Background - Ontario as a Trendsetter

Ontario’s Construction Act reforms in recent years, particularly the introduction of prompt payment and adjudication provisions, have been closely watched by other provinces, such as Alberta and its implementation of the Prompt Payment and Construction Lien Act in 2022.

Ontario's move toward mandatory annual release of holdback and expanded adjudication rights, among other things, ensures cash flow and project progress, addressing certain contractor and subcontractor concerns, gives parties more flexibility in dispute resolution, and provides further clarity and fairness in the legislative scheme.

If the Ontario amendments prove successful in improving payment timelines, reducing disputes, and fostering smoother project execution, Alberta may see similar amendments to its own framework, as these innovations align with broader industry trends of improving efficiency, fairness, and transparency.

Summary of Key Amendments

1. Mandatory Annual Release of Holdback

One of the most transformative changes is the overhaul of the holdback release process. Previously, basic and finishing holdbacks were released 61 days after lien expiry. Now, mandatory annual holdback releases will occur, changing the financial dynamics for all parties. Here’s how it works:

• owners must publish a notice 14 days after the contract anniversary;
• lien claimants then have 60 days to preserve their liens; and
• if no liens are filed, holdbacks are released down the contractual chain within 14-day intervals.

While this streamlines cash flow, owners may need to implement additional holdbacks to account for potential liens. The amendments also bring changes to lien expiry periods, such that liens related to holdbacks now expire 60 days after the notice of annual release is published. These adjustments mean contractors and subcontractors must pay closer attention to lien deadlines to preserve their rights.

2. Adjudication 2.0

Adjudication under the Ontario Construction Act is expanding, offering parties more flexibility. The proposed amendments impact the following key issues in the adjudication process:

• Scope: Any “prescribed matter” can now be adjudicated, along with disputes both parties agree to address;
• Timing: Adjudication rights extend to 90 days after contract completion, termination, or abandonment; and
• Process Improvements: Adjudicators now have statutory jurisdictional authority, and any party can consolidate multiple adjudications.

In addition, the introduction of private adjudicators and the ability to address jurisdictional issues further enhance the dispute resolution process.

3. Deemed Proper Invoices

Invoicing procedures are also evolving. Under the amendments, if an invoice does not meet the Act’s criteria for a “proper invoice,” owners must notify contractors about why it’s insufficient and how to address the issues. If no notice is given, the invoice is deemed a proper invoice, triggering prompt payment requirements. This change encourages better communication between owners and contractors while ensuring payment disputes are addressed quickly.

4. Pre-Construction Design + Liens

Holdbacks for pre-construction design work, such as plans, drawings, or specifications, are now lienable unless owners can prove the design did not enhance the property value. This clarifies the rights of design professionals, ensuring they are protected in the lien process.

5. Additional Updates

In addition, the proposed amendments also include changes to the following:

• Price Determination: The definition of "price" is evolving into a statutory tool, though details remain to be seen.
• Joinder of Claims: Amendments allow lien and breach of contract claims to be joined with other claims, subject to future regulations.
• Notice of Termination: A construction newsletter publication will now trigger lien periods after contract termination.
• Multiple Improvements: Contracts may treat separate improvements on the same property as independent projects, impacting lien timing and holdbacks.

What This Means for Stakeholders Across Canada

The upcoming amendments to the Ontario Construction Act mark a significant shift toward efficiency, transparency, and fairness in the construction process. Whether you're an owner, contractor, subcontractor, or design professional, staying informed and proactive will be key to navigating these changes. For businesses with projects in multiple jurisdictions, this may result in:

• adjusted workflows and additional administrative/accounting requirements to accommodate annual holdback releases;
• an increased focus on compliance with invoicing and lien processes; and
• a greater emphasis on adjudication readiness as dispute resolution becomes a larger focus nationwide.

Ontario’s reforms set the bar for what construction legislation can achieve, and it’s likely only a matter of time before Alberta and others follow suit. These changes reflect an industry-wide movement toward greater accountability and efficiency, which benefits all players in the construction ecosystem.

If you would like advice on the current state of lien legislation, please contact Anthony Burden or Tristen Pomerance in Calgary, Ryan Krushelnitzky in Edmonton, or any member of Field Law's Construction Group for guidance and assistance in this area.