Royal Assent Granted: Preparing For Prompt Payment In BC

On November 27, the Construction Prompt Payment Act (the "Act") received Royal Assent. Following similar legislation in Ontario and Alberta, BC's Act marks a significant shift in the construction industry's payment practices. Payment disputes and delays have long been among the industry's most persistent challenges, reinforcing the demand for clearer expectations and more reliable payment processes. Stakeholders should begin preparing now to ensure they are ready to meet the mandatory requirements and understand the processes available to them.

Key Features of the New Prompt Payment and Adjudication Regime

1. Proper Invoice Requirements

A central feature of the new regime is the introduction of detailed rules governing proper invoices. Both owners and contractors should ensure their teams are aware of the necessary elements for a proper invoice. For contractors, non-compliance may result in payment delays. For owners, there is a limited time to dispute an invoice for failing to adhere to these necessary elements. Teams should be prepared early to issue and review invoices to ensure compliance and reduce disputes.

Contractors must provide proper invoices to owners on a monthly basis unless a contract specifies different timelines, such as milestone invoicing. A proper invoice must include:

• the contractor's name and address;
• the invoice date;
• the period, milestone, or other basis to which the invoice relates;
• identification of the contract, purchase order, or other authorization;
• a description of the services or materials supplied, including quantity if appropriate;
• the amount payable and payment terms;
• payment instructions as specified in the contract, or, if none, the name of the person or office to receive payment; and
• any prescribed information.

However, if an owner does not provide written notice within 7 days stating that an invoice does not meet these requirements and what is required to bring the invoice into conformance, the invoice is deemed to be a proper invoice. Therefore, if an owner is delayed in their review of invoices, they may be out of time to dispute whether they are a proper invoice.

2. Mandatory Payment Timelines and Notice of Non-Payment

The Act mandates various deadlines for parties across the construction chain. Both owners and contractors should be aware of these deadlines, as strict compliance is required through the construction pyramid.

The issuance of a proper invoice creates a cascading trigger for payment. Once a proper invoice has been issued, an owner must pay a contractor within 28 days of the invoice date. Upon receiving payment, contractors have 7 days to pay their subcontractors.

Compensation models often vary between tiers in a project. Misalignment in these schemes can lead to cash flow disputes or administrative confusion. For example, the 7-day payment rule does not address upstream payment delays caused by owners. These misunderstandings may lead to a lack of urgency in funding timely payments, and subcontractors are often excluded from discussions about project financing. All parties should be aware of how these differences affect payment expectations, timing, and dispute resolution.

If an owner wishes to contest the obligation to pay, the owner must issue a formal notice of non-payment within 14 days of receipt of a proper invoice, and contractors or subcontractors must do so by the earlier of seven days after receiving an upstream notice, or their calculated payment date. If a contractor or subcontractor wishes to contest an obligation to pay, they must also issue a formal notice of non-payment. This notice must also specify the amount being withheld and outline the reasons for non-payment. The Act specifies that such notices must be in "the prescribed form and manner" but does not provide these details yet—they will be set out in the regulations to follow.

If non-payment is related to an upstream non-payment, the notice must include copies of any other notices of non-payment received from higher-tier parties and include an undertaking to refer the matter to adjudication within 21 days. If an amount subject to a notice is paid at a later date, downstream payments must still be made within seven days, in accordance with the Act's prompt payment rules.

3. New Adjudication Process

One of the greatest changes coming in the Act is a new fast-track adjudication process to resolve payment disputes. Parties can access this process for issues such as improper invoices, failures to meet prompt payment deadlines, notices of non-payment, work valuation, and change order disputes. In Ontario and Alberta, we have seen hundreds of adjudications to address such disputes.

In Ontario, a large number of disputes arose from what qualifies as a "proper invoice." There was uncertainty and differing interpretations of invoice requirements, leading to prolonged payment processing and increased conflicts among parties. We can learn from these disputes and seek to avoid similar disputes in British Columbia, with the goal of reducing uncertainty and unnecessary dispute costs.

To support this process, British Columbia will establish a designated Adjudication Authority, similar to Ontario's ODACC. Adjudicators will issue written determinations within 30 days of receiving the parties' responses. These determinations are binding on an interim basis and must be complied with immediately, subject to limited options for appeal. If a party fails to pay an adjudicated amount within 15 days, the unpaid party may suspend work and recover reasonable costs associated with suspension.

4. Enforcement

The Act is not yet in force—this date will be determined by regulations that have not yet been released. However, the Act provides that it will not apply retroactively and will only govern contracts entered into after the in-force date. This issue has been a significant point of contention in Alberta and Ontario, where stakeholders faced uncertainty about whether prompt payment legislation applied to contracts executed before those provinces' prompt payment regimes came into force. Stakeholders should address this uncertainty when entering into new contracts to seek to avoid such disputes.

Takeaways

Prompt payment legislation will significantly change how payments and payment disputes are managed in the province and improves certainty to contractors with the removal of the Shimco lien. All stakeholders should consider the following in preparing for the implementation of the prompt payment and adjudication regime in BC:

• Understanding "Proper Invoices": Owners and contractors alike need to ensure their team is aware of the necessary elements required for "proper invoices." Non-compliance may result in payment delays to contractors, while delays in reviews by owners may result in invoices being deemed proper invoices.
• Tracking Deadlines: Prompt payment schemes require strict adherence to timelines for issuing payments and disputing invoices. All parties should consider implementing systems to monitor and track these deadlines.
• Keeping Proper Records: All parties should maintain clear and organized records of contracts, communications, and invoices in the event adjudication is initiated. Timelines are short, so clear document organization is critical to preparing a response.
• Planning Cash Flow: Payors should plan for statutory payment cycles to avoid funding gaps and ensure timely compliance with legal obligations.
• Supporting Smaller Subcontractors: Prompt payment structures require organized documentation and swift dispute resolution. Small subcontractors may not yet have systems fully structured to comply with the new regime, which demands faster responses and clearer documentation.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2025