By Catherine E. Willson
Ontario’s Construction Lien Amendment Act, 2017 was passed in December 2017, but the changes will be rolled out later this year and during 2019 as the various elements of the act are proclaimed. The overhaul of Ontario’s construction regulatory framework includes prompt payment rules. Even though the legislation applies only to Ontario, the implementation of prompt payment rules is expected to be closely watched by other jurisdictions across Canada.

The changes will also modernize the lien and holdback process, and set out a new adjudication process to resolve payment disputes. (For more on the adjudication process, see Construction Canada, December 2017, www.constructioncanada.net/adjudication-ontarios-new-construction-act.)

It is expected changes to the lien and holdback process will take effect first, sometime after June, followed by the prompt payment rules and the new adjudication process.

Prompt payment
The section of the act relating to prompt payment sets out short timelines for the payment of contractor and subcontractor invoices. The payer is required to make payments in accordance with the timelines, unless it provides a notice of non-payment. Amounts not paid in accordance with the timelines will accrue interest at a specified rate. The prompt payment regime applies to both private and public contracts.

The trigger for payment is the delivery of a proper invoice to the owner. A proper invoice is provided on a monthly basis, unless the contract specifies otherwise. A contract cannot make the giving of a proper invoice contingent upon payment certification or the prior approval of the invoice by the owner.

A proper payment invoice must contain the following information:

• the contractor’s name and address;
• the date of the proper invoice and the period during which services or materials were supplied;
• information identifying the authority (typically the contract) under which services or materials were supplied;
• description, including quantity, of the services or materials supplied;
• the amount payable for services or materials supplied and payment terms;
• the name, title, telephone number, and mailing address of the person to whom payment is to be sent; and
• any other information that may be prescribed by the contract.

Payment period
Upon submission of a proper invoice, the owner shall pay the amount due within 28 days (unless the owner delivers a notice of non-payment).

A contractor who receives full payment of a proper invoice within the 28 days must, no later than seven days after receiving payment, pay each subcontractor who supplied services or materials included in the proper invoice.

A contractor who receives partial payment of a proper invoice must, no later than seven days after receiving payment, pay each subcontractor who supplied services or materials included in the proper invoice, the amount earmarked for that subcontractor or, where no amount is specifically identified, pay the subcontractors on a pro-rata basis.

Payment withheld
An owner who disputes a proper invoice can refuse to pay all or any portion of the proper invoice if, no later than 14 days after receiving the proper invoice, the owner gives the contractor a notice of non-payment (in the prescribed form and manner) specifying the amount not being paid and detailing all of the reasons for non-payment. If only a portion of the invoice is disputed, the owner must still pay the undisputed amount within 28 days.

As with an owner, a contractor can dispute a subcontractor’s entitlement to payment, in whole or in part, within the time specified if the contractor gives notice of non-payment to the subcontractor no later than seven days after receipt of a notice of non-payment from the owner or, if no notice is given by the owner, no later than 35 days after the proper invoice was given to the owner. The notice of non-payment again shall be made in the prescribed form and manner, detailing the amount not being paid and reasons for non-payment. The same applies to payments from subcontractors to subcontractors.