Alberta has a new builders’ lien Act coming into force in July of 2021, the Prompt Payment and Construction Lien Act (the “New Act”).
The New Act will have significant implications on Alberta’s longstanding construction industry practices. The major changes from the Builders’ Lien Act (the “Old Act”) to the New Act can be summarized as follows:
- Introduction of a new prompt payment regime.
- Introduction of new adjudication procedure for payment related claims.
- Modification of lien registration periods, holdback periods and lien entitlements.
- Enhanced access to information provisions.
Introduction of New Prompt Payment Regime
The New Act prohibits the common practice of having pay-when-paid provisions in subcontracts. For contracts entered into after the coming into force of the New Act, a general contractor will no longer be able to withhold payment to a subcontractor until the general contractor has received payment from the project owner. Instead, with the introduction of the prompt payment regime, general contractors will be required, except in certain situations, to issue “proper invoices” to project owners every 31 calendar days, which requires that the project owner pay the general contractor the amounts under the proper invoice within 28 days. Once the general contractor is in receipt of payment from the project owner, they are required to pay their subcontractors within 7 days. Payment from a subcontractor to their sub-subcontractor is required within 7 days of receipt of payment, and so forth down the construction chain. If any payment along the chain is late, statutory late payment interest will be applied. The interest rate to be applied is unknow at this time but will be included in the regulations upon their release at some point prior to July 2021.
Introduction of New Adjudication Procedure for Payment Related Claims
Although the prompt payment regime requires money to flow from project owner to general contractor to subcontractor within 35 days, the process still contemplates and allows for parties to dispute whether amounts are properly owning. When such disputes arise, the New Act requires notice of non-payment to be provided within certain time frames, after which the New Act has procedures for the matter to be referred to the new adjudication process for resolution by qualified and appointed 3rd party adjudicators.
The intent of this new adjudication procedure is to offer parties a timelier, more cost-effective alternative to receiving binding decisions than is otherwise available through court actions. The details on exactly how this procedure will be implemented and the practical application of the procedure is expected to come with the release of the New Act’s regulations. Notwithstanding this new dispute resolution process, the parties will retain their ability to file liens and enforce them through an action within the Alberta Court of Queen’s Bench.
Modification of Lien Registration Periods, Holdback Periods and Lien Entitlements
Under the Old Act, with the exception of improvements to oil and gas wells, liens had to be registered within 45 days of completing the work or furnishing the materials. Under the New Act, and as a result of the mandatory time periods requiring payment under a proper invoice, liens can now be registered within 60 days. The time to register oil and gas liens remains unchanged at 90 days, however, persons engaged in the completion of improvements related to the furnishing of concrete as a material or work done in relation to concrete, now have 90 days to file their lien.
The holdback periods for such work unrelated to improvements of oil and gas wells has also been adjusted accordingly, from 45 days to 60 days, or 90 days in the case of concrete work. The impact of these increased holdback periods has been partially balanced by the introduction of phased holdback releases in certain scenarios, generally reserved for larger projects, or projects lasting longer than one year. Another change is to the minimum amount owing to a party that wishes to file a lien: the minimum amount has been increased from $300 to $700.
Enhanced Access to Information Provisions
The New Act now allows for an expanded list of persons involved in a construction project to request information in certain circumstances from the project owner, general contractor, or subcontractors. Such information may include a copy of the prime contract, subcontracts or information on the state of accounts between the parties in the construction chain. The information on the status of the accounts between the parties is an important change intended to facilitate the effective implementation of the prompt payment regime.
In addition to these major changes to the legislation, there are many other less significant changes coming that may be relevant to your particular business. If you have any questions or concerns about what any of these changes mean to your business, please contact McCuaig Desrochers LLP’s Construction Law Practice Group for guidance and assistance.
This article was written by Travis W. Yachimec, a lawyer at McCuaig Desrochers LLP.
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