Saskatchewan’s new prompt payment and mandatory adjudication legislation is now in force. With the new rules in effect, there’s no better time to review what types of contracts prompt payment will apply to.
What Contracts Do Prompt Payment and Adjudication Apply to?
The short answer is that prompt payment applies to most construction projects in Saskatchewan, subject to a few exceptions discussed below. The longer answer is that there are three fundamental questions to ask to determine whether prompt payment applies to your project:
- Does your project fall under the Builders’ Lien Act (“BLA”) normally (i.e. does it meet the definition of an “improvement”)?
- Has the transition period passed?
- Is your project in an exempt sector/industry?
Below we discuss what each of these three considerations involves.
Definition of an Improvement
The new legislation applies to all projects that would fall under the application of the BLA. The BLA definition of an “improvement” is very wide (see the definition below) – so chances are prompt payment will apply to most projects.
(h) “improvement” means a thing constructed, erected, built, placed, altered, repaired, improved, added to, dug or drilled or intended to be constructed, erected, built, placed, altered, repaired, improved, added to, dug or drilled on or into, land, except a thing that is not affixed to the land or intended to become part of the land and includes:
(i) landscaping, clearing, breaking, excavating, digging, drilling, tunnelling, filling, grading or ditching of, in, on or under land;
(ii) the demolition or removal of any building, structure or works or part thereof;
(iii) services provided by an architect, engineer or land surveyor;
The legislation has some transition periods in place. If a contract between an owner and contractor was entered into prior to March 1, 2022, prompt payment will not apply to that contract or any resulting subcontracts.
In addition, the new provisions do not apply to improvements made pursuant to a lease entered into before March 1, 2022.
While these transition periods will likely exclude some projects with already-signed contracts that will be executed later in 2022 or even 2023, the transition period exemptions are time limited and will eventually phase out as pre-March 1, 2022 contracts are completed and contracts for new projects are executed.
The regulations also have a limited number of exemptions from prompt payment and adjudication legislation. The following sectors/industries are exempt:
- Mining and mineral extraction (with the exception of oil and gas)
- Contracts with architects and engineers
- Contracts for power generation and transmission infrastructure made pursuant to the Power Corporation Act
The broad application of the new legislation with limited exceptions means your organization needs to be ready for prompt payment now. Project owners and contractors can avoid surprises by anticipating and planning for what projects and contracts prompt payment applies to and ensuring that procurement and project management staff are prepared to run projects in accordance with the new legislation.
The lawyers in the MLT Aikins Construction group have helped numerous clients in Saskatchewan review their contracts in advance of the new legislation taking effect. Contact us to learn how we can help your organization comply with the new prompt payment rules.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.