Prompt Payment and Construction Lien Act

On August 29, 2022, the Builders’ Lien Act was amended and renamed the Prompt Payment and Construction Lien Act (the “PPCLA”). A primary goal of the amendment is to create a system to ensure contractors and subcontractors get paid on time. This article sets out some of the highlights respecting the legislation, but is in no way intended to substitute for legal advice.

Previously, Alberta had no rules for payment timelines in the construction industry. The PPCLA sets a clear timeline of 28 calendar days for general contractors to receive payments, and seven calendar days after payment is received by a contractor for subcontractors to then receive payments.

KEY CHANGES:

• Sets a 28-day timeline for project owners to pay invoices to general contractors.
• Sets a 7-day timeline for contractors to pay subcontractors after receiving payment.
• Improves subcontractors’ access to payment information.
  • Allows dispute resolution through adjudication, which is faster and less costly than going to court.
• Extends timelines for registering liens from 45 days to 60 days.
  • Exception: 90 days for improvements primarily related to the furnishing of concrete as a material or work done in relation to concrete.
• Extends the time period for which a major or minor lien find must be retained from 45 days to 60 days.
  • Exception: 90 days for improvements primarily related to the furnishing of concrete as a material or work done in relation to concrete.
• Provides the option to provide an electronic copy of the signed certificate of substantial certificate in accordance with the applicable contract/agreement.
• Introduces new rules allowing holdback money on large, multi-year projects to be released without risks at pre-set times.
• Increases the minimum amount owed that can be subject to a lien from $300 to $700.

TRANSITION:

Any contract or subcontract entered into on or after August 29, 2022, must conform to the new provisions of the PPCLA.[1] Existing contracts and subcontracts entered into prior to August 29, 2022, and scheduled to remain in effect for more than 2 years after August 29, 2022, must be amended to conform with the PPCLA before August 29, 2024.[2]  For all other contracts, the former provisions of the Builder’s Lien Act continue to apply.[3]

NEW FORMS

The new forms for the PPCLA can be found online here.[4]

PROPER INVOICE:

A proper invoice is a request for payment in writing that includes the following:[5]

1. The contractor’s name and business address;
2. The date of the proper invoice and the period during which the work was done or materials were furnished;
3. Information identifying the authority under which the work was done or materials were furnished (either in a written contract, verbal contract, or otherwise);
4. A description of the work done and materials furnished;
5. The amount requested for payment and the corresponding payment terms with a breakdown of payment amounts for the work done and materials furnished;
6. The name, title, and contact information of the person to whom the payment is to be sent;
7. A statement confirming that the invoice is intended to be a proper invoice; and
8. Any other information that may be prescribed by the contract.

A proper invoice may be revised if:[6]

1. The parties to the proper invoice agree;
2. The date of the proper invoice is not changed; and
3. The proper invoice continues to meet all requirements as set out above.

PAYMENT AND DISPUTE – OWNER TO CONTRACTOR:

A contractor must give a proper invoice to the project owner at least every 31 days.[7] Once a proper invoice is submitted, the owner must pay the contractor within 28 days of receipt, unless the owner disputes payment.[8] Interest accrues on any unpaid amounts at the rate specified in the contract (or if there is no contract then at the current rate provided in the Judgment Interest Regulation, AR 215/2011).[9]

Upon request the of a subcontractor who is required to make payments to other subcontractors, the contractor must confirm the date on which the contractor gave the owner a proper invoice.[10]

A project owner may dispute and refuse to pay all or any portion of the amount payable under a proper invoice by delivering to the contractor a notice of dispute no later than 14 days after receipt of the proper invoice.[11] Notices of dispute must be delivered to the contractor’s regular place of business unless the contract specifies the manner for service.[12] The notice of dispute must specify the amount not being paid and the reasons for non-payment.[13] Upon receiving the notice of dispute, the contractor is required to advise its subcontractors of the dispute without delay.[14]

PAYMENT AND DISPUTE –CONTRACTOR TO SUBCONTRACTOR:

The contractor must, within 7 days of receiving payment of a proper invoice, pay each subcontractor for work completed or materials furnished that formed the proper invoice.[15]

Where the owner has only partially paid, the contractor is still required to pay subcontractors the amount paid by the owner within 7 days of receiving the partial payment unless the contractor disputes (in whole or in part) a subcontractor’s entitlement to payment.[16] Where an owner makes a partial payment to the contractor and more than one subcontractor is entitled to payment, the contractor must pay its subcontractors as follows: [17]

1. If an amount not paid by an owner relates specifically to work done or materials supplied by a particular subcontractor (or subcontractors):
   1. The other subcontractors not implicated in the dispute must be paid first;
   2. Then, any amounts paid by the owner with respect to a subcontractor (or subcontractors) implicated in a dispute must be paid to the subcontractor (or subcontractors) on a proportionate basis.
2. In any other case, all subcontractors must be paid on a proportionate basis.

In order for a contractor to properly dispute payment to a subcontractor, the contractor must give the subcontractor a notice of non-payment in the proper form specifying the amount not being paid and the reason(s) for non-payment.[18] Notices of non-payment must be delivered to the subcontractor’s regular place of business unless the contract specifies the manner for service.[19] The contractor must give the subcontractor the notice of non-payment no later than:[20]

1. 7 days after receiving a notice of dispute from the owner; or
2. 35 days after the date the proper invoice was given to the owner if no notice of dispute was given by the owner.

Upon receiving the notice of non-payment, the subcontractor is required to advise its subcontractors of the dispute without delay.[21]

Where an owner fails to pay the contractor for a proper invoice, the contractor is still required to pay its subcontractors for the work or materials that formed the proper invoice within 35 days after the date the proper invoice was given to the owner.[22] A contractor will be exempt from this mandatory obligation if it does one of three things:[23]

1. Providing a notice of non-payment in the proper form to the subcontractor which states:
   1. That some or all of the amount payable to the subcontractor is not being paid within the specified 35 days due to the non-payment by the owner; and
   2. The amount not being paid.
2. Providing an undertaking to the subcontractor to refer the matter to the adjudication process no later than 21 days after giving the notice to the subcontractor; or
3. Providing the subcontractor a copy of the notice of dispute given by the owner.

PAYMENT AND DISPUTE – SUBCONTRACTOR TO SUBCONTRACTOR:

The subcontractor must, within 7 days of receiving full payment from the contractor in respect of a proper invoice, pay each of its subcontractors for work completed or materials furnished that was included in the proper invoice.[24]

Where the contractor has only partially paid, the subcontractor is still required to pay its subcontractors the amount paid by the owner within 7 days of receiving the partial payment unless the subcontractor disputes (in whole or in part) the subcontractor’s entitlement to payment.[25] Where a contractor makes a partial payment to the subcontractor, and more than one of the subcontractor’s subcontractors are entitled to payment, the subcontractor must pay its subcontractors as follows: [26]

1. If an amount not paid by a contractor relates specifically to work done or materials supplied by a particular subcontractor (or subcontractors):
   1. The other subcontractors not implicated in the dispute must be paid first;
   2. Then, any amounts paid by the contractor with respect to a subcontractor (or subcontractors) implicated in a dispute must be paid to the subcontractor (or subcontractors) on a proportionate basis.
2. In any other case, all subcontractors must be paid on a proportionate basis.

In order for a subcontractor to properly dispute payment to one or more of its subcontractors, the subcontractor must give its subcontractor a notice of non-payment in the proper form specifying the amount not being paid and the reason(s) for non-payment.[27] Notices of non-payment must be delivered to the subcontractor’s regular place of business unless the contract specifies the manner for service.[28] The contractor must give the subcontractor the notice of non-payment no later than:[29]

1. 7 days after receiving a notice of non-payment from the contractor; or
2. 42 days after the date the proper invoice was given to the owner if no notice of non-payment was given by the contractor.

Where a contractor fails to pay some or all of the amount to the subcontractor with respect to the proper invoice, unless the subcontractor disputes the entitlement to payment of one or more of its subcontracts, the subcontractor is still required to pay its subcontractors for the work or materials that formed the proper invoice no later than:[30]

1. 7 days after the subcontractor receives payment from the contractor; or
2. If no payment is received, 42 days after the proper invoice was given to the owner.

A subcontractor will be exempt from this mandatory obligation if it does one of three things:[31]

1. Providing a notice of non-payment in the proper form to the subcontractor which states;
   1. That some or all of the amount payable to the subcontractor is not being paid within the specified period (either 7 days after receiving a notice of non-payment from the contractor or 42 days where no notice is given) due to the non-payment by the contractor; and
   2. The amount not being paid.
2. Providing an undertaking to the subcontractor to refer the matter to the adjudication process no later than 21 days after giving the notice to the subcontractor unless the contractor’s failure to pay is due to the non-payment of the owner; or
3. Providing the subcontractor a copy of the notice of dispute or notice of non-payment given by the owner or contractor respectively.

THE ADJUDICATION PROCESS:

The new adjudication process is created with the goal of being faster and less costly than going to court. Adjudication is not available where an action in court has already commenced, and if a party commences an action with respect to the dispute on the same day that the dispute is referred to adjudication, the adjudication will be discontinued.[32] An adjudicator may also refer the dispute to the court if it is of the opinion that the court is the more appropriate forum for the matter.[33]

A party to a contract or subcontract may refer a dispute to adjudication by issuing a notice of adjudication. However, adjudication cannot be commenced if the notice of adjudication was given after the date the contract or subcontract was completed unless the parties agree otherwise.[34]  The notice of adjudication has specific requirements and must be provided to both the relevant parties as well as the relevant Nominating Authority (as defined by the Regulations).[35] The Regulations set out timelines and procedures for the adjudication process.

The following matters are open to adjudication:[36]

1. The valuation of services or materials provided under the contract;
2. Payment under the contract;
3. Disputes that are the subject of a notice of non-payment;
4. Payment or non-payment of an amount retained as a major or minor lien fund and owed to a party during or at the end of the contract; and
5. Any other matter in relation to the contract regardless of whether or not a proper invoice was issued or the claim is lienable.

The determination of the adjudicator is binding on the parties, unless:

1. A court order is made in respect of the matter;
2. A party applies for judicial review of the decision;
3. The parties have entered a written agreement to appoint an arbitrator under the Arbitration Act; or
4. The parties have entered into a written agreement that resolves the matter.

A party may have an adjudicator’s order registered as a court order if they meet certain requirements as set out in the PPCLA and corresponding Regulations.[37]

PERIOD TO MAINTAIN A MAJOR OR MINOR LIEN FUND:

An owner liable on a contract under which a lien may arise shall retain an amount equal to 10% of the value of the work actually done and materials actually furnished for 60 days.[38] However, for improvements or the supply of work and services in relation to concrete, the period for the lien fund is 90 days.[39] The period for improvements related to an oil or gas well or well site remains the same at 90 days.[40]

THE LIEN PERIOD:

The PPCLA extends the lien period (including the time to register a lien) to 60 days from the date that work was last done, or materials were last provided.[41] The PPCLA extends the lien period to 90 days for contracts primarily related to concrete.[42] The lien period for improvements related to an oil or gas well or well site remains the same at 90 days.[43] No lien shall be registered unless the claim or joined claims aggregate $700.00 or more.[44]

POSTING OR PROVISION OF THE CERTIFICATE OF SUBSTANTIAL PERFORMANCE

A person issuing a certificate of substantial performance must, within 3 days of issuing the certificate, ensure that the persons working or furnishing materials have a reasonable opportunity to see the certificate by either:[45]

1. Posting the signed copy in a conspicuous place on the job site; or
2. Providing an electronic copy of the signed certificate in accordance with the applicable contract or agreement.

STATUTORY HOLDBACKS FOR LARGE PROJECTS:

Progressive releases of holdbacks are now mandatory for certain large projects. In projects where (i) the contract price exceeds $10,000,000; and (ii) the completion date is longer than one year and the contract provides for payment on an annual basis; a partial release of holdback payments must be made on an annual basis.[46]

PROFESSIONALS ACTING IN A CONSULTATIVE CAPACITY

The PPCLA or any of its provisions applies to regulated professional engineers or regulated professional architects acting in a consultative capacity.[47]

PPCLA DOES NOT APPLY

The PPCLA does not apply to[48]:

1. Public works as defined in the Public Works Act.
2. Agreements to finance and undertake an improvement in which either of the following is a party:
3. the Crown in right of Alberta;
4. a provincial corporation as defined in the Financial Administration Act that is an agent of the Crown in right of Alberta,

and

1. any other agreement, entity, undertaking or work or class of agreements, entities, undertakings or works as may be prescribed for the purposes of this section.

Subject to the Regulations, the PPCLA does not apply in respect of a prescribed person or entity, whether incorporated or not, that enters into a prescribed project agreement to finance and undertake an improvement or to a prescribed class of such persons, entities or project agreements.[49]

By Jessie Bakker and Michelle Hugman

Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.

[1] PPCLA, s 74(2).

[2] PPCLA, s 74(3); Prompt Payment and Adjudication Regulation, Alta Reg 23/2022, s 37 [PPCLA Regulations].

[3] PPCLA, s 74(3).

[4] Prompt Payment and Construction Lien Forms Regulation, Alta Reg 51/2002.

[5] PPCLA, s 32.1(1).

[6] Section 32.1(5).

[7] Section 32.1(6).

[8] Section 32.2.

[9] Section 32.6; PPCLA Regulations s 4.

[10] Section 32.5(10).

[11] Section 32.2(2).

[12] PPCLA Regulations, s 31.

[13] Ibid.

[14] PPCLA, s 32.4(1).

[15] Section 32.3(1).

[16] Section 32.3(2) and (6).

[17] Section 32.3(3).

[18] Section 32.3(6).

[19] Supra note 8.

[20] Section 32.3(7).

[21] Section 32.4(2).

[22] Section32.3(4).

[23] Section 32.3(5).

[24] Section 32.5(1).

[25] Sections 32.5(2) and (6).

[26] Section 32.5(3).

[27] Section 32.5(7).

[28] Supra note 8.

[29] Section 32.3(8).

[30] Section32.5(4–5).

[31] Section 32.5(6–7).

[32] Section 33.4(1) and (3).

[33] Section 33.6(2).

[34] Section 33.4(2).

[35] PPCLA Regulations, ss 20–21.

[36] Ibid, s 19.

[37] PPLCA, s 33.61.

[38] Sections 18(1), 21(1–2), and 23(1).

[39] Sections 18(1.2), 21(4.1), and 23(1.2).

[40] Sections 18(1.1), 21(3–4), and 23(1.1).

[41] Sections 27(1) and (2).

[42] Sections 27(2.11), (2.21) and 41.

[43] Sections 27(2.1), (2.2), and 41.

[44] Section 35(3).

[45] Section 20(1).

[46] PPCLA, s 24.1; PPCLA Regulations, s 2.

[47] PPCLA, s 1.1(1); PPCLA Regulations, s 35.

[48] PPCLA, s 1.1(2).

[49] Section 1.1(3).