In the summer of 2022, Alberta’s legislature introduced changes to the province’s construction law legislation, motivated by the rapid growth of the real estate industry and similar changes in provinces across Canada. The legislation marks the first update to the construction lien framework in several decades. After being in force for a number of months, it is time to review the operation of these legislative changes.
The Prompt Payment and Construction Lien Act received royal assent on August 29, 2022. It incorporates changes to the Builders’ Lien Act originating from the Builder’s Lien (Prompt Payment) Amendment Act and the Red Tape Reduction Implementation Act, followed by the Prompt Payment and Adjudication Regulation and the Prompt Payment and Construction Lien Forms Regulation. Together, the legislation and regulations constitute the new laws on prompt payment and construction liens, including the new adjudication mechanism. The following sections will review the new frameworks for construction liens and prompt payment.
Construction liens are legal claims made by contractors, subcontractors, or suppliers for payment from a property owner for work performed or materials supplied in a construction project. The purpose of a construction lien is to secure compensation for the work done and prevent the property owner from transferring the property until the payment is made. The construction lien is attached to the property and serves as a notice to potential buyers that an outstanding debt must be paid before the property can be sold or transferred.
Under the new legislation, the registration deadlines for construction liens have been increased. For contracts entered into after August 29, 2022, construction liens must be registered within 60 days of the contract’s completion, increasing from 45 days under the Builders’ Lien Act. It is important to note that projects commenced prior to August 29, 2022 are still subject to the 45 day deadline.
The registration deadline is 90 days in the case of “furnishing of concrete as a material or work done in relation to concrete”, doubling the period under the previous legislation. However, no changes were made to the registration deadline for work completed on an oil or gas well/ site – the deadline remains 90 days after the completion of work.
Much of the operation of holdbacks remains unchanged from the regime under the Builders’ Lien Act; the release is subject to receiving a certificate of substantial performance or the completion of work and the absence of builders’ liens on the property. However, the new legislation requires a progressive release of holdback for contracts with a “completion schedule that is longer than one year” and where the contract price is greater than $10M. In s.20(1), the legislation also mandates that an issuer of a certificate of substantial performance must provide “an electronic copy of the signed certificate in accordance with the applicable contract or agreement.” The old legislation only required posting the certificate on the job site.
The new legislation will apply to “professionals acting in a consultative capacity”, which the Prompt Payment and Adjudication Regulation defines as consultants who are regulated professional engineers and architects performing work “in respect of an improvement.”
Prompt payment under the Prompt Payment and Construction Lien Act is defined as the timely payment of invoices for work performed or materials supplied in a construction project. The payment is contingent on the issuance of a proper invoice, which must include:
- the contractor’s name and business address;
- the date of the proper invoice and the period during which the work was done or materials were furnished;
- information identifying the authority, whether in a written or verbal contract or otherwise, under which the work was done or materials were furnished;
- a description of the work done or materials furnished;
- the amount requested for payment and the corresponding payment terms broken down for the work done or materials furnished;
- the name, title and contact information of the person to whom the payment is to be sent;
- a statement indicating that the invoice provided is intended to constitute a proper invoice;
- any other information that may be prescribed.
A proper invoice must be given to the owner every 31 days during the contract “unless the contract includes a provision for the testing and commissioning of the improvement or of the work done or materials furnished under the contract.” Once a proper invoice is received, prompt payment deadlines are initiated.
The Prompt Payment and Construction Lien Act includes deadlines that differ depending on the contractual relationship.
For an owner to a contractor, the owner must pay the invoice within 28 days of receiving the proper invoice. The owner may dispute all or part of the invoice and, if doing so, must provide the contractor with a notice of dispute, which must include the “amount of the proper invoice that is not being paid and detailing all the reasons for non‑payment.”
If the contractor receives full invoice payment within the timelines specified above, the contractor must pay each subcontractor the amount owed for work done no later than 7 days after receiving payment. If the contractor only received a partial payment of the proper invoice, the contractor must pay “the amount paid by the owner for the work done or the materials furnished.” In this case, subcontractors whose work was not disputed will receive priority over the subcontractors’ work regarding payment. Regardless, the contractor must pay the subcontractor(s) for work that formed part of the proper invoice within 35 days. The exception includes a deferral or dispute.
Lastly, for subcontractor to subcontractor, the payment deadline is 7 days after payment from the contractor. If not paid, the deadline is 42 days after the proper invoice is given to the owner by the contractor.
The Prompt Payment and Construction Lien Act and its regulations create an adjudication mechanism for disputes relating to payment and change orders, notices of non-payment, and holdbacks. Per s.33.4(1), parties may only adjudicate where an action in court has yet to commence and if a contract is yet to be complete. The adjudication is initiated with the filing of a written notice of adjudication. Thereafter, the parties are subject to deadlines relating to the selection of an adjudicator, submissions, and the adjudicator’s determination.
Our construction law lawyers are highly versed in the latest legislation within this field. If you have questions regarding construction liens or prompt payment, contact DBB Law.
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