Surety Bond Quarterly - Fall 2017 - 31

of Ontario's Construction Lien Act."
This report was prepared by Bruce
Reynolds and Sharon Vogel of the
Canadian law firm Borden Ladner
Gervais LLP for the Ministry of the
Attorney General and the Ministry of
Economic Development, Employment
and Infrastructure. With their help
and hard work by SAC, this proposed
legislation was drafted. The new
measure seeks to update Ontario's
construction laws to reflect current
construction industry practices and
to support the thousands of construction workers and businesses across
the province. Of the 101 recommendations included in the report,
98 were adopted in the bill.
A new section, Part XI.1, covering
surety bonds has been added to the
proposed CLA. Section 85.1 of the Act
creates requirements for a contractor
that enters into a contract with an
owner that is the Crown, a municipality or a broader public sector organization (public contract) to furnish the
owner with a labor and material payment bond and with a performance
bond if the contract price is above
the amount set out in the regulations.
This means, if passed, this new Act
would require all public construction
work in the province to be protected
by at least 50 percent performance
and payment bonds.
The proposed Act specifies bonds
are to be provided on public contracts
where the contract price exceeds
the prescribed threshold amount.
Since there is no definition of the
threshold amount in the Act itself,
this is expected to be specified in the
enabling regulations. Other sections
of the proposed CLA require prompt
payment with clear payment timelines
for all parties involved in a public construction project. A new fast-tracked
adjudication process outside of court
will deal with payment slowing disputes. The new act will also update
the rules surrounding construction
liens, trusts, and holdbacks (Canadian
version of retainage).
This proposal is absolutely groundbreaking. The current lien act in
Ontario was introduced in 1983 and
has not been amended since then.

Part of the recommendation in the
Reynolds and Vogel review was that
the surety bond requirement should
be addressed, which made it into the
proposed legislation. It's a pretty
exciting time in Ontario. Everybody
is watching this unfold. Who knows?
This may lead to changes in the lien
legislation in the other provinces. The
benefit of this new CLA would be that
public spending would be guaranteed through bonds. If a contractor
defaulted on a project, the cost of
completing the work would not fall
on the government and, ultimately,
the taxpayers, but would be covered
by the surety bonds.
Surety Bond Marketing
Despite the current lack of government requirements for bonding, SAC
has been active in explaining the
value of surety bonds to public and
private owners. When SAC staff sit
down with owners to discuss onerous
surety situations, they have a very
good track record for success. They
advocate for a better surety product
and are fairly successful in that.
In addition to construction contracts, there are also contracts that
span a number of years, such as janitorial, waste removal, or snow clearance contracts. SAC's development
team created the multi-year bond
forms designed especially for these
types of contracts. SAC has a very
good track record explaining those
bonds and why it's better to use them
than the standard bond.
Why Bonds are
Needed in Canada
Just because there is no law requiring surety bonds in Canada does
not mean they are unimportant. If
a contractor defaults on a project
and there is no bond, the owner is
stuck with an incomplete project
and needs a lot of dollars to fix it.
Subcontractors are left with unpaid
bills and can resort only to their lien
rights. Depending on the circumstances causing the contractor to
default, the subcontractors may end
up in bankruptcy court trying to collect what is owed to them.

When there have been situations
with bonded projects contractors did
not complete, those claims have been
resolved satisfactorily. There have
been some high-profile claims. There
have been situations where a surety
has stepped in to fix a problem with
the public being unaware that there
was an issue. For example, within the
last five years a contractor went bankrupt while working on unbonded and
bonded projects, including a number
of high-profile government projects.
Of those, the bonded projects got
completed more quickly, while the
unbonded ones cost the public purse
a lot more money.
Any time a project grinds to a halt
because of a contractor's default, there
are always hidden costs. Nobody is
going to come on the job site to complete the work for the remaining money
in the project fund. Subcontractors
won't go back to a project where
they already haven't been paid. But if
there's a bond, they are more likely to
return and finish the job.
The Bill's Future
For the new proposed CLA to become
law, it must proceed through second
and third readings and probably committee study before receiving Royal
Assent. That is the last step required
for a bill to become a law in Canada.
Amendments could be proposed at
any time during this process.
Now that the Ontario Legislative
Assembly has reconvened as of
September 11, 2017, the new CLA will
most likely become law because the
government has a legislative majority. Once the bill is passed, Attorney
General Naqvi anticipates the act's
legislative and regulatory changes
will take effect in 2018.
When Bill 142 becomes law, surety
bonds will be required for all Ontario
government contracts over a specified dollar value. Other provisions
of the law relating to prompt payment and dispute resolution will
also apply. In addition, many provisions will only become effective
after related regulations are adopted
and proclaimed in force by the
Lieutenant Governor.

NATIONAL ASSOCIATION OF SURETY BOND PRODUCERS | WWW.NASBP.ORG

31


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Table of Contents for the Digital Edition of Surety Bond Quarterly - Fall 2017

NASBP Upcoming Meetings & Events
2017–2018 Executive Committee
From the CEO: Advice for the Advisor!
How Can Construction Contractors Expedite Payment on Federal Contracts?
The Growing Importance of the Bond Producer in the Efficient Resolution of Claims
Practical Tools to Help Jump-Start Your Company’s Cyber Plan
Bond Agency Owners: The Hardest Part is Letting Go
New Software Selection and Implementation is not a Weekend Project
Is Canada Soon to Have Its Version of the Miller Act?
2017 NASBP Resource Directory
Surety Bond Quarterly - Fall 2017 - Intro
Surety Bond Quarterly - Fall 2017 - cover1
Surety Bond Quarterly - Fall 2017 - cover2
Surety Bond Quarterly - Fall 2017 - 3
Surety Bond Quarterly - Fall 2017 - 4
Surety Bond Quarterly - Fall 2017 - 5
Surety Bond Quarterly - Fall 2017 - 6
Surety Bond Quarterly - Fall 2017 - 2017–2018 Executive Committee
Surety Bond Quarterly - Fall 2017 - 8
Surety Bond Quarterly - Fall 2017 - From the CEO: Advice for the Advisor!
Surety Bond Quarterly - Fall 2017 - How Can Construction Contractors Expedite Payment on Federal Contracts?
Surety Bond Quarterly - Fall 2017 - 11
Surety Bond Quarterly - Fall 2017 - 12
Surety Bond Quarterly - Fall 2017 - 13
Surety Bond Quarterly - Fall 2017 - The Growing Importance of the Bond Producer in the Efficient Resolution of Claims
Surety Bond Quarterly - Fall 2017 - 15
Surety Bond Quarterly - Fall 2017 - 16
Surety Bond Quarterly - Fall 2017 - 17
Surety Bond Quarterly - Fall 2017 - Practical Tools to Help Jump-Start Your Company’s Cyber Plan
Surety Bond Quarterly - Fall 2017 - 19
Surety Bond Quarterly - Fall 2017 - 20
Surety Bond Quarterly - Fall 2017 - Bond Agency Owners: The Hardest Part is Letting Go
Surety Bond Quarterly - Fall 2017 - 22
Surety Bond Quarterly - Fall 2017 - 23
Surety Bond Quarterly - Fall 2017 - 24
Surety Bond Quarterly - Fall 2017 - 25
Surety Bond Quarterly - Fall 2017 - New Software Selection and Implementation is not a Weekend Project
Surety Bond Quarterly - Fall 2017 - 27
Surety Bond Quarterly - Fall 2017 - 28
Surety Bond Quarterly - Fall 2017 - 29
Surety Bond Quarterly - Fall 2017 - Is Canada Soon to Have Its Version of the Miller Act?
Surety Bond Quarterly - Fall 2017 - 31
Surety Bond Quarterly - Fall 2017 - 32
Surety Bond Quarterly - Fall 2017 - 2017 NASBP Resource Directory
Surety Bond Quarterly - Fall 2017 - 34
Surety Bond Quarterly - Fall 2017 - 35
Surety Bond Quarterly - Fall 2017 - 36
Surety Bond Quarterly - Fall 2017 - 37
Surety Bond Quarterly - Fall 2017 - 38
Surety Bond Quarterly - Fall 2017 - 39
Surety Bond Quarterly - Fall 2017 - 40
Surety Bond Quarterly - Fall 2017 - 41
Surety Bond Quarterly - Fall 2017 - 42
Surety Bond Quarterly - Fall 2017 - 43
Surety Bond Quarterly - Fall 2017 - 44
Surety Bond Quarterly - Fall 2017 - 45
Surety Bond Quarterly - Fall 2017 - 46
Surety Bond Quarterly - Fall 2017 - cover3
Surety Bond Quarterly - Fall 2017 - cover4
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