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Construction Act & 2019 Changes

Construction legislation is undergoing its first overhaul since 1983. In some respects, the changes are formalizing the way that construction matters are dealt with by the court. In others, additional forms of relief have been introduced to strengthen the protections afforded to the smaller players in the construction industry—those trades and suppliers without the resources to challenge more powerful contractors and owners.

The Construction Lien Act will be amended in two phases: the first will take effect on July 1, 2018; the second on October 1, 2019. Dating your contracts or subcontracts properly is very important in determining your legal obligations. This is especially so given the new accounting requirements and the changes in the timelines for substantial performance, completion, holdback and registering liens.

All contracts dated July 1, 2018, will be subject to the new Construction Act. However, the date of a contract is not necessarily the date on which it was signed. While I hope to provide some guidance with the information below, each project is different—the determination is not an easy one. The first phase of amendments will affect all contracts dated July 1, 2018, and later. But how do you date a contract?

Contracts Directly with an Owner (No Tender or Bid Process)
Where a contractor enters an agreement directly with an owner, the applicable date is July 1, 2018. Additional considerations apply for project subject to tender, which will be detailed below. Where, for example, a general contractor signs a contract directly with an owner, any contract dated July 1, 2018, will be subject to the new regime. The existing Construction Lien Act will apply to contracts dated up until June 30, 2018.

Prime Contract (No Tender or Bid Process)
The date of the prime contract determines whether the old regime under the existing Construction Lien Act or the amended Construction Act applies. This applies to situations where either: (i) a contractor retained under a prime contract engages subcontractors; or (ii) an owner retains trades directly on a project subject to a prime contact. On these projects, the date of the prime contract is the applicable date.

Procurement Process / Tenders / Bids
For projects subject to a procurement process—including those where Requests for Quotation (RFQ), Request for Proposals (RFP), or call for tenders–the date that the procurement process was commenced will apply. If a call for tenders is made before June 30, 2018, the old Construction Lien Act will apply, even if the contracts are signed after July 1, 2018. 

For example, a contractor is awarded a tender and enters a contract with an owner on August 1, 2018; if the call for tenders was on May 1, 2018, the current Construction Lien Act applies. If the call for tenders was on July 2, 2018, the amended Construction Act applies.

With respect to the second phase of amendments, contracts will be similarly dated with the applicable date being October 1, 2019.

The above information is provided by way of guidance as to the application of the amended legislation. It is not exhaustive in its scope and is not legal advice. Much confusion is anticipated as to how the Construction Act will be administered and interpreted. It is strongly recommended that you consult with a specialized construction lawyer to determine how the amendments will affect your business and what you need to do to prepare.

If you have any questions relating to this article or wish to discuss your particular concerns, you may reach the author at
ahatsios@kmblaw.com or (905) 276-0420

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This article is provided for general information purposes and should not be considered a legal opinion. Clients are advised to obtain legal advice on their specific situations.

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