Home / Alberta’s new prompt payment and construction lien legislation: An overview

Alberta’s new prompt payment and construction lien legislation: An overview

September 27, 2022 | Emma L. Johnston, Bronwhyn Simmons, Mark Puszczak

On August 29, 2022, the Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4 (the “Act”), came into force in Alberta. The construction lawyers at Miller Thomson LLP have been preparing for the Act’s implementation for over a year and a half – our first communique on the subject was written on November 17, 2020.

The major changes to construction law in Alberta are summarized below. Please also refer to our previous updates, linked at the end of this post, for further details. As noted in our August 18, 2022 communication the Act includes a transition section[1], such that any contracts or subcontracts entered into on or after August 29, 2022 must conform to the provisions of the new Act.

Prompt payment

The prompt payment regime set out in the Act provides for the issuance of proper invoices by the contractor which then must be paid by the owner on a legislated timeframe. Key points regarding this process include:

  • A “proper invoice” must contain the following information:[2]
    • the full name and business address of the contractor or subcontractor;
    • a description of the work or materials provided;
    • the period of time during which the work or materials were provided and the date of the invoice;
    • the authority, whether through a written or verbal contract or otherwise, for the work or materials to be provided;
    • the amount of the invoice and corresponding payment terms broken down for the work or materials provided;
    • the name, title and contact information of the person to whom the payment is to be sent;
    • a statement indicating that the invoice provided is intended to constitute a proper invoice; and
    • any other information that may be prescribed, whether via regulation or otherwise.
    • Note: contractors and owners may want to consider adding additional requirements to proper invoices through construction contracts.
  • Contractors must issue proper invoices every 31 days.[3]
  • An owner under a construction contract has 28 days to pay a proper invoice when issued by a contractor[4] and, once payment is received by the contractor, payment must be rendered to subcontractors within 7 days.[5]
  • Interest at a rate defined by the contract or the Judgment Interest Regulation, Alta Reg 215/2011, begins accruing on any unpaid amounts after the 28 day period has expired.[6]
  • If an owner or contractor disputes a proper invoice, a notice of non-payment must be issued in the proper form within 14 days of receipt of the invoice, setting out the reasons for the refusal to pay. Any undisputed portions of the invoice must be paid within 28 days of receipt of the proper invoice.[7]

A key area of interest to many construction and lending parties is the fact that contracts cannot make payment of a proper invoice contingent upon the prior certification of a person (or approval by an owner) unless the contract provides for testing and commissioning of completed work.[8]

Adjudication

In addition to the prompt payment regime, the Act also provides for an adjudication system to resolve payment disputes (amongst other common disputes) on construction projects. Adjudications will be decided by adjudicators, who are appointed by a “Nominating Authority.”[9] We can now advise that approved Nominating Authorities to date, include, the ADR Institute of Alberta and the Royal Institute of Chartered Surveyors.

Key elements of the new adjudication process include the following:

  • Any party to a construction contract/subcontract can initiate dispute resolution before an adjudicator by issuing a notice of adjudication which complies with the regulations.[10]
  • Matters which may be adjudicated under this regime are:[11]
    • the valuation of services or materials provided under the contract or subcontract including a written or proposed change order;
    • payment under a contract/subcontract including in respect of a written or proposed change order;
    • disputes that are the subject of a notice of non-payment issued under the Act;
    • payment or non-payment of an amount retained as a major or minor lien fund and owed to a party during or at the end of a contract/subcontract; and
    • any other matter relating to the contract/subcontract that the parties in dispute agree to regardless of whether a proper invoices was issued, or the claim is lienable.
  • Adjudicator’s decisions are binding except where a court order is made in respect of the matter, the parties have entered into a written agreement to appoint an arbitrator or written settlement agreement in respect of the matter, or where a party applies for judicial review.[12]
  • Judicial review, which a party must apply for within 30 days of the adjudicator’s decision, may be available for the following reasons:[13]
    • the applicant party participated in the adjudication while under a legal incapacity
    • the procedures followed in the adjudication did not accord with the procedures to which the adjudication was subject and the failure to accord prejudiced the applicant party’s right to a fair adjudication;
    • the contract was invalid or did not exist at the time the dispute arose;
    • the determination was of a matter for which adjudication under the legislation was not permitted, or of a matter entirely unrelated to the subject of the adjudication;
    • the adjudication was conducted by someone other than a duly qualified adjudicator;
    • there was a reasonable apprehension of bias on the part of the adjudicator; or
    • the determination was made as a result of fraud.
  • Once a decision has been rendered in the adjudication, the decision can be registered as an order of the court within 30 days of the issuance of the decision if neither party has applied for judicial review, there is no settlement agreement, and the parties have not agreed in writing to refer the matter to arbitration.[14]

Adjudications have yet to prove popular in Ontario, which implemented a similar regime in October of 2019 so we will watch with interest to see how the system develops in Alberta. We have no doubt it will generate interest as it presents an opportunity for early and expedient resolution of small scale disputes.

Lien registrations

The Act contains minor changes to the existing lien regime. We recommend obtaining legal advice in respect to the registration of liens, and the payment of holdback during this transition period to ensure your project does not become a test case. On projects and contracts governed by the Act:

  • The lien registration period is extended from 45 day to 60 days (subject to extensions on certain work);[15]
  • Liens on oil and gas wells and sites, and for the production and provision of concrete (except for ready-mix concrete), must be registered within 90 days;[16]
  • The minimum amount for which a lien can be registered has been increased to $700;[17] and
  • Regulated professional engineers and architects have been brought within the scope of the Act provided the work completed amounts to work upon an improvement.[18]

Phased holdback release

Where provided for in a contract, holdbacks may be released on a progressive basis for projects that are over a year in duration and worth over $10,000,000.[19] We recommend obtaining legal advice on the implementation of holdback provisions to your projects.

Electronic certificates and access to payment information

Some additional changes implemented under the Act are the following:

  • If provided for in the applicable contract, a Certificate of Substantial Performance may be provided electronically;[20] and
  • The Act expands access to information about particular construction contracts/subcontracts. Now, in addition to lienholders, beneficiaries of trusts, contractors, or subcontractors working under a specific contract may request production of contractual documents including a “statement of the state of accounts.”[21]

If you have questions about how your company is impacted by the new prompt payment legislation, or about construction or payment disputes, Miller Thomson’s Construction & Infrastructure lawyers have extensive experience acting for owners, consultants and contractors in the construction industry and are happy to help.

Additional resources

[1] Act, s. 74(2)

[2] Act, s. 32.1(1)

[3] Act, s. 32.1(6)

[4] Act, s. 32.2(1)

[5] Act, s. 32.3(1)

[6] Act, s. 32.6   Prompt Payment and Adjudication Regulation (the “Regulation”), s. 4

[7] Act, s. 32.2

[8] Act, ss. 32.1(3), (4)

[9] Act, s. 33.2

[10] Act, s. 33.4(1)

[11] Regulation, s. 19

[12] Act, s. 33.6(5)

[13] Act, ss. 33.7, 33.8; Regulation, s. 34

[14] Act, s. 33.61(1)

[15] Act, ss. 41(1)(a), 41(2)(a), 41(3)(a), 41(4)(a)

[16] Act, ss. 41(1)(b),(c), 41(2)(b),(c), 41(3)(b),(c), 41(4)(b),(c)

[17] Act, s. 35(3)

[18] Act, s. 70(a)(i);
Regulation, s. 35

[19] Act, s. 24.1; Regulation, s. 2

[20] Act, s. 20(1)(b)

[21] Act, s. 33

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