Upcoming Changes to Ontario’s Construction Act: New Holdback, Adjudication, and Lien Rules Explained

Ontario’s construction industry is poised for significant changes following the latest amendments to the Construction Act introduced through the Building Ontario for You Act (Bill 216). Although the bill passed on November 6, 2024, the amendments are not yet in force, and the final language of supporting regulations are still pending.

Once implemented, these changes aim to modernize the legal framework governing constructions projects, payments and disputes across the province.  

Most of the amendments fall into four main areas:

1. Mandatory release of holdback funds
2. Expanded access to adjudication
3. Updated definitions for contract price and proper invoices
4. New lien rights for certain design services

Mandatory Release of Holdback

Under the current system, owners are typically required to release holdback funds once the lien period expires – usually 60 days after project completion. In some cases, owners can release holdbacks in phases or annually for projects valued over $10 million.

The amendments will change this approach:

• All owners will be required to release holdback funds annually, regardless of project size
• Within 14 days of the anniversary of the contract date, an owner must publish a notice identifying the value of the holdback to be released and the proposed payment date
• A new 60-day lien period will begin once the notice has been published
• If no lien is preserved or perfected within that 60-day period, the owner shall be required to release the holdback within 14 days

  Importantly, owners will no longer be permitted to:

• Issue a notice of non-payment under section 27.1 of the Act so to claim a set off against the holdback amount

Broader Access to Adjudication

Currently, parties can only use adjudication for payment-related disputes, and only before a contract is complete.

The amendments expand this system:

• Parties may refer any contract-related or prescribed issues to adjudication. The list of prescribed issues will be set out in a yet-to-be released regulation.
• Disputes can be referred to adjudication for up to 90 days after a contract is completed, terminated, or abandoned.
• Parties will be able to consolidate related disputes into a single adjudication
• Parties will be able to select a private adjudicator not listed on the public registry.

These changes are intended to make the adjudication process faster, more flexible and a more appealing alternative to litigation.

Updated Rules for Contract Price and Proper Invoices

The new amendments have clarified what constitutes a “proper invoice”. Section 6.1 of the Act has been rewritten to include new requirements and to allow for Owners to request additional information be included on invoices at their discretion. 

Under the new regime, an invoice that does not meet the proper requirements will nevertheless be deemed a “proper invoice” unless the owner provides a written notice of specific deficiencies within seven days of receipt of the invoice. This means Owners must review invoices quickly and carefully to avoid unintentionally approving improper invoices.

Deemed Liens for Design Services

Design professionals – such as architects or engineers – often provide services before construction begins. Under the current Act, they may not have lien rights if the project never actually starts.

Under the amendments, if an owner holds back funds for design-related work for a planned project that never begins, the party providing design services will be presumed to have a right to a construction lien unless the owner can rebut that presumption by proving that the design work did not increase the value of the land.

Conclusion

These amendments are expected to have a significant impact on payment practices, dispute resolution, and lien rights in Ontario’s construction industry.

SV Law LLP will continue to monitor the status of the new regulations and will provide updates as more information becomes available.

If you have any questions about how these changes may affect your organization, please contact Matt McMahon at mmcmaho@svlaw.ca. Our team would be happy to discuss the implications of this important legislative update.