Alberta's Prompt Payment and Construction Lien Act comes into effect

Alberta’s new legislation creating payment timelines and setting out the adjudication process for the construction sector in the province has come into effect.

The Prompt Payment and Construction Lien Act applies to all private construction contracts made in Alberta on or after August 29. Meanwhile, existing contracts expiring after two years must comply with the new law by August 29, 2024. The new legislation replaces the Builders’ Lien Act.

“Albertans in the construction industry have been advocating for prompt payment legislation for nearly 10 years,” Minister of Service Alberta Nate Glubish said. “I am proud of the work that Alberta’s government did, collaborating over the last three years with members of the construction industry to develop and pass legislation that will protect jobs and unlock cash flow in this multibillion-dollar industry that employs hundreds of thousands of Albertans.”

Prompt payment rules

Under the new legislation, the payment timelines apply to contractors, subcontractors, labourers, and regulated professional engineers and architects who provide materials or consultative services on construction projects. They also apply to construction projects, materials, and work covered previously by the Builders’ Lien Act.

However, provincial government project contracts are subject to the Public Works Act and, therefore, exempt from timelines outlined in the new legislation.

Project owners must pay contractors within 28 calendar days of receiving a proper invoice. If a project owner disputes an invoice, they must give notice of non-payment to the contractor within 14 calendar days of receiving the invoice. Notice of non-payment must include the amount withheld and the reasons for non-payment. Once the notice is provided, the project owner may withhold payment of all, or a portion of, the amount invoiced.

Contractors must also pay a subcontractor within seven calendar days from the receipt of payment from the owner. If a subcontractor has not received payment within the required period, they may issue a notice of adjudication to initiate an adjudication process.

Simplified adjudication process

The new legislation provides that if a dispute arises from work performed under a construction contract, parties to the contract may initiate an adjudication process to resolve the dispute.

As long as no court application arising from a dispute has been initiated, contractors and subcontractors may submit a notice for adjudication for any dispute regarding (a) valuation of services or materials provided under the contract or subcontract; (b) payment; (c) notices of payment; (d) payment or non-payment of an amount retained as a lien; or (e) any other matter concerning the contract or subcontract to which the parties in dispute may agree.

A contractor or subcontractor initiating a dispute must give notice of adjudication to the other party and a selected nominating authority. Nominating authorities are responsible for certifying and training adjudicators for disputes, maintaining the public registry of available adjudicators, and establishing and maintaining a code of conduct for adjudicators.

Project contracts may indicate a nominating authority to whom a notice of adjudication must be submitted in case of a dispute. The initiating party may choose one if a nominating authority is not named in a contract.

The nominating authority will provide the initiating party with a notice of adjudication to fill out and serve to the other party. The notice must include the following details:

• Names and addresses of the parties in the dispute;
• Nature and a brief description of the dispute, including details of how and when it arose;
• Nature of remedies sought;
• Name of the nominating authority to whom the party intends to submit notice;
• Name of the adjudicator requested to conduct the adjudication if any.

“As general contractors, we are prepared to implement prompt payment for our subcontractors and suppliers, ensuring we continue to lead by example in the industry,” said Jason Portas, General Contractors Alliance of Canada Alberta chair. “We look forward to the successful implementation of prompt payment and adjudication in Alberta, which would not have happened without this partnership between industry and government.”