Posted: April 28, 2021
By Kember Handzic, Partner and Tracy Zimmer, Student-at-Law
On December 9, 2020 the Province of Alberta passed a Bill that will significantly change the Builder’s Lien Act. Bill 37 renames the Builder’s Lien Act to the Prompt Payment and Construction Lien Act (the “New Act”). The New Act is expected to come into force in July 2021. This means that any contracts or subcontracts entered into after that date will be governed by the New Act. However, any contracts or subcontracts entered into prior to the New Act coming into force will be governed by the current Builder’s Lien Act.
The overall goal of the New Act is to provide more certainty, unlock cash flow, and reduce the need for liens and costly court actions. Below we provide a general overview of the key changes that you need to be aware of. We will provide you with more information about these changes in subsequent articles.
The New Act introduces rules and timelines for invoice payments and liens that will apply to the entire construction industry. Prior to this, Alberta had no rules dictating payment timelines which caused issues of vagueness in payment terms and deadlines. Once in effect, the following timelines will be in place to create a standardized billing practice of:
- 28 calendar days for general contractors to receive payments after a proper invoice has been issued; and
- 7 calendar days after payment is received for contractors to pay subcontractors.
Parties will not be able to opt out of these payment timelines and will have 14 days after receipt to dispute any invoice. The issuer of the invoice will be allowed to charge interest on any unpaid amount after the invoice due date. The goal is to ensure that contractors and subcontractors are paid on time.
The New Act makes notable changes to the rules around liens. The minimum amount owed that can be subject to a lien has increased from $300 to $700. Furthermore, the timeline for registering liens has been extended from 45 days to:
- 60 days for the construction industry;
- 90 days to the concrete industry;
The timeline of 90 days remains in effect for parties in the oil and gas industry to register liens.
The New Act has also made changes to rules regarding holdbacks:
- holdback periods have been extended from 45 days to 60 days for both the construction industry and concrete industry;
- holdbacks of money on large, multi-year projects will be mandated to be released at pre-set times either as predetermined project milestones are reached or on an annual basis.
The New Act also introduces a faster and more cost-effective means for dispute resolution than going to court. Parties now have the option to attempt to resolve disputes by participating in binding adjudication presided over by an appointed third-party adjudicator.
The above discussion provides a high-level overview of the changes that will be coming into effect. If you have any questions about your rights and obligations under the New Act, please feel free to contact our Construction Law Practice Group. Our Construction team can work with you to help ensure that you are making the most informed decisions for your company and abiding by the strict guidelines the legislation will impose.