Written by Brian Reid, Geoff Stenger, Jason Roth, Patrick Schembri and Xaverie MacLennan
The Alberta Government has now confirmed that the Builders’ Lien (Prompt Payment) Amendment Act, 2020 (BLA) will come into force on August 29, 2022 when the Alberta Builders' Lien Act, will become the Prompt Payment and Construction Lien Act (PPCLA). On February 25, 2022, the Alberta Government also released the long awaited Prompt Payment and Adjudication Regulation which provide further clarity regarding the PPCLA.
As explained in our previous insight, Prompt Payment Legislation in Alberta: More Changes and Clarifications, the two key features of the PPCLA include 1) strict timelines for the payment of invoices on construction projects; and 2) a fast-track adjudication system for the resolution of disputes. The PPCLA also includes several other specific changes from the current regime including an extended period for filing liens and new holdback release mechanisms for certain contracts. As a reminder, the key features of the PPCLA are as follows:
- A contractor must provide a proper invoice to the owner every 31 days;
- The owner then has 14 days to object to the "proper invoice." Following any such objection, either party may refer the dispute for resolution through the fast track adjudication process;
- If an owner does not object to the "proper invoice," it must pay within 28 days (including any amount not objected to if a partial notice of objection is issued); and
- The contractor must issue a notice of non-payment to its subcontractors or pay them within seven days of being paid. This seven-day deadline also applies as between subcontractors.
Key Features of the Regulations
The Regulations have now filled in many of the missing blanks regarding the application of the PPCLA. Key details of these Regulations include:
- Application: The old BLA will continue to apply to contracts entered into before August 29, 2022. However, any contracts that are scheduled to continue for more than two years, must be amended to comply with the PPCLA by August 29, 2024.
- Proper Invoices: Proper invoices must be given to an owner at least every 31 days unless the contract includes a provision for testing and commissioning and the conditions of such testing and commissioning have not been met. Subject to the 31-day limitation, the owner and the contractor may agree to specify terms as to when proper invoices may be delivered. Although this language may suggest that parties can contractually agree to extend the 31-day period (for example, for contracts that provide for payment upon achievement of a particular milestone), the "subject to" language suggests that the latest the parties can set this date is every 31 days.
- Starting an Adjudication: Disputes regarding any of the following issues may be referred for resolution through the fast-track adjudication process:
- the valuation of services or materials provided;
- payment under the contract, including the payment of change orders;
- disputes that are the subject of a notice of non payment;
- payment or non payment of an amount retained as a major lien fund or minor lien fund and owed to a party during or at the end of a contract; and
- any other matter in relation to the contract that the parties in dispute agree to.
- Adjudication Timelines: The adjudication process will proceed very quickly—approximately 60 days from commencement to the decision (note: all time periods refer to calendar days—any day but Saturday, or a statutory holiday):
The party who wishes to refer a dispute to adjudication must provide notice to the other party and a copy must be provided to the Nominating Authority on the same day.
Based on the broad categories of issues identified, it appears that virtually all typical construction disputes, regardless of complexity or amount, will be potentially be referred to adjudication.
- The parties have 4 days from the date a notice of adjudication is delivered to agree on an adjudicator failing which the Nominating Authority will select someone;
- The Nominating Authority has seven days to appoint the adjudicator from the date the adjudicator is agreed to or from when the four day period expires;
- Once the adjudicator is appointed, the initiating party has five days to provide the adjudicator and the other party with a copy of the notice of adjudication, a copy of the contract and a copy of all documents they intend to rely on;
- The responding party then has 12 days to provide a response to the adjudicator and the other party unless the adjudicator requires an earlier response;
- An adjudicator must issue a decision within 30 days of receiving the documents from the initiating party. The exact procedures of the hearing will vary, but Adjudicators may issue directions, conduct independent research, conduct site inspections and obtain assistance from other industry professionals.
- The adjudicator may extend, one or more times, any deadline in the adjudication process to a maximum of 10 calendar days if the adjudicator considers it necessary, or, if the parties agree and the adjudicator consents.