and registered on title, as long as the lien has not been paid or subject to an order declaring it to be discharged, vacated or expired.  A certificate of action must be registered on title on time.
• Owners may only withhold paying holdbacks if a lien has been preserved or perfected under those circumstances, until the outcome has been determined.
• Provisions which used to otherwise permit non-payment of holdbacks in certain circumstances have been repealed.  
• The general contractor must pay its subcontractors within 14 days of receiving payment from the condo, and each subcontractor pays other entitled payees down the line within 14 days.
• Overall, the holdback regime revisions will expedite the payments of funds to contractors, but will narrow a condo’s holdback remedies.

2.    Lien Expiry:

• Various contractors’ rights to file a Lien as security expires 60 days after the owner provides the above Notice of Annual Release of Accrued Holdback (that does not affect liens related to services or materials supplied thereafter).
• Holdback payments only need to be released by the condo if no liens have been filed by the end of that specified 60-day deadline.  Holdbacks must also be paid once all liens registered on title claimable against the holdback have been satisfied, or have expired under certification or declaration of substantial performance of the contract, or vacated, according to the timelines specified in the Act.
• Updates to the lien provision aim to streamline the release of holdbacks and promote timely payments.

3.    Proper Invoice:

• Now, an updated list of information must be included in a contractor’s “proper invoice”.  If an invoice is missing details, it may still be deemed proper - unless the owner notifies the contractor of deficiencies within 7 days.
• This “proper invoice” deeming provision relieves contractors from administrative errors but forces owners to process invoices extremely quickly.

4.    Adjudication:

• Previous provisions related to specific disputes eligible for adjudication, and criteria applicable to the adjudicator’s powers have both been repealed, leaving these to be addressed by future regulations. This may broaden both the types of disputes permissible and resolutions possible.
• There is now a 90-day window for referring disputes by means of a Notice of Adjudication following the completion, abandonment or termination of a construction contract.
• A party may request that an adjudicator consolidate multiple disputes regarding the same improvement.
• Changes applicable to the adjudication process aim to provide more flexible and efficient dispute resolution without court intervention.

5.    Transition:

• Most amendments take effect immediately.  The new annual holdback regime also mandatorily applies to post-July 1, 2018 contracts, but only after the second Contract Anniversary Date arising after November 7, 2024.   Contracts entered before July 1, 2018 are exempt from the amendments.

Implications for Condos:

The Construction Act amendments referred to in Bill 216 impose several important implications for Ontario condominium corporations.  These comments only briefly summarize the new amendments to the Construction Act and presume the reader is familiar with the pre-existing provisions (which were already complicated enough).  The more detailed technicalities and actual practical implications will need to be addressed both by construction contract provisions and in practice.

Condos undertaking construction work must manage their cash flow and plan to be able to expedite payment of “proper invoices.”   Managers must review invoices immediately and carefully dispute any “proper invoice” by notice to the contractor within 7 days if they believe an invoice is deficient.  Condos must diarize the Contract Anniversary Date to comply with the 14-day constraints for the Notice of Annual Release of Accrued Holdback requirements.  Proper tracking, documentation and timely communication with contractors will be key to minimizing risks and ensuring smooth operations.  Condos should carefully review their construction contracts, expedited cheque processing practices and internal processes to ensure they are complying with the new legislative changes.   Managers should coordinate with their project consultants and lawyers to provide assistance early and at critical stages of construction.

Alex Young is a condo corporate and commercial lawyer and associate of Gardiner Miller Arnold LLP.

J. Robert Gardiner, B.A., LL.B., ACCI, FCCI, is the senior partner of Gardiner Miller Arnold LLP practicing condo law.
 

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