Ontario to introduce prompt payment legislation

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The Ontario government is introducing legislation to modernize construction lien and holdback rules, introduce a prompt payment system and create a new process to speed up dispute resolution.

Under the proposed legislation, the Construction Lien Act (CLA) would be amended to establish a prompt payment system with clear payment timelines for all parties involved in a construction project. Disputes that slow down payment can be addressed through a new adjudicative process outside of court, reported the Heating, Refrigeration and Air Conditioning Institute of Canada (HRAI).

Under the proposed changes, the owner and general contractor on a project would be able to agree to a deadline to submit an invoice. If they do not agree, they would be required to submit monthly invoices.

Once they receive an invoice, owners would be required to pay general contractors within 28 days. After they receive payment, general contractors would have to pay subcontractors within seven days. Subcontractors would be required to pay other subcontractors within seven days of receiving payment, and so on.

In cases where there is a dispute about the amount owed or the quality of the work, owners would be permitted to deliver a notice of non-payment within 14 days of receiving the invoice. Successive payers would be permitted to deliver a notice of non-payment within seven days. Any undisputed amounts must be paid.

Contractors and subcontractors would receive mandatory interest on late payments. They would also be able to suspend work on a project if an adjudicator hears the matter and the payer does not comply with the decision.

“This is great news for the segment of our contractor membership that is impacted by the proposed legislation. We know delayed payments hurt the entire supply chain in the HVAC/R sector,” said HRAI president Warren Heeley.

The new legislation is based on the findings of an 18-month review of the Construction Lien Act by construction law experts Bruce Reynolds and Sharon Vogel of Borden Ladner Gervais LLP in Toronto.

The attorney general gathered feedback from the industry and other stakeholder groups on the report through the fall of 2016.

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