Changes to the Builders’ Lien Act in Alberta
Written By: David Adie, Student-at-Law
The Prompt Payment and Construction Lien Act (the “Prompt Payment Act”) will come into force on August 29, 2022, and represents the first set of amendments to the Builders’ Lien Act in Alberta in over two decades. The Prompt Payment Act will apply to any and all construction contracts or subcontracts entered into as of August 29, 2022. Any construction contracts or subcontracts entered into before August 29, 2022, shall continue to be governed by the Builders’ Lien Act. The Prompt Payment Act brings significant changes to the construction industry, some of which we highlight below.
Cost to Register a Lien
The minimum cost to register a lien has increased from $300.00 to $700.00.
Deadline to Register a Lien
For general projects (those not in oil and gas industries), the deadline to register a lien has increased from 45 days to 60 days from the last date of work.
For oil and gas projects, the deadline to register a lien remains 90 days from the last date of work.
The Prompt Payment Act creates a new category of work where concrete is used as the primary material. In cases primarily involving concrete, the deadline to register a lien is 90 days from the last date of work.
Proper Invoicing
The updates include new requirements for contractors and subcontractors to issue a “proper invoice.” Requirements for a proper invoice include:
a) the contractor’s name and business address;
b) the date of the proper invoice and the period during which the work materials were furnished;
c) information identifying the authority under which the work was done or materials were furnished (whether in a written or verbal contract);
d) a description of the work done or materials furnished;
e) a list of 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 to be prescribed.
A proper invoice must be issued every 31 days.
Parties may amend an invoice if:
a) the parties agree to the revision;
b) the date of the proper invoice is not changed; and
c) the proper invoice continues to meet the requirements listed above.
Paying and Disputing an Invoice
Under the Prompt Payment Act, an owner must either pay or dispute an invoice. An invoice must be paid within 28 days or disputed within 14 days. If the owner does not pay, they must provide substantive reasons as to why the proper invoice is not being paid and specify the precise sum not being paid.
If the owner pays the invoice in full, the contractor must pay subcontractors within 7 days of receiving payment. If the contractor disputes payment to a subcontractor, the contractor must give formal notice of nonpayment and an undertaking to go to adjudication within 7 days.
If the owner does not pay the invoice, the contractor must give a notice of nonpayment and an undertaking to go to adjudication within 7 days. If the contractor does not give the notice of nonpayment in time, the contractor will be responsible to pay the subcontractor in full no later than 31 days after the invoice was issued.
If a subcontractor gets paid, they have 7 more days to pay any subsequent subcontractors or sub-trades. If a subcontractor does not get paid, they have 42 days from the date the contractor provided a proper invoice to the owner to pay subsequent subcontractors or sub-trades.
Adjudication
The Prompt Payment Act gives parties the ability to adjudicate disputes outside of the court process. This adjudication process will ideally relieve some pressure on the courts as relates to the timely resolution of construction issues.
Much of the adjudication process is yet to be determined, and will be later established in regulations.
Conclusion
The Prompt Payment Act will fundamentally change how construction invoices are issued and paid in Alberta. It is important for any owner, contractor, or subcontractor to be aware of the new requirements and be proactive in implementing new practices to avoid being taken by surprise when the new legislation takes effect on August 29, 2022.
If you are an owner, contractor, or subcontractor and have any questions or require any assistance in understanding and implementing the new requirements, please do not hesitate to contact and of the following members of our team of lawyers at SB LLP: