This coming August, Alberta will become the third province in Canada after Ontario and Saskatchewan to adopt prompt payment legislation for the construction industry. The plan has been in the works for two years now, with the introduction of Bill 37: Builder’s Lien (Prompt Payment) Amendment Act in 2020.
Prior to the Bill, Alberta had no specific requirements in place governing payment timelines for construction projects, which often had the effect of leaving contractors and subcontractors waiting in limbo for payment after a delay in progress.
At the end of February, the provincial government announced that the Bill would be coming into force as of August 29th of this year. In addition, the government also issued an Order in Council setting out the Prompt Payment and Adjudication Regulation, as well as the Prompt Payment and Construction Liens Form Regulation (hereinafter, “the Regulations”), which will govern many of the incoming procedures and timelines. Below, we will outline some of the key changes coming into effect this August.
Application of New Regulations
The Regulations will apply to construction contracts entered into after the Regulations come into force on August 29, with one exception. For contracts entered into prior to August 29, the new Regulations will apply to any contract that will remain in progress for at least two years after the coming-into-force date. These contracts must be amended within this two-year period as needed to comply with the Regulations.
Owners, contractors, and subcontractors must pay proper invoices within 28 days of receipt. If they wish to dispute part of the invoice, they must do so within 14 days of receipt, and the remaining, undisputed portion must be paid within the 28-day window.
Contractors will have 7 days from receipt of payment from an owner or contractor to pay any subcontractors owed in relation to the invoice.
Builders Lien Extensions
The timeframe for registering liens will be extended as follows:
- The time period for registering a construction lien will be extended from 45 to 60 days
- The time period for registering a lien related to suppliers in the concrete industry will be extended from 45 days to 90
- The time period for registering a lien related to oil and gas will remain steady at 90 days
Appointment of Adjudicators
To avoid the cost and delay of managing payment disputes in court, Bill 37 will also create a new adjudication process dedicated to resolving construction payment disputes, similar to the model adopted in Ontario in 2019. The province will appoint a Nominating Authority to oversee and appoint adjudicators to oversee disputes throughout the province. Adjudicators must meet several requirements to qualify for appointment, including:
- They must have at least ten years of relevant construction industry experience
- They must have sufficient knowledge of:
- Dispute resolution
- Contract law
- Statutory interpretation
- The adjudication process in general
Adjudicators will also be required to comply with a code of conduct, and they must maintain ongoing training and education as set out by the Nominating Authority.
What Issues Can be Adjudicated Through the New Process?
To keep the new process streamlined and efficient, the Bill places limits on the types of disputes it will oversee. Parties can use the new adjudication process to resolve disputes relating to the following:
- The valuation of services or materials provided under a contract or subcontract, including under a proposed or written change order
- Payment under a contract, including under a proposed or written change order
- Disputes that are the subject of a Notice of Non-Payment under Part 3 of the Act
- Payment or non-payment of an amount retained under a major or minor lien fund, and owed to a party during or at the end of a contract
- Any other matter in relation to a contract or subcontract that the parties in dispute agree to
The Streamlined Adjudication Process
The party initiating the dispute is required to serve notice to both the other party and the Nominating Authority. From there, each step must take place within a specified timeframe, including the appointment of the adjudicator, the provision of documents from each party, and the decision from the adjudicator. All told, the maximum amount of time that should pass from the date of the initial notice to the receipt of the adjudicator’s order by the parties is approximately 65 days.
When conducting the adjudication, the adjudicator is permitted to undertake the following in addition to reviewing the documents provided by each party:
- Issue directions to the parties involved
- Obtain additional information through independent research
- Conduct on-site investigations of any subjects the adjudicator deems necessary
- Obtain assistance or input from other construction industry professionals
Note that the process is reserved for construction disputes related to ongoing contracts. Disputes related to completed contracts or operations or maintenance contracts will not be eligible for the adjudication process.
Decisions by an adjudicator may be overturned upon judicial review if one or more of the following situations apply:
- The applicant participated in the process under a legal incapacity
- The contract at the root of the dispute is invalid or no longer exists
- The determination related to a matter that may not be the subject of adjudication under the Regulations, or a matter that was unrelated to the subject of adjudication
- The adjudicator did not meet the requirements for qualification under the Regulations
- The adjudication did not follow the required procedures, prejudicing the applicant’s right to a fair adjudication
- The adjudicator had a reasonable apprehension of bias
- The determination was made as the result of fraud
Contact our Knowledgeable Calgary Construction Lawyers for Trusted Legal Advice
The team of professional and experienced construction lawyers at DBH Law has the experience and technical knowledge to provide you with the legal advice needed in the modern construction industry. We understand the number of moving pieces involved in construction projects and work tirelessly to resolve issues quickly. Contact us online or by phone at 403.252.9937 to discover how we can help you today.