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The Ontario government is introducing legislation that would, if passed, 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 could be addressed through a new adjudicative process outside of court.

If passed, these amendments would bring Ontario's construction laws up to date with current construction industry practices and support the thousands of workers and businesses in this important sector.

The proposed prompt payment system would ensure that contractors, subcontractors and workers are paid in a timely way.

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 invoices on a monthly basis.

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.

Parties will be free to agree to a timeline for the submission of invoices, before triggering the prompt payment timelines.

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 the matter is heard by an adjudicator 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 HVACR sector” states HRAI President, Warren Heeley.