Anyone who has been involved with a construction project likely knows that complications, delays, and unexpected problems are common in the industry. One of the side-effects of the nature of the construction industry is that payment to contractors, subcontractors, and others can sometimes take unreasonably long to occur. As a result of this, Alberta is preparing to implement Bill 27: The Builders’ Lien (Prompt Payment) Amendment Act, 2020. At HMC Lawyers, we have over 130 years of cumulative experience in construction law and wanted to take a moment to explain what the bill means.
Filling a gap
The prompt payment legislation is intended to fill a gap that has existed in Alberta’s construction industry. Presently, there is no time limit in place for customers, contractors, or subcontractors to pay people working for them. This Alberta government said that the lack of legislated payment timelines led to uncertainty for people awaiting payment for work.
What do these changes mean?
The most impactful part of the legislation will introduce a 28-day timeline for owners, contractors, and subcontractors to pay invoices. Additionally, the amendments will prohibit “pay-when-paid” clauses in construction contracts. These clauses allow contractors to withhold payment to subcontractors until the contractor is paid in full. The government says these clauses unfairly place the risk of non-payment onto subcontractors.
The Council of Construction associates published a column about the changes, quoting the Alberta Roofing Contractors Association as saying “ARCA is looking forward to seeing this legislation enacted, which we believe will be an important tool in assisting independent contractors to manage their businesses effectively.”
The Alberta Construction Association is also quoted in the article, stating “These mechanisms help timely completion of construction projects, ensure our employees are not impacted by payment delays and provide better value for taxpayers on public infrastructure projects.”
In addition, the amendments will also serve to:
- Extend the deadline for unpaid contractors and subcontractors to file liens against a project with the government’s Land Titles Office from 45 days to 60 days (workers in the concrete and oil & gas industries will have 90 days).
- An adjudication process will also be put in place to resolve conflict outside of the courts.
- New rules allowing for holdback money on large multi-year projects to be released without risk at pre-set times
- Improvements to contractors’ access to payment information
- Increase the minimum amount owed that can be subject to a lien from $300 to $700
Government says they are addressing calls for change
Nate Glubish, Minister of Services Alberta said in a press release that the amendments to the Builders’ Lien Act are the first in nearly 20 years, stating,
“We are answering calls and addressing concerns from the construction industry to protect jobs by ensuring everyone throughout the supply chain – from general contractors to subcontractors – is paid on time for their work. We’re doing this at a critical time when Alberta’s government is moving forward on its recovery plan and when hard-working Albertans in construction can least afford payment uncertainty.”
The legislation has passed its first reading through the legislature and is expected to be in place by June 2021. The government plans to roll out communications about the amendments through to the spring. At HMC Lawyers, we will be sure to update our readers on any significant developments in the legislation.
At HMC Lawyers, our highly skilled team has the experience and unique perspective needed to understand both the very technical nature of construction disputes and the particular needs of businesses in the industry. We know how small disputes can lead to long delays and the impact that liens and other claims can have on your bottom line. Call 1-800-480-3534 or contact us online to make an appointment with one of our construction lawyers.