Change is coming to the Alberta construction industry in the form of new legislation for builders’ liens and prompt payment.
On October 21, 2020, the Minister for Service Alberta, Nate Glubish, introduced Bill 37, Builders’ Lien (Prompt Payment) Amendment Act, 2020 (“Bill 37”) for first reading. Royal Assent was granted for Bill 37 on December 9, 2020. The Bill amends the Builders’ Lien Act, changing the act to the Prompt Payment and Construction Lien Act (the “Act”).
Through the last year and a half, the government has been engaged in consultations with industry stakeholders in order to iron out the practical realities of implementing the Act. On August 29, 2022, the Act will come into force. Below we set the important provisions that project owners, contractors and subcontractors will need to be aware of as they enter into contracts in late 2022 and beyond.
As always, if these provisions affect your project or your industry, please contact the commercial litigation team at Brownlee LLP.
The following major changes are coming to the Act on August 29, 2022:
1. Timing Changes for Liens
a. The timeline for registration of a lien in respect of any improvement that is not an oil and gas well is extended from 45 days to 60 days; and
b. The timeline for registration of a lien in respect of any improvement in the concrete industry is set at 90 days.
2. New Payment Formats
a. New prompt payment timelines are introduced by the Act. In order to fall under these new provisions, a contractor (as well as subcontractors) must submit what is termed a “Proper Invoice”
b. Proper Invoices must contain the following:
i. the contractor’s or subcontractor’s name and business address;
ii. the date of the proper invoice and the period during which the work was done or materials were furnished;
iii. information identifying the authority, whether in a written or verbal contract or otherwise, under which the work was done or materials were furnished;
iv. a description of the work done or materials furnished;
v. the amount requested for payment and the corresponding payment terms broken down for the work done or materials furnished;
vi. the name, title and contact information of the person to whom the payment is to be sent;
vii. a statement indicating that the invoice provided is intended to constitute a proper invoice; and
viii. any other information that may be prescribed.
c. Once a contractor submits a Proper Invoice, the prompt payment timelines come into effect.
d. Upon receipt of a Proper Invoice, an owner or contractor (in the case of a subcontractor) has 28 days to make payment of the invoiced amount or a partial amount.
e. If the payor disputes the invoiced amount, they have 14 days to provide written notice of the dispute to the payee.
f. Once a contractor receives payment from an owner, they have seven days to make payment to all subcontractors.
g. A subcontractor has the same obligations, but has 42 days from sending a Proper Invoice to pay, as opposed to 35.
h. The timelines for payment set out in Bill 37 will supersede any payment clauses in a contract, including “pay-when-paid” clauses.
3. Dispute Adjudication
a. Any party to a construction contract or subcontract will be able to bring a dispute before an adjudicator under section 33.4 of the new Act.
b. Dispute resolution is commenced when a party issues a Notice of Dispute in writing to the other party. After notice in writing is issued, either party can refer the matter to adjudication.
c. Per section 33.5, adjudication must be conducted in accordance with the adjudication procedures set out in the regulations or established by the responsible Nominating Authority.
d. Section 33.6 dictates that an adjudicator may hear a dispute regarding any matter prescribed under this Part. An adjudicator may refer any matter to the court if the adjudicator does not have the jurisdiction to hear the matter or where, in the opinion of the adjudicator, the court is the more appropriate forum for hearing the matter.
e. The determination of a matter by the adjudicator is final and binding on the parties to the adjudication, subject to section 33.7, which states that these decisions can be subject to an application for judicial review.
f. Based on Ontario’s current prompt payment regime, it is expected that the types of disputes heard by adjudicators will include simple debt claims, workmanship issues, change orders and impact claims.
a. On February 25, 2022, the Lieutenant Governor in Council filed an order in council containing the Act’s new regulations: Prompt Payment and Adjudication Regulation, Alta Reg 23/2022 (Regulation).
b. The regulations set out the amended forms for payment disputes and general lien disputes.
c. Engineers and architects are covered by the new regulation scheme, a significant change from earlier statutes.
d. Administration of the adjudication process is set out in the regulations, including the associated costs for adjudicators and the training and eligibility for adjudicators.
e. The eligibility of certain payment and lien disputes for adjudication is also set out in the new regulations.
Beginning August 29, 2022, please adjust your lien planning schedules. If you are an owner or contractor, be sure to review the payment clauses in your contracts to ensure that they align with the new payment formats and timelines. The Act cannot be contracted out of, and the new provisions will supersede any previous payment clauses you have drafted in your contracts.