Builders’ Lien (Prompt Payment) Amendment Act Comes Into Force
August 29, 2022
After more than 20 years without significant changes, Alberta’s construction law world is about to undergo serious development with the Builders’ Lien (Prompt Payment) Amendment Act (the Act) set to come into force on August 29, 2022. We wanted to take some time in this week’s blog to let you know what the high-level details of the Act are and what it might mean for all those involved in construction projects. We understand that this legislation will have a meaningful impact on many people involved in the construction industry and hope to provide some clarity on what it means.
How the Builders’ Lien (Prompt Payment) Amendment Act addresses delay
The most common sources of complaint in any construction project are delays. Not only can such events put off the completion of a project, but they can also impact the budgets of everyone involved, including contractors and customers. For people such as subcontractors, a delay in final payment on a project can significantly hold up payment for their work, even if that work is already done.
One of the primary objectives of the Builders’ Lien (Prompt Payment Amendment Act) is to fill the gap that has long existed in terms of requiring customers, contractors, and subcontractors to pay those performing work for them. For example, without legislation requiring prompt payment, someone who installed a sprinkler system in a building a couple of years ago may still be awaiting payment if something delayed the project’s completion.
The most significant piece of the legislation will be the introduction of a 28-day timeline for owners, contractors, and subcontractors to pay invoices. Contracts that include terms such as “pay when paid” will be prohibited. These clauses have traditionally allowed contractors to withhold payments to subcontractors until the contractor receives payment in full. The Alberta government has said that these clauses have unfairly placed the risk of non-payment onto the backs of subcontractors.
Construction Industry has praised changes
People involved in the construction industry voiced support for the legislation in the years leading up to it coming into force. The Council of Construction Associations published a column two years ago that quoted the Alberta Roofing Contractors Association (ACRA) as saying:
“ACRA 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 echoed this praise, stating:
“This framework has been a long time coming. It’s great to see that this government took a problem and consulted extensively with industry to reach a solution. This framework will be beneficial for all levels of construction, and I look forward to seeing it come into force.”
Overview of key changes
The Alberta Government shared a document outlining the details of the most significant changes contained in the Builders’ Lien (Prompt Payment) Amendment Act, including:
- A 28-day timeline for project owners to pay invoices to general contractors
- A7-day timeline for contractors to pay subcontractors after receiving payment
- Extended timelines for registering liens:
- construction industry: from 45 days to 60 days
- concrete industry: from 45 days to 90 days
- A higher minimum amount owed that can be subject to a lien, from $300 to $700
- Dispute resolution through adjudication, which is faster and less costly than going to court
- New rules allowing holdback money on large, multi-year projects to be released without risks at pre-set times
- Improved access to payment information by subcontractors
- The change of the legislation’s name from the Builders’ Lien Act to the Prompt Payment and Construction Lien Act
Alberta government is hopeful amendments will help workers
In February of this year, Nate Glubish, the Minister of Service Alberta, wrote that the goal of the Prompt Payment and Construction Lien Act is not only to get people paid but to keep investment moving through the economy. In other words, the government’s goal is to allow money to flow into the hands of people who do work so that they can spend their money on goods and services, thus providing a consistent boost to the economy. The Minister stated:
“We’ve been hard at work over the past two years collaborating with the construction industry to develop a prompt payment framework. This important effort will ensure that hard-working Albertans will be paid on time. These measures support our economic recovery – as well as economic growth – and I’m excited to see them come into force this summer.”
As with any new legislation, it may take affected people time to understand how the law will impact them day-by-day. We will be sure to update our readers on any litigation that makes its way through Alberta’s court system, where people might challenge or fail to respond to their obligations under the Prompt Payment and Construction Lien Act.
HMC Lawyers: Providing Insightful Construction Law Advice in Calgary
At HMC Lawyers, our skilled team of construction lawyers has the experience and unique perspective needed to understand the technical nature of construction disputes and the particular needs of businesses in the industry. We know how even minor disagreements can lead to long delays and the impact that liens and other claims can have on your bottom line. We regularly help clients with a variety of construction-related matters, including builders’ liens, negligent construction issues, delay claims, and professional liability claims. If you have questions about any of the above problems or want to better understand how the new Prompt Payment and Construction Lien Act might impact you or your business, call us at 403-269-7220 (toll-free at 1-800-480-3534) or reach out online.