by Amber Nickel – Willis Law
On Board – Prompt Payment Legislation: The Time Has Come
A long time ago in a galaxy far, far away, after jazzercise and step aerobics left the scene to make way for yoga and Zumba classes… an article was published in the CCI North Alberta Chapter Insite to Condos (specifically, Vol. 36, Issue 4 – Summer 2021). Fair warning was given to those near and far (well, at least within the Province of Alberta), that changes to the Builders’ Lien Act were afoot. The name of that article – (Please Don’t) Lien on Me.
The countdown is now on for the new Builders’ Lien (Prompt Payment) Amendment Act to come into force and the Builders’ Lien Act to become the Prompt Payment and Construction Lien Act (PPCLA). Alberta will ring in the new legislation on August 29, 2022.
In anticipation of these changes, let’s review the highlights.
- Property owners (i.e. the condominium corporation) must pay the contractor within 28 days of receiving a “proper invoice”, or issue an “Owner’s Notice of Dispute” to the Contractor within 14 days of receiving the disputed invoice.
- Contractors and subcontractors have to pay their subcontractors within 7 days of receiving payment from the property owner.
- Contractors and subcontractors will have 60 days to register a lien (currently they have 45 days), with an exception for contractors doing concrete work, who will have 90 days to register a lien (not applicable to entities that install or use ready-mix concrete).
- The minimum requirement to register a lien (the amount owed to the contractor or subcontractor), is increased from $300 to $700.
- Introduction of new rules for the payment of holdbacks on large, multi-year projects.
- Implementation of a new adjudication process to resolve disputes without use of the Courts.
A “proper invoice” must contain the following:
- Contractor’s name and business address;
- The date of the proper invoice and the period during which work was done or materials were provided;
- Information identifying the authority (such as the contract) under which the work was performed, or materials provided;
- A description of the work performed, or materials provided;
- The amount requested for payment and the payment terms;
- The name, title and contact information of the person to whom payment is to be sent;
- A statement indicating that the invoice is intended to be a “proper invoice”; and
- Any other information prescribed by the regulations.
Prompt Payment and Adjudication Regulation
The Regulations have filled in many of the missing pieces that initially were found in the draft legislation. Key details of these Regulations include:
- Application: The old Builders’ Lien Act continues 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, with some exceptions.
- 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.
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. The written notice must include, as follows:
- Names and addresses of the parties in dispute;
- Nature and brief description of the dispute;
- Nature of the remedy sought;
- Name of the Nominating Authority to whom the party serving notice intends to submit the notice; and
- Name of the adjudicator requested to oversee the adjudication, if any.
- Adjudication Timelines: Based on the timelines set out in the Regulations, the adjudication process will proceed quickly – approximately 60 days from the triggering of the adjudication process to the decision (N.B. all time periods referred to are “calendar days” – any day but Saturday, or a statutory holiday). Timelines for each step of the adjudication process are contained in the Regulations, such as agreeing on an adjudicator, and providing records and materials. Adjudicators have the authority to extend deadlines to a maximum of 10 calendar days if determined necessary or agreed to by the parties and the adjudicator
- Adjudication Remedies: The adjudicator has the jurisdiction to: (1) order the non-paying party to make payment within a specified time; and (2) allow the unpaid party or parties to cease performing work under the contract until payment is made.
- Limitation Period: Any party to an adjudication may commence an action in court within 2 years after the notice of adjudication is sent, other than an application for judicial review. The impact of these provisions on those contracts that provide for mandatory arbitration, if any, is unknown.
- Progressive Holdback Release: The Regulations outline two mechanisms for holdback release – annual release and release on a phased basis specified in the contract, which only apply to contracts that exceed a price of $10 million at the time the contract is entered.
- Consulting Engineers and Architects: The PPCLA will apply to regulated professional engineers and architects contracted to act in a consultative capacity for projects involving improvements. This means that engineers and architects will also be subject to holdbacks, which they typically have not been.
- Interest: The interest rate specified in the applicable contract will apply to any invoice that is not paid when due. If no interest rate is defined in the contract, the rate provided in the Judgment Interest Act.
The Builders’ Lien Forms Amendment Regulation adds 5 new forms to those currently available under regulation: an “Owner’s Notice of Dispute”, used to dispute a contractor’s invoice; “Contractor’s Notice of Non-Payment”, issued upon non-payment by the owner; a “Contractor’s Notice of Non-Payment Dispute” issued upon the contractor disputing the amount a subcontractor is entitled to; a “Subcontractor’s Notice of Non-Payment Where Contractor Does Not Pay”, issued upon non-payment by the contractor; and a “Subcontractor’s Notice of Non-Payment Dispute” issued upon the subcontractor disputing the amount another subcontractor is entitled to.
Being involved with a builder’s lien can lead to a sticky situation, especially for condominium corporations. The new legislation, while providing some clarity and the ability to resolve disputes in what will (hopefully) be a more efficient manner, is a lot of information to process and adapt to. With that said, the condo industry does not have to go it alone. This is a great learning opportunity for those in the industry, such as Property Managers and Boards, that could lead to new effective and efficient processes being developed. Corporations should connect with legal counsel for guidance. Never hesitate to ask questions. Remember – knowledge is power!