To help ensure both buyers and sellers of construction services for work delivered in Ontario have a better understanding of the Construction Act, the London and District Construction Association (LDCA) is providing a summary of its key aspects.

The Act is a critical, long overdue, welcomed, and important improvement over the Construction Lien Act to, amongst various benefits, improve the flow of money between project participants (a.k.a. prompt payment). Prompt payment for work/services, is covered in several ways, but importantly:

Two types of construction work/services are explicitly subject to prompt payment:

1. Improvement: which means, in respect of any land
   1. any alteration, addition or capital repair to the land,
   2. any construction, erection or installation on the land, including the installation of industrial, mechanical, electrical or other equipment on the land or on any building, structure or works on the land that is essential to the normal or intended use of the land, building, structure or works, or
   3. the complete or partial demolition or removal of any building, structure or works on the land; (“amelioration”)
2. Capital repair: a capital repair to land is any repair intended to extend the normal economic life of the land or of any building, structure or works on the land, or to improve the value or productivity of the land, building, structure or works, but does not include maintenance work performed in order to prevent the normal deterioration of the land, building, structure or works or to maintain the land, building, structure or works in a normal, functional state. 2017, c. 24, s. 2 (17).

In addition:

• No party can contract out of prompt payment and payment, for improvement and/or capital repair, is to occur within 28 days of receipt of invoice (“rule of 7” 28 days for contractor payment who than has 7 days for subcontractor payment). A contractor has the right, and is provided the legal means, to enforce prompt payment even after a contract is signed.

• The form of contract is irrelevant; prompt payment overrides any non-conforming contract language(whether it is in CCDC contracts, other (in)formal contracts, purchase orders (or other orders)). (To assist in this matter, LDCA, as part of Link2Build, has created a Construction Act compliant PO for industry use.)

LDCA believes the essential, legally determinant, descriptions of, or differences between, improvement, capital repair and maintenance work are well defined and self-evident. There should be little to no confusion or disagreement in this regard. It is also noted that all work conducted in Ontario, except in a few specific circumstances, is covered by theConstruction Act.

If you desire more information on this matter, LDCA suggests three sources: a) your legal advisor, b) the Layperson’s Guide to the Construction Act, and/or c) the Construction Act.

We suggest you share this note broadly with all the construction participants you know. Over the next few weeks, we will provide summary informational and educational notes regarding: Proper Invoice, Adjudication and, once Bill 216 is fully in force, Annual Release of Holdbacks.

We hope this note provides guidance for appropriate behaviour, as effective relations between buyers and sellers is the cornerstone of a mutually beneficial outcome.

Mike Carter

CEO LDCA