Alberta's Bill 37, The Builders' Lien (Prompt Payment) Amendment Act, received royal assent on December 9, 2020. As discussed in our recent legal update, Bill 37 will modernize Alberta's Builders' Lien Act, renaming it the Prompt Payment and Construction Lien Act (the Act) and adding prompt payment deadlines and an adjudication mechanism to resolve disputes. This update reviews the upcoming changes now that the Act has passed into law.
Transition period
The Act will come into force on proclamation, which is expected to occur in July 2021. This leeway period has been provided to give parties in the construction industry time to prepare for the upcoming changes.
In particular, any contracts or subcontracts entered into between now and proclamation will continue to be governed by Alberta's former Builders' Lien Act until those contracts expire, terminate, or are amended. Any contract or subcontract that postdates proclamation will be governed under the new Act.
Adding prompt payment deadlines
Prompt payment is a legislative framework whereby an owner must pay its contractors, and contractors must pay their subcontractors, within a set timeframe. At present, construction contracts in Alberta are not subject to any statutory prompt payment deadlines. However, under the new Act, any owners, contractors, and subcontractors who enter into contracts after July 2021 will be statutorily mandated to pay within a set timeframe.
The Act will require an owner to pay contractors within 28 days of receiving a "proper invoice," and contractors will have an additional seven days to pay subcontractors down the line. If an owner does not issue payment, contractors will nonetheless be required to pay subcontractors no later than 35 days after providing the proper invoice to the owner.
Similarly, subcontractors will have an additional seven days from receipt of payment to pay subsequent subcontractors or, if the subcontractor has not been paid, 42 days after the contractor provided the proper invoice to the owner. Owners, contractors and subcontractors who take issue with a proper invoice will have 14 days to provide a notice of dispute.
To constitute a proper invoice, an invoice must satisfy seven requirements set out in the legislation. Failure to satisfy the requirements will prevent prompt payment deadlines from commencing until any failures are remedied. The new legislation will require that a proper invoice be provided to the owner at least every 31 days, unless the contract includes a provision for the testing and commissioning of work and such conditions are not met.
Creating an adjudication scheme
Construction disputes in Alberta are currently expensive for all parties involved, often requiring lengthy court applications. The Act responds to this concern by establishing a statutory adjudication scheme to resolve disputes. The scheme will supersede any adjudication procedures set out in contract and an adjudicator's decision will be final and binding on all parties, subject to an application for judicial review.
The Act is silent on the details of the adjudication process, such as the cost of adjudication, process for appointing adjudicators, and range of disputes that may be referred to adjudication. We expect upcoming regulations will clarify these points.
Changes to builders' liens
Finally, the Act will extend lien filing deadlines from 45 to 60 days for general work, and 45 to 90 days for work in relation to concrete. The minimum amount owed that can be subject to a lien will increase from $300 to $700. Owners will be required to retain lien funds for the duration of the extended lien filing periods.
The Act will also:
- permit trust beneficiaries, contractors, and subcontractors to demand access to statements of account between owners, contractors, and subcontractors; and
- permit parties to agree that holdbacks on liens will be released annually, for multi-year projects, or on a phased basis, for projects less than one year.
Our construction group in Calgary is versed on the new Act and is closely monitoring the progress of its anticipated regulations. We are well positioned to advise construction industry stakeholders on aligning their internal processes and contractual relationships with the incoming legislative framework in preparation for proclamation in July 2021.
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