Prompt Payment Legislation Coming Soon to an Alberta Construction Project Near You

Bennett Jones LLP
Contact

Bennett Jones LLP[co-author: Patrick Schembri - Articling Student]

Cash flow and payment delays due to disputes are a critical concern for construction companies who rely on the timely receipt of funds to maintain operations and pay subcontractors and suppliers. The introduction of prompt payment legislation is intended to address these issues. On October 21, 2020, following other Canadian jurisdictions, Bill 37, Builders' Lien (Prompt Payment) Amendment Act, 2020, passed its first reading in the Legislature of Alberta. If Bill 37 receives royal assent, it will, following proclamation, amend Alberta's Builders' Lien Act (BLA) and become the Prompt Payment and Construction Lien Act.

Key Features of Bill 37

Bill 37 will impose a number of significant changes to construction contracts. In particular:

  1. Prompt Payment: Under the prompt payment system, if a party providing work or materials (the Payee) issues a "proper invoice" (i.e., one that includes certain prescribed information) to the party they contracted with (the Payor), two time periods begin:
    • First, the Payor has 14 days to issue a dispute notice to the Payee; and
    • Second, the Payor has 28 days to pay all amounts in the "proper invoice" that have not been properly disputed.
  2. Adjudication: Following the issuance of a dispute notice, a party may refer the matter to adjudication, which will be final and binding unless successfully challenged through an application for judicial review. This judicial review will be limited to certain defined issues including, for example, a mistake of law by the adjudicator.
  3. Extended Time Periods: Bill 37 will extend certain time periods in the current BLA applicable to the registration of a lien and the retention or release of lien (holdback) funds. Where those time periods are 45 days under the BLA, they will be extended to 60 days. Similarly, where the work is done or the materials are furnished primarily in relation to concrete, those time periods will be extended to 90 days.
  4. Prohibition of Pay-When-Paid Clauses: Pay-When-Paid clauses are a common feature of many standard form construction contracts and allow a party to delay payment until they themselves have been paid by the party above them on the chain. However, Bill 37 prohibits these very controversial clauses on the assumption that they will no longer be required in light of the prompt payment regime.
  5. Holdback Release: If provided for in the subject contract, no liens are have been registered and certain other conditions are met, Bill 37 will allow holdback funds to be released at pre-established times unrelated to the completion or the issuance of a Certificate of Substantial Performance.
  6. Right to Demand Information: Bill 37 expands the list of those entitled to demand financial information from the narrow list currently included in Section 33 of the BLA.

Finally, it appears that the above changes will apply only to contracts entered into on or after the date Bill 37 is proclaimed, which is currently targeted for July of 2021.

Stay Tuned

Bill 37 will have a significant impact on the construction industry in Alberta. Accordingly, we recommend that industry participants familiarize themselves now with the key elements of Bill 37 and commence proactive planning measures. The Construction team at Bennett Jones is ready to respond to any questions or concerns regarding Bill 37. We will also continue to monitor Bill 37 and will provide updates as they become available.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bennett Jones LLP | Attorney Advertising

Written by:

Bennett Jones LLP
Contact
more
less

Bennett Jones LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.