Bill 37, The Builders' Lien (Prompt Payment) Amendment Act, 2020 revitalizes and modernizes the Alberta's Builders' Lien Act renaming it the Prompt Payment and Construction Lien Act (the "Act"). The new Act prescribes timelines and mandatory rules for payments and liens in all construction industry sectors, including Condominiums, to ensure contractors and subcontractors are paid promptly. Bill 37 received royal assent on December 9, 2020 and will likely come into force in or around July 2021 ("Proclamation").
WILL THIS AFFECT CURRENT CONSTRUCTION CONTRACTS?
All contracts entered into between now and the date of Proclamation will continue to be governed by the current Alberta's Builders' Lien Act. Any contract that is entered into after Proclamation, if and when that occurs, will be governed under the new Act.
PROMPT PAYMENT DEADLINES
The new statutory regime develops a prompt payment framework whereby an owner must pay its contractors, and contractors must pay their subcontractors within a legislatively prescribed timeframe. Under the present legislative regime in Alberta, construction contracts are not subject to any statutory prompt payment deadlines.
The various deadlines are as follows:
- The Act will require an owner (i.e. a Condominium Corporation or a Developer) to pay contractors within twenty-eight (28) days of receiving a proper invoice. Contractors will have an additional seven (7) daysto pay subcontractors after receiving payment from the owner;
- If an owner does not issue payment, contractors will nonetheless be required to pay subcontractors no later than thirty-five (35) days after providing the proper invoice to the owner;
- Subcontractors will have an additional seven (7) days from receipt of payment to pay subsequent subcontractors or, if the subcontractor has not been paid, forty-two (42) days after the contractor provided the proper invoice to the owner; and
- Owners, contractors and subcontractors who take issue with a proper invoice will have fourteen (14) days to provide a notice of dispute.
WHAT IS A PROPER INVOICE?
To constitute a proper invoice, an invoice must satisfy the following requirements set out in the legislation. A proper invoice must contain:
a) The full name and business address of the contractor or subcontractor;
b) The date of invoice and period during which work was done or materials were furnished;
c) Information identifying the authority whether in a written or verbal contract under which work was done;
d) A description of work done and materials furnished;
e) The amount requested for payment and the corresponding payment terms broken down for the work done or materials furnished;
f) The name, title and contact information of the person to whom the payment is to be sent;
g) A statement indicating that the invoice provided is intended to constitute a proper invoice; and
h) Any other information that may be prescribed through regulation or otherwise.
If an invoice does not comply with the above requirements, the prompt payment deadlines will not apply until the failures are remedied. The new Act will require that a proper invoice be provided to the owner at least every thirty-one (31) days. There is an exception for situations where a contract includes a provision for the testing and commissioning of work and such conditions are not met.
Construction disputes in Alberta are lengthy, and expensive for all parties involved. The Act addresses this concern by establishing a statutory adjudication scheme to resolve disputes. This process is still under development and we expect upcoming regulations to clarify the particulars of the adjudication process under the new regime.
CHANGES TO BUILDERS LIENS'
The Act will extend lien filing deadlines from forty-five (45) days to sixty (60) days for general construction work and from forty-five (45) days to ninety (90) days for the concrete industry. In addition, the minimum amount owed that can be subject to a lien will increase from $300 to $700. Owners, including Condominiums, will be required to retain lien holdback funds for the duration of the extended lien filing periods.
SUMMARY OF KEY CHANGES
- The Act will require an owner to pay contractors within twenty-eight (28) days of receiving a proper invoice. Contractors will have an additional seven (7) days to pay subcontractors after receiving payment from the owner;
- The Act states contractors are required to pay subcontractors no later than thirty-five (35) days after providing the proper invoice to the owner;
- Subcontractors will have an additional seven (7) days from receipt of payment to pay subsequent subcontractors or, if the subcontractor has not been paid, forty-two (42) days after the contractor provided the proper invoice to the owner;
- The Act extends timelines for registering liens in the construction industry from forty-five (45) days to sixty (60) days for general construction and from forty-five (45) days to ninety (90) days for the concrete industry;
- Owners, contractors and subcontractors who take issue with a proper invoice will have fourteen (14) days to provide a notice of dispute;
- The Act increases the minimum amount owed that can be subject to a lien from $300 to $700; and
- The Act allows dispute resolution through adjudication.
The important take away for Condominium Corporations and Property Managers is to know that any contract with trades for work should be in writing and those written contacts should ensure they follow these new rules when the Act comes into force.
Look for our next update regarding the regulations that will clarify the details of the adjudication process pursuant to the Act.
Should you have any questions please do not hesitate to contact the SVR Lawyers Condominium Group.
About Mackrell International - Canada - Scott Venturo LLP is a full service business law firm in Calgary, AB and a member of Mackrell International. Mackrell International - Canada is comprised of four independent law firms in Alberta, British Columbia, Ontario and Quebec. Each firm is regionally based and well-connected in our communities, an advantage shared with our clients. With close relations amongst our Canadian member firms, we are committed to working with clients who have legal needs in multiple jurisdictions within Canada.
This article is intended to be an overview and is for informational purposes only.