Note: This article was written prior to the passage of Bill 142 and the version of the the bill this post was based on may be outdated.
In America, the Miller Act and states’ Little Miller Acts require that contractors post surety bonds on public projects. This is because public property cannot be liened, and subcontractors and suppliers still need protection on public projects.
North of the border, in Ontario, there is no requirement for surety bonds on public projects. However, parties may utilize “Labour and Material Bonds” (aka payment bonds) on their own. With Bill 142, legislation is in the pipeline to require these bonds on public projects in Ontario. Bill 142 would also bring changes to prompt payment, lien deadlines, and dispute resolution.
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Changes to Ontario Lien Law
The proposed changes under Bill 142 are actually pretty far sweeping. The bill comes following the recommendations from the Construction Lien Act Review, which refers to a recent review of Ontario’s construction payment laws by experts Bruce Reynolds and Sharon Vogel. The review was initiated by Ontario’s Ministry of the Attorney General and its Ministry of Economic Development, Employment, and Infrastructure.
Here’s the full text of Bill 142.
Ontario’s “Miller Act”
One of the biggest changes proposed is that labour and material bonds would be required on public projects. Currently, no threshold has been established (for instance, America’s Miller Act only applies to projects exceeding $100,000). To learn more about the American version of this legislation, here are our Miller Act Resources.
For an in-depth look at how P3 projects may be affected, this article is a great resource.
Under Bill 142, the default payment period will be monthly. However, parties are free to negotiate and agree to different periods. When an owner disputes an invoice, they must provide notice of non-payment. If a party fails to make payment when due, interest will begin to accrue (that rhyme was accidental, I promise).
For more information on American prompt payment, we’ve got you covered.
Perhaps the most ambitious part of this proposed legislation is the Construction Dispute Interim Adjudication section. This would institute a mandatory dispute resolution process. Under this new process, an Authorized Nominating Authority would appoint “adjudicators” to hear payment disputes. These adjudicators are not judges, and the process for qualifying adjudicators is largely unclear at the moment.
In any event, through this adjudication process, a decision on the dispute will be made between 1-2 months following a dispute. The decision will not be appealable through the adjudication process, but parties are free to take the dispute to arbitration or court following an adjudication decision.
Under Bill 142, the deadline to file a lien would go from 45 days to 60 days under this legislation. Also, the deadline to enforce a lien will be extended from 45 days to 90 days.
Bill 142 has been looming on the horizon for quite some time. It entered its second reading earlier this week, and will be subject to more debate and, if it passes that stage, royal assent (which is essentially the same as a governor or president sign a bill into law). Considering the legislation is largely based on a lien law review that was initiated by Ontario officials, it’s safe to say that some version of this Ontario lien law legislation will pass.
We don’t venture north of the border often, but give our American construction payment resources a look.