The Builders’ Lien (Prompt Payment) Amendment Act is expected to come into force in July 2021. It will expand upon the Builders’ Lien Act 2000. The 2000 Act will now be known as the Prompt Payment and Construction Lien Act. As indicated by the new name, the Act seeks to promote prompt payment within the construction industry. It also sets out a method of dispute adjudication in an attempt to resolve issues outside of court. Further to these amendments, the Red Tape Reduction Implementation Act 2021 was also introduced. This particular Act provides clarity to the dispute adjudication process. The government seems to be trying to provide statutory footing where it had previously been lacking.
The Act sets out the requirements for a “proper invoice.” These invoices are to be given, in writing, at least every 31 days. The requirements for a proper invoice are as follows:
- Contractor’s name and business address;
- Date of the proper invoice and time frame of work done or materials furnished;
- Identification of authority under which work was done or materials furnished;
- Description of work done or materials furnished;
- Payment amount and payment terms;
- Name, title and contact information of person to receive payment;
- A statement that the invoice is intended to be a proper invoice;
- Other information.
Invoices may be revised provided that the parties agree, the date of the invoice is unchanged and the above requirements are still met.
Relatively short payment deadlines have also been introduced. The owner is required to pay within 28 days of receiving the invoice. If there is a dispute, the owner has 14 days from receipt of the invoice to give notice of dispute. From contractor to subcontractor, the contractor has 7 days to pay the subcontractors from receipt of payment from the owner. This carries on down the chain. The Act stipulates what is to be done in the event of partial payment. It also further clarifies what to do in a situation with a partial payment and multiple subcontractors.
A contractor is obligated to pay their subcontractors, regardless of non-payment or partial payment by the owner, no later than 35 days after the proper invoice has been issued. The only exception is if the following are provided:
- proper notice of non-payment;
- an undertaking to refer to adjudication;
- a copy of the notice of dispute given by the owner.
The same applies to payments between subcontractors and their subcontractors.
The Act promotes communication between parties in that notice of dispute and notice of non-payment must be communicated to subcontractors. Regardless of questionable practical value from the construction industry viewpoint, the new regulations provide a trail of documentation in the event of a dispute.
Right to Information
Under the Builders’ Lien Act 2000, only a lienholder was able to demand access to information. This has now been expanded to include beneficiaries of a trust and contractors or subcontractors currently working under contract for an owner, contractor or subcontractor. Parties with rights to information can demand to see contracts between involved parties as well as statements of the state of accounts. The government is promoting good communication and transparency between key parties.
Dispute Adjudication and the Red Tape Reduction Implementation Act 2021
The reforms introduce a method of dispute adjudication for the construction industry. The Minister will designate Nominating Authorities who will then appoint adjudicators. Decisions reached in adjudication are to be final and binding. However, the decision may be subject to judicial review. Following these recent reforms however, the government saw the need to further clarify the adjudication process and introduced the Red Tape Reduction Implementation Act 2021. It was given royal assent in June 2021. It amends the Builders’ Lien (Prompt Payment) Act 2020 and comes into force on various dates. The 2021 Act sets out that adjudication can only be used if there is no action already in court. It must also be commenced before the date of completion of the contract. Should notice of adjudication and an action in court occur on the same day, the action will prevail over adjudication. The decision of the adjudicator is still to be binding but there are now clear exceptions to this. The exceptions are as follows:
- When a court order is made;
- When judicial review is applied for;
- If the parties, in writing, agree to arbitration; or
- The parties have reached an agreement.
The new reforms allow for decisions made by adjudication to be considered by the court or an arbitrator, whereas under the 2020 Act, they were final. The 2021 Act also states that the adjudicator’s order can be registered as an order of the court. These amendments to the amendments are a further attempt to encourage dispute resolution outside of the courts.
The Red Tape Reduction Implementation Act 2021 extends the Builders’ Lien (Prompt Payment) Amendment Act 2020 to include consulting professionals. At the same time, it also removes the government from the equation. Public works, the Crown in right of Alberta and provincial corporations are exempt from the new Prompt Payment regulations. Certificates of substantial performance are now allowed to be posted on the job site or provided electronically.
Previously, liens could be registered for claims of $300 and above. This amount has now been increased to $700. The period of retention for the major lien fund has been increased from 45 days to 60 days. Similar to oil and gas projects currently covered by the Act, concrete projects have been added as their own category with a retention period of 90 days. Under certain circumstances, the owner is required to make a payment of the retained amount. This will occur with projects longer than one year or if the contract provides for phased payments. It will also apply when the contract price exceeds the prescribed amount. This is a change from the previous legislation that merely allowed for release of funds; the new regulations require it under certain circumstances.
These changes will have a significant impact on the construction industry and should be closely followed. The tight deadlines and statutory requirements for invoicing will be pertinent to day to day operations within the industry. This legislation will apply to contracts entered into following proclamation, which is expected to be July 2021. All contracts dated prior to the Builders’ Lien (Prompt Payment) Amendment Act coming into force will abide by the previous regulations.
Jessica Lypkie is currently studying law at the University of Kent in England. She has a bachelor of commerce from the University of Alberta in business economics and business law. Following that she studied pastry at Le Cordon Bleu in Ottawa.