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Construction Act Reforms: Now in Effect! A Summary

Ontario Dispute Adjudication for Construction Contracts (ODACC)


Eric Turkienicz,
Partner

November 2019

 

By Eric Turkienicz

As of October 1, 2019, the Construction Act has brought in major reforms for contracts entered into after July 1, 2018, with a goal to early and efficient dispute resolution and reducing costly litigation and arbitration. This will likely mean the end of liens registered in the middle of a construction project and quicker resolution of payment disputes. It also means all parties involved must be on the ball at all times in order to protect their rights.

Prompt Payment Regime (S.6.1)

Once a month, the general contractor invoices the owner in conformance with the Construction Act. Within 28 days of receiving a proper invoice, the owner must pay the general contractor in full or provide written reasons for any deductions and pay the remainder.  If there are deductions, the general contractor has 35 days to commence Adjudication. Within 7 days of payment received by the general contractor, the subcontractors must be paid in full or provide written reasons for any deductions and pay the remainder. Subcontractors will have the same rights to quick Adjudciation. Subcontractors have 7 days to pay their sub-subcontractors and so on down the line. Parties cannot contract out of these payment deadlines once a proper invoice has been delivered, though there are several avenues to dispute a payment.

Adjudication

Adjudication is a binding, interim dispute resolution process designed to avoid the registration of liens in the middle of projects and other actions that grind construction projects to a halt. It must start prior to completion of the contract or subcontract unless otherwise agreed upon.

The party can enforce the adjudicator's determination by filing a certified copy in Superior Court. 

Adjudication is a quick (30-day) process performed on-site so that the adjudicator can see what is going on first-hand. If a party has been ordered to pay by the adjudicator, they must do so within 10 days, otherwise, the successful party will be entitled to suspend their work with compensation for expenses incurred in doing so plus mandatory interest on the late payments. The party can enforce the adjudicator's determination by filing a certified copy in Superior Court.

ADR Chambers Inc. has been appointed the Authorized Nominating Authority to manage the Adjudication regime and to qualify and appoint adjudicators. Parties can agree on an adjudicator or request the Authority to appoint one. It is important who you choose as the adjudicator because the adjudicator has a lot of discretion.

This is just a snapshot of the Construction Act's various deadlines and procedural requirements. McCague Borlack's Construction Law Group has extensive experience in dealing with construction matters. Our lawyers will be happy to provide you with any assistance in navigating and complying with the new Construction Act.

Read more of the details behind the changes in the Construction Act.

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