Alberta’s Builders’ Lien Act has been amended and renamed the Prompt Payment and Construction Lien Act (the Act).[1] The amended and renamed Act, which will come into force on August 29, 2022, introduces a number of major changes that actors in the construction sector should be aware of, including strict statutory payment deadlines, extended lien registration periods, and a new non-judicial dispute resolution process.
Application of the Act
All contracts and subcontracts entered into on or after August 29, 2022, must conform with the Act and accompanying Prompt Payment and Adjudication Regulation and Prompt Payment and Construction Lien Forms Regulation.[2]
The new rules will also apply to all existing contracts and subcontracts that are scheduled to remain in effect after August 29, 2024, although owners, contractors and subcontractors will have until that date to amend their existing contracts and subcontracts to bring them into compliance with the Act and associated regulations.[3]
All other existing contracts and subcontracts will continue to be governed by the provisions of the former Builders’ Lien Act until expired, terminated or amended, in order to conform with the new Act.[4]
Prompt payment rules
To ensure that contractors and subcontractors get paid promptly, the Act introduces a new statutory payment scheme whereby owners must pay their contractors, and contractors must pay their subcontractors (and so on down the contractual chain), within a prescribed period of time. Failure to do so will result in the accrual of interest on unpaid amounts at the rate specified in the contract (or, if no rate is specified in the contract, the current rate set out under the Judgement Interest Regulation).[5]
Prompt payment: Owner to contractor
Requirement to issue proper invoices
Contractors are now required to issue a “proper invoice” to the owner at least once every 31 days, unless the applicable contract includes a provision for testing and commissioning, and the conditions of such testing and commissioning have not been met.[6] Subject to the 31-day limit, however, an owner and contractor may agree to specify terms as to when proper invoices may be delivered.[7]
As an example, an agreement requiring a proper invoice to be delivered on the last day of every month would satisfy the requirements of the Act – as it would never be more than 31 days between invoices. Notably, however, an agreement requiring a proper invoice to be delivered on the last business day of every month would not necessarily satisfy the requirements of the Act – as depending on how the days fell, such a term might lead to more than 31 days between invoices.
Payment of a proper invoice
Once an owner has received a proper invoice, it has 14 days after receipt to dispute the invoice.[8] If an owner chooses to dispute the invoice, it must issue an Owner’s Notice of Dispute (Form 1) setting out the amount that is not being paid and the reasons for the non-payment.[9]
If an owner does not issue a notice of dispute, or only issues a notice of dispute with respect to part of the invoice, it must pay the contractor the undisputed portion within 28 days after receipt of the proper invoice.[10]
Testing and commissioning
While a contract may make the testing and commissioning of the work done or materials furnished under the contract a condition of issuing a proper invoice—it may not otherwise make the approval of an owner or prior certification of a person, like a payment certifier, a condition of issuing a proper invoice.[11]
Prompt payment: Contractor to subcontractor
Full payment
A contractor who receives full payment under a proper invoice must pay each subcontractor for work and materials included in the proper invoice no later than seven days after receiving payment from the owner—unless the contractor disputes a subcontractor’s entitlement to payment under the applicable subcontract.[12] In which case, the contractor may refuse to pay its subcontractor, provided it issues a Contractor’s Notice of Non-Payment Dispute (Form 3) to the subcontractor, specifying the amount that is not being paid and detailing the reasons for non-payment.[13]
Part payment
If a contractor only receives part payment from the owner, it must pay its subcontractors whose work was not disputed first—with any remaining amounts distributed among its other subcontractors on a proportionate basis.[14]
To the extent that an owner does not pay some or all of a contractor’s proper invoice, the contractor must either:
- pay its subcontractors, out of its own pocket, for all the work and materials furnished under a subcontract with the contractor that were included in the contractor’s proper invoice within 35 days of the contractor issuing the proper invoice to the owner; [15] or
- issue a Contractor’s Notice of Non-Payment (Form 2) to its subcontractors and undertake to refer the matter to adjudication within 21 days. [16]
Notices of dispute
If a contractor elects to issue a Contractor’s Notice of Non-Payment (Form 2) or a Contractor’s Notice of Non-Payment Dispute (Form 3) to its subcontractors, it must do so in accordance with the following timelines:
- if the owner has issued an Owner’s Notice of Dispute (Form 1) to the contractor, within seven days of receiving the notice from the owner; or
- if the owner has not issued an Owner’s Notice of Dispute (Form 1) to the contractor, within 35 days of the contractor issuing the proper invoice to the[17]
Prompt payment: Subcontractor to sub-subcontractor
Full payment
The requirement to pay within a prescribed period of time flows down the entire contractual chain.
A subcontractor who receives full payment from a contractor with respect to a proper invoice must pay each of its sub-subcontractors for work and materials included in the proper invoice no later than seven days after receiving payment from the contractor, unless the subcontractor disputes its sub-subcontractor’s entitlement to payment under the applicable subcontract.[18] In that case, the subcontractor may refuse to pay a sub-subcontractor, provided it issues a Subcontractor’s Notice of Non-Payment Dispute (Form 5) to the sub-subcontractor, specifying the amount that is not being paid and detailing the reasons for non-payment.[19]
Part payment
If a subcontractor only receives part payment from a contractor, it must pay its sub-subcontractors whose work was not disputed first—with any remaining amounts distributed among its other sub-subcontractors on a proportionate basis.[20]
To the extent that a contractor does not pay some or all of an amount owed to a subcontractor with respect to work included in a proper invoice, the subcontractor must either:
- pay its sub-subcontractors, out of its own pocket, for all the work and materials furnished under a subcontract with the subcontractor that were included in the contractor’s proper invoice within 42 days of the contractor issuing the proper invoice to the owner, [21] or
- issue a Subcontractor’s Notice of Non-Payment Where Contractor Does Not Pay (Form 4) to its sub-subcontractors and, unless the contractor’s failure to pay is a result of non-payment by the owner, undertake to refer the dispute to adjudication within 21 days. [22]
Notices of dispute
If a subcontractor elects to issue a Subcontractor’s Notice of Non-Payment Dispute (Form 5) or a Subcontractor’s Notice of Non-Payment Where Contractor Does Not Pay (Form 4) to its sub-subcontractors, it must do so in accordance with the following timelines:
- if the contractor has issued a Contractor’s Notice of Non-Payment (Form 2) or a Contractor’s Notice of Non-Payment Dispute (Form 3) to the subcontractor, within seven days of receiving said notice from the contractor; or
- if the contractor has not issued any notices to the subcontractor, within 42 days of the contractor issuing the proper invoice to the owner.[23]
Date of proper invoice
On the request of a subcontractor who is required to make payments to its sub-contractors, the contractor must, as soon as possible, provide confirmation of the date on which they issued a proper invoice.[24]
What constitutes a “proper invoice”?
Invoices from contractors to owners
The delivery of a “proper invoice” by a contractor to an owner triggers the new prompt payment rules. To be a “proper invoice,”, a contractor’s invoice must include all of the following:
- the contractor’s name and business address;
- the date of the proper 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 to; and
- a statement indicating that the invoice provided is intended to constitute a proper invoice.[25]
While an owner and contractor can contractually agree to include additional information in an invoice, it is important that all of the above elements are satisfied, otherwise delivery of an invoice by the contractor will not trigger the prompt payment rules set out above.
Invoices from subcontractors to contractors
Invoices delivered by subcontractors to contractors (and from subcontractors to sub-subcontractors) are not “proper invoices” under the Act. They do not, as a result, need to comply with the statutory requirements for proper invoices—though contractors may require their subcontractors to do so under the terms of the applicable subcontract.
Extension of lien filing periods
The Act extends the lien filing period for general construction work from 45 days to 60 days.[26]
It further extends the lien filing period for work “primarily related to the furnishing of concrete as a material or work done in relation to concrete” from 60 to 90 days.[27] The extension to 90 days does not, however, apply to entities that install or use ready-mix concrete—though, somewhat interestingly, the Prompt Payment and Construction Lien Forms Regulation suggests that the extension does apply with respect to the manufacture and supply of ready-mix concrete.[28]
The lien filing period for oil and gas well improvements remains unchanged at 90 days.[29]
Progressive release of holdback amounts
Under the Act, owners are still required to set aside 10% of the contract price as a holdback to help satisfy any liens that may be registered. However, the Act now allows the progressive release of holdback amounts in contracts where the contract price at the time the contract is entered into exceeds CA$10 million.[30]
In contracts where the contract price at the time the contract is entered into exceeds CA$10 million, the contract may provide that holdback amounts are required to be released by the owner (i) on an annual basis provided the completion schedule is longer than one year, or (ii) at pre-established contractual milestones (i.e., a phased basis).[31] In the event a contract with a contract price in excess of CA$10 million contemplates a completion schedule longer than a year, but the contract does not establish contractual milestones for the release of holdback amounts, the holdback amounts must nonetheless be released by the owner on an annual basis even if not explicitly contemplated in the contract.[32]
Access to information
The categories of persons that have a right to information related to a lien have been expanded.[33] In addition to lienholders, trust beneficiaries, and contractors and subcontractors under a contract with a relevant owner, contractor or subcontractor now have the right to inspect relevant contractual documents.[34]
Application to professionals
The Act now specifically applies to professional engineers and architects acting in a consultative capacity in respect of an improvement.[35]
Application to public works
The Act clarifies that it does not apply to public works under the Public Works Act or contracts with the Government of Alberta or provincial crown corporations.[36]
Electronic certificates of substantial performance
Where permitted by the applicable contract, the Act now allows certificates of substantial performance to be posted electronically, rather than on the job site, provided that all persons providing labour or materials have a reasonable opportunity of seeing the electronic certificate.[37]
Dispute resolution process
The Act introduces a new statutory adjudication system that is intended to provide a quicker and less costly means of resolving construction disputes. The new system is administered by “Nominating Authorities,” who are responsible for qualifying and appointing adjudicators, arranging hearings, and establishing a register of adjudicators.[38]
Adjudicators
Under the Regulations, an adjudicator must meet the following minimum requirements and qualifications, as determined by the Nominating Authority:
- have at least 10 years of relevant work experience in the construction sector;
- have sufficient knowledge and experience in the following areas: (i) dispute resolution; (ii) contract law; (iii) legislative interpretation; (iv) determination writing; (v) ethics; (vi) jurisdiction; and (vii) adjudication process;
- not be an undischarged bankrupt;
- not have been convicted of an indictable offence in Canada or of a comparable offence outside Canada;
- pay to the Nominating Authority the required fees, costs or charges for training and qualification as an adjudicator; and
- agree in writing to abide by the code of conduct.[39]
Matters that may be referred to adjudication
Under the Act, a party to contract or subcontract may submit any of the following matters for adjudication by giving the other party written notice of their intention to do so:
- the valuation of services or materials provided under a contract or subcontract;
- payment under a contract or subcontract;
- disputes that are the subject of a notice of non-payment under the Act;
- payment or non-payment of an amount retained as a major lien fund or minor lien fund and owed to a party during or at the end of a contract or subcontract; and
- any other matter in relation to a contract or subcontract, as the case may be, that the parties in dispute agree to, regardless of whether or not a proper invoice was issued or the claim is lienable. [40]
Exceptions to adjudication
A matter otherwise subject to adjudication may not be referred to adjudication if one of the parties has already commenced an action in court with respect to the matter.[41] A matter may also not be referred to adjudication if the underlying contract or subcontract has been completed.[42]
Expedited timelines
The timelines in the new adjudication system are highly condensed. It is anticipated most disputes will be resolved within 60 days of their commencement:
- once a party has given notice of their intention to have a matter adjudicated, the parties have four days to agree on an adjudicator, failing which the nominating authority will appoint an adjudicator for the parties within seven days; [43]
- once an adjudicator has been appointed, the initiating party has five days to send copies of all the documents they intend to rely on to the adjudicator and other parties; [44]
- once the initiating party has provided its documents, the respondents have 12 days to provide their responding documents; [45] and
- once both sides have exchanged documents, the adjudicator has 30 days to issue a decision. [46]
If the adjudicator considers it necessary, or the parties agree and the adjudicator consents, an adjudicator may extend any deadline in the adjudication process for a maximum of 10 calendar days.[47]
Adjudicator’s determination
An adjudicator’s determination of a matter is binding on the parties, unless:
- a court order is made in respect of the matter;
- a party applies for a judicial review of the decision;
- the parties have entered into a written agreement to appoint an arbitrator under the Arbitration Act; or
- the parties have entered into a written agreement that resolves the matter. [48]
A written agreement to resolve the matter or appoint an arbitrator must be made by the parties after the adjudicator has made a determination.[49] It cannot be done beforehand.
Judicial review
If a party desires to apply for judicial review of an adjudicator’s determination, the application must be made within 30 days of the notice of determination being issued.[50] An adjudicator’s determination may, however, only be set aside by the courts on the following narrow grounds:
- the applicant party participated in the adjudication while under a legal incapacity;
- the contract or subcontract was invalid or ceased to exist;
- the determination was of a matter that may not be the subject of adjudication under the Act or of a matter entirely unrelated to the subject of the adjudication;
- the adjudication was conducted by someone who was not a duly qualified adjudicator;
- the procedures followed in the adjudication did not accord with the procedures to which the adjudication was subject, and the failure to accord prejudiced the applicant party’s right to a fair adjudication;
- there was a reasonable apprehension of bias on the part of the adjudicator; or
- the determination of the adjudication was made as a result of fraud. [51]
Key takeaways
The changes introduced by the Prompt Payment and Construction Lien Act (Alberta) are significant. Owners, contractors, and subcontractors should carefully review their contracts and payment procedures and revise them to comply with the new statutory regime.
They should also consider implementing policies and procedures to ensure they are ready to initiate and respond to proceedings under the new dispute adjudication system. Once a dispute has arisen, parties now have very little time to gather their evidence and prepare their arguments. Parties must, as a result, be organized and be prepared to move swiftly.
Dentons will continue to monitor developments related to this new statutory regime and the evolution of the dispute adjudication process. We are cautiously optimistic that the prompt payment regime will streamline payments and expedite disputes in the construction industry.
Please do not hesitate to reach out to a member of the Dentons construction team should you need assistance with any of the foregoing.
For a review of the key differences between the British Columbia Builders Lien Act (the BC BLA) and Alberta’s new PPCLA click here.
[1] Prompt Payment and Construction Lien Act, c P-26.4 [PPCL].
[2] PPCL, s. 74(2); Prompt Payment and Adjudication Regulation, Alta Reg 23/2022 [PPAR]; Prompt Payment and Construction Lien Forms Regulation, Alta Reg 51/2002, as amended by Alta Reg 22/2022 [PPCL Forms Regulation].
[3] PPCL, s. 74(3); PPAR, s. 37.
[4] PPCL, s. 74(3).
[5] PPCL, s. 32.6; PPAR, s. 4; Judgement Interest Regulations, Alta Reg 215/2011.
[6] PPCL, ss. 32.1(3),(4),(6).
[7] PPAR, s. 3.
[8] PPCL, s. 32.2(2).
[9] PPCL, s. 32.3(2); PPCL Forms Regulation, Form 1.
[10] PPCL, s. 32.2(1).
[11] PPCL, ss. 32.1(3),(4),(6).
[12] PPCL, ss. 32.3(1),(6).
[13] PPCL, s. 32.3(6); PPCL Forms Regulation, Form 3.
[14] PPCL, s. 32.3(3).
[15] PPCL, s. 32.3(4).
[16] PPCL, ss. 32.3(5); PPCL Forms Regulation, Form 2.
[17] PPCL, ss. 32.3(4)-(7).
[18] PPCL, ss. 32.5(1),(7).
[19] PPCL, ss. 32.5(1),(7); PPCL Forms Regulation, Form 5.
[20] PPCL, s. 32.5(3).
[21] PPCL, ss. 32.5(4),(5).
[22] PPCL, ss. 32.5(6); PPCL Forms Regulation, Form 4.
[23] PPCL, ss. 32.5(4)-(8).
[24] PPCL, ss 32.5(10).
[25] PPCL, s. 32.1(1).
[26] PPCL, s. 41.
[27] PPCL, s. 41.
[28] PPAR, s. 36; PPCL Forms Regulation, Form 6.
[29] PPCL, s. 41.
[30] PPCL, ss. 24.1(1), (2)(b); PPAR, s 2(2).
[31] PPCL, ss. 24.1(1), (2)(a).
[32] PPCL, s. 24(2)(a); PPAR, s 2(1).
[33] PPCL, ss. 33(1), (2).
[34] PPCL, s. 33(1).
[35] PPCL, s. 1.1(1); PPAR, s 35.
[36] PPCL, s. 1.1(2).
[37] PPCL, s. 20(1).
[38] PPCL, s. 33.2.
[39] PPAR, s. 7(2).
[40] PPAR, s. 19.
[41] PPCL, s. 33.4(1).
[42] PPCL, s. 33.4(2).
[43] PPAR, s. 22.
[44] PPAR, s. 23.
[45] PPAR, s. 24.
[46] PPAR, s. 26(1).
[47] PPAR, s. 25(3).
[48] PPCL, s. 33.4(5).
[49] PPAR, s. 1(2).
[50] PPCL, s. 33.8.
[51] PPCL, s. 33.7, PPAR s. 34.
