Upcoming Changes to the Builders’ Lien Act

Upcoming Changes to the Builders’ Lien Act

The current Builders’ Lien Act (the “Act”) is getting an upgrade this year and there are some key changes that you should be aware of:

• The lien period is changing from 45 days to 60 days for the construction industry and from 45 days to 90 days for contracts primarily related to the supply of work and services in relation to concrete;
• Statutory holdback on large multiyear projects will be released on an annual or phased basis which will allow for funds to flow to the contractors and subcontractors and restrict the retention of lien holdbacks from non-permitted purposes;
• There is better access to information for those involved in a project as the changes to section 33 of the Act allows for a lienholder, beneficiary of a trust or a contractor or subcontractor currently working under a contract on the project to request certain information regarding contracts and accounts payable.

The most significant change comes from the implementation of prompt payment and adjudication provisions in the legislation which, among other effects, will put an end to “pay when paid” clauses. The issuance of a proper invoice, which is defined in the Act as the invoice from the Prime Contractor to the Owner, triggers the following statutory payment terms:

Subject to any notice of dispute:

• Owner must pay within 28 days after receipt of proper invoice;
• Prime Contractor must pay within 7 days of receipt of payment from Owner;
• Subcontractor must pay within 7 days of receipt of payment from the contractor.

If all or a portion of the proper invoice is disputed by the Owner, then:

• The Owner must provide Notice of Dispute to the Prime Contractor no later than 14 days after receipt of the proper invoice.
• If the Prime Contractor receives Notice of Dispute from the Owner, then the Prime Contractor must give Notice of Non-Payment to subcontractor within 7 days or must pay the subcontractor within 35 days of the Prime Contractor’s proper invoice being submitted to the Owner even if the Prime Contractor has not been paid in full.
• If a subcontractor receives notice of non-payment from the Prime Contractor, then the subcontractor may issue a Notice of Non-Payment to its subcontractor or must pay its subcontractor within 42 days of the Prime Contractor giving the proper invoice to the Owner even if subcontractor has not been paid in full.

If a Notice of Dispute or Notice of Non-Payment is issued, the dispute must be referred to  adjudication for determination. The intent of the adjudication process is to provide a timelier and more cost-effective resolution of disputes to ensure payment is actively flowing to those performing work on projects. An adjudicator’s decision would be final and binding subject only to judicial review on the grounds set out in the Act. The adjudication process will be established by the Nominating Authority(ies) or Regulations and currently remains a work in progress with the Alberta Government.

There are also practical implications as a result of the changes to the Act, including the requirement to revise contracts, including the Owner’s contract with the Consultant, and dedicate more resources to reviewing and processing invoices.

To learn more about the Builders’ Lien Act and construction law, please contact Adrianna Worman at 403-668-9195 or visit gfslaw.ca.