Bill 37: The Builders’ Lien (Prompt Payment) Amendment Act in Alberta

On December 9, 2020, Bill 37 received royal assent. The Bill proposed amendments to the Province of Alberta’s Builders’ Lien Act (the “Act”) which are expected to come into force in July 2021.

The amendments will only affect a contract or subcontract signed after July 2021. Bill 37 attempts to modernize the Act by proposing changes to (i) prompt payment; (ii) adjudication of construction disputes; and (iii) builders’ liens registration and information. The Bill also renames the Act, the Prompt Payment and Construction Lien Act to reflect this change.

Prompt Payment

Bill 37 establishes the following changes to ensure the prompt payment of builders’ liens:

  • 28 day timeline for project owners to pay invoices to general contractors;
  • The owner has 14 days after receiving a proper invoice to issue notice of non-payment and dispute the amount;
  • 7 day timeline for contractors to pay subcontractors after receiving payment;
  • extends timelines for registering liens:
    • 45 days to 60 days for the construction industry;
    • 45 days to 90 days for the concrete industry; and
  • increases the minimum amount that can be subject to a lien from $300 to $700.

Bill 37 defines a proper invoice as including:

  • name and address of contractor/subcontractor;
  • description of the work performed or materials provided;
  • authority for work or materials to be provided (verbal or written contract);
  • the period of time the work was performed or materials were provided;
  • date of invoice;
  • amount of invoice and corresponding payment terms;
  • name, title, and contact information of person to whom payment is to be sent;
  • any other information prescribed in the regulations (to be determined); and
  • a statement that the invoice is intended to be a “proper” invoice.

The owner must pay within 28 days of receiving a proper invoice. Once the owner has paid the proper invoice, the contractor must pay their subcontractor within 7 days of receiving payment from the owner. The subcontractor must pay the sub-subcontractors within 7 days of receiving payment from the contractor. The 7 day period will apply “down” the construction chain to ensure all parties are paid in a timely manner.

The contractor is required to issue invoices to the owner every 31 days. This is to ensure that payments further down the chain are not delayed. Parties may dispute monies that are due and owing or the issuance of a proper invoice by delivering a Notice of Dispute within 14 days.

Bill 37 also removes the prohibition of pay-when-paid clauses from the Act. Where a contractor receives partial payment from the owner, subcontractors are to be paid first. Interest will also begin to accrue at a prescribed rate on all late payments. This interest cannot be waived.

Adjudication

Bill 37 introduces construction dispute adjudication, which is intended to fast-track dispute resolutions as an alternative to litigation. Adjudication offers a faster and less costly process than going to court.

To be eligible for adjudication, the parties must have a contract or subcontract. For example, a subcontractor cannot adjudicate a matter with an owner. Any eligible party can initiate the adjudication process.

The Minister of Service Alberta will appoint Authorized Nominating Authorities who will train and accredit adjudicators. The Authorized Nominating Authorities are also responsible for assigning disputes to adjudicators.

The Government has not set timelines for adjudication as of yet. However, adjudication decisions are often final and binding upon the parties and an appeal from an adjudication is provided in limited circumstances. It is still unclear how exactly adjudication will work in the enforcement of liens. Greater clarity will come from the publication of Regulations.

Builders’ Liens Registration and Information

Bill 37 amends the time limits to register a lien the following ways:

  • improvements to oil and gas wells and well sites: the statutory lien period remains 90 days and it is recommended that lienholders should register their liens within 60 days if there are any doubts as to the nature of the improvement;
  • improvements relating to concrete: the statutory lien period is extended to 90 days to reflect the time it takes for concrete to cure and be tested; and
  • all other improvements: the statutory lien period is extended to 60 days.

An owner may progressively release the major lien fund in the following ways:

  • pursuant to the contract;
  • on an annual basis for projects lasting longer than a year; and
  • on a phased basis specified in the contract.

The amendments regarding progressive release are optional. Bill 37 makes it possible for a owner to keep the entire major lien fund until the contractor has issued a certificate of substantial performance. However, the owner cannot keep the entire fund when there are liens registered against the improvement.

Progressive release of lien funds provides benefits to contractors, however owners and subcontractors face risks to their security with this method of release. To mitigate this risk, potential lien claimants may obtain copies of relevant contracts and payment status down the chain.

Bill 37 entitles more parties to access information regarding relevant contracts and payment status. Currently, only lien holders can demand access to information. Under Bill 37 contractors and subcontractors who do not have a lien are able to access information. Beneficiaries of trusts may also have the same access. If a demand for information is not met within 6 days and the requesting party suffers a loss as a result, the withholding party is liable for that loss.

Bill 37 does not apply to the Public Works Act, which is the legislation that governs public works contracts with the Government of Alberta. Thus, these amendments will have no effect on existing or future contracts in this area.

Businesses and individuals governed by the Act and the proposed Bill 37 should be mindful of the effects these proposed changes will have on their industries and the agreements that govern their operations. MLT Aikins is available to help our clients better understand the proposed changes and impacts these may have upon your organization. Contact a member of our Builders’ Liens team for assistance.