Daily Commercial News – October 26, 2018
Renewed optimism under new Construction Act and here’s why
On July 1, 2018, the first part of Ontario’s new Construction Act came into effect. The Construction Act is the most wide-ranging change of rules in the construction industry in Ontario since 1983. These broad changes are going to have a major impact on our industry.
Under the new prompt payment rules, the industry can expect to see a much faster flow funds from project owners all the way down to sub-trades and suppliers. This will lead to fewer hung receivables and better cash flow across the industry as a whole. When future disputes do arise between parties, the new adjudication rules should also provide a faster and clearer path towards resolution. Sureties are also required to be much more responsive when dealing with performance and labour and material payment bond claims. The overall intention is to keep projects and the flow of funds moving forward and to provide a fairer marketplace for all parties. While we cannot focus on all of the changes, there are a few key ones that are important to understand for all subcontractors.
Prompt Payment — Improving the Flow of Contract Funds
Under the new prompt payment rules, which will come into effect on Oct. 1, 2019, an owner must pay a contractor within 28 days of receiving a ‘proper invoice’, unless the owner delivers a notice of non-payment in the prescribed form within 14 days. This is a significant improvement from the past, when sub-trades were often forced to wait up to 90 days or even longer for payments.
A ‘proper invoice’ must:
- describe the services or materials supplied;
- the period during which they were supplied; and
- the authority under which they were supplied.
A contractor who receives full payment from an owner must