On October 21, 2020, Bill 37: The Builders' Lien (Prompt Payment) Amendment Act, 2020, (the "Prompt Payment Act") was introduced and passed the first reading.
If passed, significant changes will be made to Alberta's current builders' lien regime. In addition to renaming the Builders' Lien Act to become the Prompt Payment and Construction Lien Act, the proposed amendments will also establish a 28-day timeline for payment of invoices, prohibit "pay-when-paid" clauses, extend timelines for registering liens, allow dispute resolution through adjudication, and more.
Most notably, the proposed Prompt Payment section provides that an owner, a contractor or a subcontractor who owes money under a proper invoice will have to pay within 28 days of receipt. A proper invoice will have to contain:
- the contractor's or subcontractor's name and business address;
- the date of the 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.
In addition, a provision in a contract that makes the giving of a proper invoice conditional on the prior certification of a person (other than the testing or commissioning of the improvement) or prior approval of the owner to give the invoice, would be of no force or effect. Furthermore, any existing contract provision requiring a (sub)contractor to pay a subcontractor after receiving payment for the work done or materials furnished, would be of no force or effect.
If passed, the Prompt Payment Act will extend the deadlines for the registration of construction-related liens from 45 to 60 days and for concrete-related liens from 45 days to 90 days. (The deadline for the registration of the oil and gas related liens will remain at 90 days.)
Under the proposed Prompt Payment Act, an owner, a contractor or a subcontractor will be able to dispute the proper invoice within 14 days of receipt. Furthermore, any party to a contract or a subcontract will be able to refer a dispute to adjudication. Subject to judicial review, the adjudicator's decision will be final and binding on parties to the adjudication.
Additionally, the Prompt Payment Act proposes to increase access to payment information. If passed, it will allow a lienholder, a beneficiary of a trust, a contractor or a subcontractor demand a copy of the contract and a statement of the accounts between the owner and contractor, or between contractor and subcontractor, as the case may be, containing all information prescribed. If the requested documents are not produced within six days of the demand, and the applicable person sustains a loss due to the refusal, neglect or a false statement, the owner, contractor or the subcontractor would be liable to the applicable person for the loss amount.
The proposed Prompt Payment Act also introduces new rules allowing holdback money to be released within 90 days from the date of issue of a certificate of substantial performance or the date of completion.
If passed, the Prompt Payment Act will increase the minimum amount owed that can be subject to a lien from $300 to $700.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.