Ontario Construction Act 2018: Prompt Payment, Construction Liens, ODACC Adjudication & Engineer Rights

Bill 142 Overview — What Changed

The Construction Act 2018 (S.O. 2017, c. 24 — formerly Construction Lien Act, R.S.O. 1990) made the most significant reforms to Ontario construction law in decades:

• Prompt payment: Mandatory payment timelines throughout the payment chain, triggered by a proper invoice and governed by current non-payment notice rules
• ODACC adjudication: A mandatory adjudication mechanism for eligible payment disputes, providing binding interim decisions without immediately going to court
• Modernized lien law: Updated lien timelines, new rules for public sector contracts, clarified holdback provisions, and improved trust fund protections
• Substantial performance: Clarified definition and publication requirements to provide more certainty about when holdback can be released

The applicable version of the Act depends on the contract and project timeline, so parties should confirm which prompt payment, lien, and adjudication provisions govern their file before relying on a simplified summary.

Prompt Payment

The prompt payment regime creates a statutory payment cascade from owner to contractor and then downstream through the project team. Once a proper invoice is delivered, each payer must either pay within the applicable statutory deadline or serve a compliant notice of non-payment within the required time.

A "proper invoice" must satisfy the Act and the contract. If an invoice is deficient, the recipient should address that issue immediately because the validity of the invoice often affects when the payment clock starts and whether prompt payment remedies are available.

Notice of Non-Payment

A paying party who disputes all or part of an invoice must serve a written notice of non-payment within the statutory deadline that applies to that payment tier. If the notice is late or defective, the payer can lose important rights under the prompt payment regime even where a substantive dispute exists.

That makes notice management a critical project-control issue. Owners, contractors, and consultants should coordinate their invoice review process carefully so a legitimate dispute is not undermined by a missed statutory response window.

10% Statutory Holdback

The Construction Act requires that at each stage of the payment chain, 10% of amounts earned be retained as a statutory holdback:

• Owner retains 10% from each contractor payment
• Contractor retains 10% from each subcontractor payment
• Subcontractor retains 10% from payments to sub-subcontractors

The holdback creates a lien fund — lien claimants can assert claims against the holdback. The holdback cannot be released until the lien period expires and all liens are cleared. For contracts with multiple stages or certifiable phases, a separate holdback period may apply to each phase.

Post-substantial performance, holdback release turns on the current lien and publication rules. Before releasing retained funds, owners and contractors should confirm that the applicable publication, lien, and discharge conditions have been fully satisfied.

Construction Liens in Ontario

The construction lien is the fundamental payment protection tool under the Construction Act. Any person who supplies services or materials to an improvement has lien rights against the owner's interest in the premises. Persons entitled to a lien include:

• General contractors
• Subcontractors and sub-subcontractors at any tier
• Material suppliers
• Equipment lessors
• Engineers, architects, and surveyors who provide services in relation to the improvement
• Workers

The lien amount is the unpaid amount owed to the lienor for services or materials supplied. The lien creates a charge against the title of the improved land — effectively encumbering the property until the lien is cleared (paid, vacated by security, or discharged by court order).

Lien Registration Timelines

Lien rights only survive if they are preserved and perfected within the statutory deadlines that apply to the project. Missing those deadlines can extinguish the lien, so any party considering a lien should confirm the live timeline with counsel rather than relying on a generalized rule of thumb.

For structural engineers, the "last day of supplying services" is often a key trigger for the lien clock. Track the last field review, design deliverable, or review letter carefully and obtain legal advice promptly if payment issues arise.

ODACC Adjudication

ODACC (Ontario Dispute Adjudication for Construction Contracts) provides a mandatory adjudication pathway for payment disputes that is faster and cheaper than court:

• Any party can trigger adjudication for an eligible dispute by serving the required notice on the other party
• The parties either agree on an adjudicator or ODACC appoints one under the current adjudication rules
• The adjudicator issues a binding interim decision on the statutory schedule, subject to any permitted extensions
• The decision is binding and immediately enforceable as a court judgment — the losing party must pay promptly
• Either party may bring the same issue to court or arbitration after adjudication for a final determination (adjudication is "interim binding")
• Adjudicator fees are paid by the losing party (unless the adjudicator orders otherwise)

Engineering Firms and the Construction Act

Structural engineering firms providing services on Ontario construction projects have important rights and obligations under the Construction Act:

• Lien rights: Engineering services provided in relation to an improvement — design, review, inspection, General Review — can qualify for lien rights. If an engineering firm is unpaid for these services, it should confirm the live preservation deadline immediately rather than waiting until the project is near closeout.
• Prompt payment eligibility: Engineering contracts structured as contracts for services in relation to an improvement may be subject to prompt payment if they fall within the Construction Act's definition of contract. Firms should review their engagement letters to assess eligibility and to ensure their invoicing is in the form of a "proper invoice."
• ODACC adjudication for unpaid fees: If prompt payment obligations are not met, an engineering firm may be able to trigger ODACC adjudication for a fast interim determination without going straight to court.
• Trust fund obligations if acting as holding party: Where an engineering firm receives payments from an owner and is responsible for further distribution, trust fund provisions may apply.