June 1, 2009

National Trade Contractors Coalition of Canada

Contractors press Ottawa for prompt payment legislation

DON PROCTER

correspondent

The National Trade Contractors Coalition of Canada (NTCCC) is pressing the federal government for prompt payment legislation so trade contractors get paid in a timely fashion by general contractors (GCs).

John Blair, executive director of the Masonry Contractors Association and chair of the NTCCC’s prompt payment committee, said delayed payments are common in the industry.

Late payments have become an accepted way of doing business, he said, noting that on some projects there are no strict timelines for the generals to pay their subs for work completed.

Furthermore, a common contract clause stipulates that subtrades get paid only when GCs are paid.

“Those are punitive clauses and we don’t see them as a functioning part of the standard documents promoted by the CCA (Canadian Construction Association)” said Blair.

The NTCCC wants the legislation to include interest and penalty fees levied on GCs who don’t meet their obligations. GCs could be on the hook for legal costs of subs trying to get their money.

Blair said he hopes the feds will act on the issue this year, at least through a private member’s bill.

“I don’t see or believe that there is tremendous political opposition to something that makes so much sense as this,” he said, adding that prompt payment legislation is in place in some American states and parts of Australia and Britain.

Clive Thurston, president of the Ontario General Contractors Association, said NTCCC’s push for legislation draws attention to a problem that does exist and has been getting worse since the downturn. However, he said that more legislation likely won’t resolve it.

“The solution has to come from the industry. To refer it to the courts and the legislators, in my opinion, is not going to be successful,” he said.

Part of the solution, Thurston said, is for subtrades and suppliers to start turning down work when the contract terms are unreasonable. GCs too, must say no to unfair contracts laid out by owners.

Blair agreed that subtrades have to take some ownership for the problem because they have tolerated it for a long time and haven’t exercised their rights to remedy the situation.

For example, most generals and their subtrades won’t file a lien because of fear it will offend their employer, said Thurston.

He advises his members to get their lawyers to issue a letter to the owners when there is no sign of payment and the lien period is nearly up.

“It’s the only way you have to protect your money,” he said.

In a perfect world, subcontractors are paid a progress draw by GCs every 30 days, based on work completed.

In the real world, however, GCs often don’t get paid by the project owner on time and therefore don’t pay their subs on time.

Paid When Paid clauses are common in most contracts.

Still, many generals will pay their subs even before they have been paid by the owners.

If a prompt payment schedule was worked out between the owners and the GCs, the subcontractors might not face so many delayed payments, but negotiating with owners isn’t common.

Thurston said that while not all owners are holding back draws, the ones that are produce contracts which are far more adversarial than we’ve seen in years. The payment terms are longer (60 to 90 days, instead of the usual 30 day, for example) and the conditions of getting payment are becoming more onerous.

“Clauses that we should never agree to are showing up that transfer more risk and cost to the generals,” he said.

He said subtrades and GCs should work together to convince owners to remove unfair terms and conditions in contracts, but decades of mistrust between the two groups has kept them from working together on a solution.

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