Bill 211 2011

An Act to protect contractors by requiring prompt payment of construction contracts

Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

Definitions

    1.  In this Act,

"construction contract" means a written or oral agreement between an owner and a contractor, between a contractor and a subcontractor or between two or more subcontractors, under which one or more parties agree to carry out construction work or to supply related goods and services to another party; ("contrat de construction")

"contractor" means a person contracting with or employed directly by the owner or an agent of the owner to carry out construction work or to supply related goods and services; ("entrepreneur")

"payment application" means an invoice, bill or other request for periodic payment, final payment or release of retainage in accordance with the terms of the applicable construction contract; ("demande de paiement")

"progress payment" means,

     (a)   a final payment for construction work carried out or for related goods and services supplied under a construction contract,

    (b)   a periodic payment for construction work carried out or for related goods and services supplied under a construction contract, and

     (c)   a payment that is based on an event or date; ("paiement échelonné")

"regulation" means a regulation made under this Act; ("règlement")

"retainage" means a percentage of a contract price retained by a party to a construction contract for the purpose of protecting against defect or to guarantee a certain standard of workmanship, but does not include a holdback under the Construction Lien Act; ("retenue de garantie")

"subcontractor" means a person carrying out construction work or supplying related goods and services pursuant to a construction contract entered into between an owner and a contractor, but who is not himself or herself a party to the contract. ("sous-traitant")

Application

    2.  (1)  Subject to subsection (2), this Act applies to a construction contract under which construction work is to be carried out or related goods and services supplied in the Province of Ontario.

Exceptions

    (2)  This Act does not apply to a construction contract,

     (a)   to the extent that a party to the contract undertakes to carry out construction work or to supply related goods and services as a condition of a loan agreement;

    (b)   to the extent that a party to the contract undertakes to lend or repay money, to guarantee payment of money owing or repayment of money lent or to provide an indemnity for construction work carried out or related goods and services supplied under the contract; or

     (c)   that is prescribed by regulation.

Application to Crown

    (3)  This Act applies to the Crown and to all Crown agencies.

Non-application of payment on payment provision

    3.  A provision in a construction contract that makes payment of the contract conditional on payment or completion of another contract by a third party is of no force and effect.

Progress payment

    4.  (1)  A person carrying out construction work or supplying related goods and services under a construction contract shall receive a progress payment on the date specified in the contract or, if no date is specified, at the end of every month during which construction work is carried out or related goods and services are supplied under the contract.

Amount of payment

    (2)  A progress payment shall be made in the amount specified in the contract or, if no amount is specified, in an amount based on the value of the construction work carried out or the related goods and services supplied at the time the payment is due relative to the total value of the contract.

Interest on overdue payments

    5.  Interest is payable on any unpaid amount of a progress payment at the rate of 18 per cent per year.

Payment application

    6.  (1)  Subject to subsection (3), payment of an amount due under a construction contract shall be made within five days after a payment application requesting the payment is approved.

Approval of payment application

    (2)  A payment application is considered to be approved 10 days after it is received by the owner, an agent of the owner or the architect or engineer of record.

Withholding payment

    (3)  An amount due under a construction contract shall be paid in accordance with subsection (1) unless the party owing the amount provides a written statement to the contractor or subcontractor who submitted the payment application describing how the construction work or the related goods and services for which payment is being sought were not carried out or supplied in accordance with the contract.

Same

    (4)  If a party withholds payment under subsection (3), the party may only do so in respect of the portion of the contract to which the written statement provided applies.

Suspension of construction work

    7.  If a party to a construction contract submits a payment application and does not receive payment within 20 days after submitting the application, the party may give notice to the other parties to the contract of its intention to suspend construction work or the supply of related goods and services until payment is received.

Retainage

    8.  Any retainage in excess of the holdback requirement for construction liens under the Construction Lien Act shall not exceed,

     (a)   5 per cent of the total price of a construction contract; and

    (b)   upon completion of 50 per cent of a construction contract, 2.5 per cent of the total price of a construction contract.

Act prevails

    9.  If any provision of a construction contract or any provision in any other Act conflicts with the provisions of this Act, this Act prevails to the extent of the conflict.

Regulations

    10.  The Lieutenant Governor in Council may make regulations,

     (a)   defining "construction work" for the purposes of this Act;

    (b)   defining "related goods and services" for the purposes of this Act;

     (c)   defining any term for the purposes of this Act;

    (d)   prescribing construction contracts to which this Act does not apply.

Commencement

    11.  This Act comes into force on the day it receives Royal Assent.

Short title

    12.  The short title of this Act is the Protecting Contractors Through Prompt Payment Act, 2011.

 

EXPLANATORY NOTE

The Bill requires a person carrying out construction work or supplying related goods and services under a construction contract to receive a progress payment on the date specified in the contract or, if no date is specified, at the end of every month during which construction work is carried out or related goods and services are supplied under the contract.  Progress payments shall be made in the amount specified in the contract or, if no amount is specified, in an amount based on the value of the construction work carried out or the related goods and services supplied to date relative to the total value of the contract.  Interest is payable on any unpaid amount of a progress payment at the rate of 18 per cent per year.

The Bill also requires payment of an amount due under a construction contract to be made within five days after a payment application is approved.  A payment application is considered to be approved 10 days after it is received by the owner, an agent of the owner or the engineer or architect of record.  The person responsible for paying the contractor or subcontractor who submitted the payment application may withhold payment for a portion of the contract if he or she submits a written statement describing how construction work was not carried out or related goods and services were not supplied in accordance with the contract.