Bill 37, the Builders’ Lien (Prompt Payment) Amendment Act, 2020 received first reading on October 21, 2020. If passed, the Bill would amend the current Builder’s Lien Act, by establishing clear statutory timelines for payments to contractors, subcontractors, and suppliers throughout the construction industry.
The proposed amendments would carve out contracts primarily related to the supply of work and services in relation to concrete from other construction contracts. The owner would now be obligated to retain the holdback for 90 days after the issuance of a certificate of substantial performance or completion of the contract. Similarly, the proposed amendments would also extend the timeline for the registration of liens for contracts primarily related to concrete work and services to 90 days.
The proposed amendments also allow for the owner of a multiyear project to release the accrued holdback on an annual or phased basis as may be specified in the contract. The intent of this amendment is to allow for funds to flow to the contractors and subcontractors and restrict the retention of lien holdbacks from non-permitted purposes.
The timelines for registering liens would be extended from 45 days to 60 days for the construction industry and 90 days for the concrete industry. Liens within the oil and gas industry remain at the previous 90-day registration timeline. The Bill additionally proposes to increase the minimum amount owing to register a lien from $300 to $700.
The proposed changes to section 33 of the current Builders’ Lien Act, R.S.A. 2000, c. B-7 are a welcome change and will provide better access to information for those involved in a project. As it stands, the current section 33 allows a lienholder to request a copy of the contracts and statements of accounts for the relevant project. However, the proposed changes will expand who may request that information to include any person working under a contract on the project.
The most significant change in the Bill is with the addition of the section on Prompt Payment. Within Part 3 we find a detailed description and definition of what constitutes as a “proper invoice”. The issuance of a “proper invoice” is critical to triggering the payment deadlines outlined in the Bill’s proposed Section 32.2. The proposed amendments also prohibit contract terms that impose prior certification from a consultant or approval of the owner as a condition precedent to the issuance of a “proper invoice”.
According to the Bill the definition of “proper invoice” under Section 32.1 must include:
(a) the contractor’s or subcontractor’s name and business address;
(b) the date of the proper invoice and the period during which the work was done or materials were furnished;
(c) information identifying the authority, whether in a written or verbal contract or otherwise, under which the work was done or materials were furnished;
(d) a description of the work done or materials furnished;
(e) the amount requested for payment and the corresponding payment terms broken down for the work done or materials furnished;
(f) the name, title and contact information of the person to whom the payment is to be sent;
(g) a statement indicating that the invoice provided is intended to constitute a proper invoice;
(h) any other information that may be prescribed.
Once a “proper invoice” is provided, it can only be revised by agreement between the parties.
Upon receipt of a “proper invoice”, the clock then begins to tick on the 28-day statutory payment term. This payment term applies to every level of the contractual chain, owners to general contractors, general contractors to sub-contractors, and sub-contractors to suppliers. The triggering event is the issuance of a “proper invoice” by the entity submitting the “proper invoice”. Consequently, where a subcontractor submits a proper invoice to the general contractor, prior to the general contractor submitting the proper invoice to the owner, a general contractor might find itself paying its subcontractors prior to receiving payment from the owner.
If a “proper invoice’ is disputed, then the party disputing the invoice may refuse to pay all or some of the invoice within the 28 days if it gives the other party a notice of dispute within 14 days of receipt of the invoice.
The proposed amendments would also put an end to any pay-when-paid contractual clauses with the statue expressly declaring any such terms to have no force or effect.
The other significant change is with the proposed addition of Part 5: Dispute Adjudication. Disputes may be referred to adjudication for determination. An adjudicator’s decision would be final and binding subject only to judicial review on the grounds set out in proposed section 33.8.
Adjudicators will be appointed by a Nominating Authority. The proposed amendment does leave the possibility open for the responsible Minister to designate one or more entities to act as a Nominating Authority. Perhaps this was done in response to the July 2, 2020 letter send on behalf of various industry organizations, including the Alberta Construction Association.
The required training and qualifications for adjudicators, and the specifics of the adjudication process and procedures have not been set out in the proposed amendments and will be established by the Nominating Authority(ies) or regulations down the road.
The Government has said that it is targeting July of 2021 for the implementation of these changes.
For any questions regarding Bill 37 or questions regarding builders’ liens, please contact Adrianna Worman at 403-668-9195 or aworman@gfslaw.ca.