The construction and infrastructure industry brings in a lot of revenue for Alberta. It also goes without saying that conflicts would arise between the players in this industry. To provide for a legal process to solve these conflicts, the Prompt Payment and Construction Lien Act in Alberta was recently enacted. How does this law work, and what are its implications to the parties in a construction project?
What is the Prompt Payment and Construction Lien Act in Alberta?
The Prompt Payment and Construction Lien Act in Alberta came into force on August 29, 2022. The Act establishes:
- payment deadlines for owners, contractors, and sub-contractors for the work done, or materials furnished, to improve a real property; and
- procedures to collect accounts that are due and owing to the workers or suppliers, such as filing a lien against a real property or initiating an optional adjudication process with a certified provider
Along with the Act, the following Regulations also came into force on the same date:
- Prompt Payment and Adjudication Regulation
- Builders’ Lien Forms Amendment Regulation
These Regulations provide for the implementation of two important parts of the Act:
- the adjudication process
- the enforcement of builder’s lien
The different parts of Prompt Payment and Construction Lien Act in Alberta are discussed below. As an intro to this law, watch this video:
To know more about the Prompt Payment and Construction Lien Act in Alberta, consult with the Lexpert-ranked best construction lawyers in Alberta.
What are the prompt payment rules for builders in Alberta?
Builders can rely on the prompt payment rules and timelines under Alberta’s Prompt Payment and Construction Lien Act (PPCLA). The PPCLA provides that:
- builders be paid according to the timelines established by the law
- billing, invoices, and other requests for payment contain the required information
- holdbacks be released annually, except when the contract says otherwise
- construction liens can be filed for the collection of money owed to builders
Application of prompt payment rules
These rules and timelines on prompt payment under the PPCLA can apply to:
- contractors
- sub-contractors
- labourers
- engineers
- architects
Whether they supplied the materials, provided consultative services, or worked for the construction project, these persons or entities can use these rules on prompt payment.
Requirements for a proper invoice
Payment of builders and triggering of the prompt payment is dependent on the issuance of a proper invoice. However, to be considered as “proper,” the PPCLA lists the information that an invoice must contain:
- name and business address of contractor
- date of the invoice
- period when the work was done, or when materials were provided
- description of the work done, or the materials provided
- amount requested for payment
- payment terms, broken down according to the work done or materials provided
- name, title, and contact information of the person to be paid
- a statement saying that it is intended to be a proper invoice
The PPCLA also says that proper invoice must be given to a project owner at least every 31 days, unless there’s a testing and commissioning provision in the contract.
Timelines for payment of contractors and sub-contractors
After the proper invoice has been issued, payment timelines will then be triggered. This means that payors must then pay the following parties according to the days prescribed by the PPCLA:
- paying the contractor by the project owner: within 28 calendar days from receipt of the proper invoice
- paying the sub-contractor by the contractor: within 7 calendar days from receipt of payment by contractor from the project owner
- paying the sub-contractor by the sub-contractor: within 7 calendar days from receipt of payment by sub-contractor from the contractor
Disputing a proper invoice or non-payment
A project owner may dispute the proper invoice within 14 calendar days of its receipt from the contractor. This is called the notice of non-payment, which must:
- be in the prescribed form by the PCCLA’s Forms Regulation
- indicate the amount that is not paid
- indicate the reasons for non-payment
Upon receipt of the notice of non-payment, the contractor must also inform the sub-contractor, who must also inform its sub-contractor. The adjudication process for construction issues may then be used to resolve this issue of non-payment.
Similarly, a contractor may also issue a notice of non-payment to the contractor when:
- the contractor disputes the sub-contractor's entitlement to any payment; or
- the contractor defers the payment because it has not been paid by the project owner
This notice by the contractor must be sent within:
- 7 days: after the contractor’s receipt of notice of dispute from the project owner; or
- 35 days: from the giving of proper invoice, if no notice of non-payment was given by the project owner to the contractor
How does a construction lien work in Alberta?
A construction lien is a claim or interest over the improved property. It may be created under the PPCLA by the contractors, subcontractors, suppliers, or labourers for the payment of:
- any labour that they’ve done; or
- any supplies and materials they’ve provided
When a lien is properly created (or attached), the subject property cannot be transferred or sold by the project owner until the lien has been discharged. Through this registered lien, potential buyers are also cautioned that the project owner has debts to be settled with any of the builders in relation to the property.
Deadline of registration of liens
The PPCLA provides for the following deadlines that the builder must register the lien:
- 60 days: general rule in case of performance of services, furnishing of materials, or for wages
- 90 days: in case of improvements to an oil or gas well, or to its site
- 90 days: in case of furnishing of concrete as a material or work done in relation to concrete
These periods are counted from the last day that the:
- services were performed; or
- materials were furnished; or
- abandonment of the contract for the performance of services or furnishment of materials; or
- work was completed or abandoned
To know more about the laws of other provinces like the Prompt Payment and Construction Lien Act in Alberta, reach out to the best construction lawyers in Canada as ranked by Lexpert.