How Changes to the Construction Act Impact Extending Credit

Disclaimer: The content on the Lumbermens website is only for the purpose of providing general information and does not constitute legal advice. 

Recent changes to the Construction Act have affected how organizations in Ontario can create construction liens, how promptly they should be paid, and how adjudications should be carried out to resolve disputes. Currently, all recent changes have now come into effect. However Ontario is still in a transition period for construction liens that were agreed upon prior to July 1st, 2018, or after July 1st but before October 1st, 2019.

The transition period means that for any construction liens that were entered into prior to July 1st, 2018, the previous Construction Lien Act will apply. For construction liens that were entered into after July 1st, 2018 but before October 1st, 2019, the new lien modernization provisions will apply – but the new provisions for prompt payment and adjudication will not. According to the new changes, all construction liens agreed upon after October 1st 2019 will use the new lien modernization provisions and the new provisions for prompt payment and adjudication.

Provisions for Lien Modernization in Ontario

The first part of changes to the Construction Act involve how construction liens can be entered into, how and when they need to be paid back, and how they apply to public contracts. The first significant change to take note of is the deadline for preserving and perfecting a construction lien. The previous 45 day deadline for preserving has been extended to 60 days after the date it was initially triggered, and the deadline for perfecting has been extended from 45 days after the last possible day of lien preservation to 90 days after.

The construction lien modernization provisions for Ontario also include new rules for how holdbacks and lien terminations occur. Also included is an increased amount of responsibility placed upon both subcontractors and contractors to ensure that they are following the new accounting requirements for creating and perfecting construction liens.

If you would like to learn more about Ontario’s new provisions for lien modernization, or if you have any questions about how lien modernization affects your company, please contact us at 1-800-761-2072.

Prompt Payment and Adjudication Provisions Are Now in Effect in Ontario

The second part of the changes to the Ontario Construction Act modify how payment and adjudication occurs. According to these changes, any new construction liens not affected by the transition period are now bound to statutory deadlines to ensure prompt payment to contractors and subcontractors. This deadline is set to be 28 days after the contractor sends a proper invoice to the owner, wherein the contractor has 7 days to pay subcontractors once payment has been received.

If the owner wishes to dispute part or all of the contract, a notice indicating non-payment must be given to the contractor within 14 days of the owner receiving the receipt for the proper invoice. If only part of the invoice is disputed, the remaining balance of the invoice must be paid within 28 days of the notice indicating non-payment.

In terms of holdbacks, the new changes indicate that holdback releases are now required, unless a notice indicating non-payment has been given to the contractor. In the scenario where the owner does not release the holdback and gives a notice indicating non-payment, the contractor is allowed to refuse payment to the subcontractor, provided the contractor takes the case to adjudication and alerts all subcontractors involved.

For cases where adjudication is needed to settle a dispute between owner and contractor in Ontario, the outcome of the appointed adjudicator must be followed by all parties involved. The adjudicator must make a decision within 30 days, from the time that all documents are received. Although the recent changes to the Construction Act attempt to prevent this from occurring, the dispute can still be litigated after the outcome of the adjudication.

Lumbermens Can Help Determine How the Construction Act Applies to You

Lumbermens is partnered with law firms to ensure that our members have access to accurate information about construction liens – specific to their unique situation. For further help with understanding how the changes to the Construction Act affect your organization, please contact Lumbermens by telephone at 1-800-761-2072, by email at or fill out a contact form on our website and we will be in touch shortly.