Alberta’s new construction prompt payment legislation, the Prompt Payment and Construction Lien Act, came into force at the end of August. As this new law has been in place for nearly two months, businesses in the construction industry must ensure their practices and operational infrastructure comply. This blog outlines vital actions companies should take as the industry continues to adapt to the new processes outlined in the Act.
Review New and Existing Contracts
The Prompt Payment and Construction Lien Act and its regulations apply to any construction contracts entered into after August 29, 2022. For contracts entered into before then, the new rules will apply to any contracts that remain in progress for at least two years after August 29, 2022. These contracts must be amended within this two-year period to comply with the regulations.
For existing contracts expected to remain in progress for less than two years, the parties may opt, by agreement, to amend the contracts so they will be subject to the new rules under the Act and regulations.
Companies who use standard form agreements relating to construction matters should take the time to review all existing precedents to ensure the language properly reflects the new terms under the Act and regulations.
Since the new rules and regulations may be applied automatically to specific contracts, businesses should also review all “in progress” contracts to identify any that have become subject to the new rules so they can be amended as necessary.
Ensure Invoices Comply with the Requirements for a “Proper Invoice”
The definition of a “proper invoice” is set out under s. 32.1(1) of the Act as:
“a written bill or other request for payment for the work done or materials furnished in respect of an improvement under a contract or a subcontract”.
In addition, a proper invoice must contain the following information (in addition to meeting other requirements which may be set out in the contract):
- the contractor 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; and
- any other information that may be prescribed under the Act or its regulations.
Under the Prompt Payment and Construction Lien Act, proper invoices must be submitted to an owner at least once every 31 days. This timeline does not apply if the contract requires testing and commissioning of the work done, materials used, or the improvements made, and the specified conditions are not met.
Set Reminders for Important Dates
The most significant changes under the Prompt Payment and Construction Lien Act are the deadlines making up the prompt payment timeline. Note that these timelines may not apply if an invoice is disputed and a notice of non-payment is delivered by a party (see “Notices of Dispute and Non-Payment”).
Owners to Contractors
Owners must pay proper invoices issued by contractors within 28 days of receipt.
Contractors to Subcontractors
If the owner pays the contractor in full, the contractor must pay their subcontractors within seven days. If the contractor receives partial payment from the owner, they must pay their subcontractors the amounts owing that were paid by the owner for work performed or materials furnished within seven days.
A contractor must pay its subcontractors in full within 35 days of issuing a proper invoice to the owner, even if it does not receive full or partial payment from the owner.
Subcontractors to Sub-subcontractors
If a subcontractor is paid in full by the contractor, the subcontractor must pay their sub-subcontractors within 7 days. If the subcontractor receives partial payment from the contractor, the subcontractor must pay their sub-subcontractors the amounts owing that were paid by the contractor for the work performed or materials furnished.
The subcontractor must pay its sub-subcontractors in full within 42 days from the date the proper invoice was delivered to the owner unless the subcontractor delivers a notice of non-payment to their sub-subcontractors.
Notices of Dispute and Non-Payment
An owner wishing to dispute part of a contractor’s invoice must do so under the requirements of the Act and regulations. They must deliver a notice of dispute, in the prescribed form, to the contractor within 14 days of receiving the invoice. The undisputed remaining portion of the invoice must still be paid within the 28-day payment timeline.
A contractor disputing a subcontractor’s entitlement to payment must provide the subcontractor with a notice of non-payment in the prescribed form:
- Within seven days of receiving a notice of dispute from the owner; or
- If no notice of dispute was made by the owner, within 35 days of the contractor providing a proper invoice to the owner.
Similarly, a subcontractor disputing a sub-subcontractor’s invoice must provide a notice of non-payment to the sub-subcontractor, in the prescribed form:
- Within seven days of receiving a notice of non-payment from the contractor; or
- If no notice of non-payment is provided by the contractor, within 42 days of the date the proper invoice was given to the owner.
Diarize Lien Filing Deadlines
Companies must be aware that under the Prompt Payment and Construction Lien Act, the general deadline for registering a construction lien has been extended to 60 days or 90 days for concrete work. The deadline for registering a lien related to oil and gas suppliers, wells, and sites remains the same at 90 days.
Update Adjudication Procedures
The Prompt Payment and Construction Lien Act sets out an adjudication process for the following disputes:
- Valuation of services or materials provided under a contract;
- Change orders;
- Lien fund amounts;
- Payment of contractors or subcontractors under a contract; and
- Other matters in relation to the contract.
Adjudication is mandatory if one party issues a notice of adjudication, but the parties can still use mediation, arbitration, or litigation to resolve disputes. Adjudicators are certified and trained through Nominating Authorities authorized by the Alberta government. An adjudicator’s decision is binding but may be subject to judicial review if:
- The applicant party did not have legal capacity during the adjudication process;
- The contract at the heart of the process was invalid; or
- There was a reasonable apprehension of bias on the part of the adjudicator.
Contact DBH Law in Calgary for Comprehensive Advice on Prompt Payment & Construction Liens
The team of professional and experienced construction lawyers at DBH Law have the experience and technical knowledge to provide you with the legal advice needed in the modern construction industry. We can help ensure your business complies with all current laws and regulations and represent your interests in construction disputes as necessary. We understand the number of moving pieces involved in construction projects and work tirelessly to resolve issues quickly. To schedule a consultation, contact us online or by phone at 403-252-9937.