Bill 37: The Builders’ Lien (Prompt Payment) Amendment Act, 2020 (the “Amendment Act”), which we previously wrote about on the blog here, received royal assent on December 9, 2020 and will come into force in Alberta on August 29, 2022. Among other extensive changes being introduced, the Amendment Act will also change the name of the current Builders’ Lien Act to the Prompt Payment and Construction Lien Act (the “PPCLA”).
The Alberta government recently released two related regulations under the PPCLA, the Prompt Payment and Construction Lien Forms Regulation and the Prompt Payment and Adjudication Regulation (collectively, the “PPCLA Regulations”), which will both come into force on August 29, 2022. The PPCLA Regulations, together with the PPCLA, will introduce a comprehensive new legislative framework with clear timelines and rules for payments and liens and a new adjudication system for payment disputes within the construction industry.
One of the government’s stated goals of this new PPCLA regime is to help ensure that contractors and subcontractors in all construction industry sectors are paid on time. Prior to the PPCLA regime, Alberta’s construction industry had no statutory rules for payment timelines. With the PPCLA Regulations coming into force, these new rules will address:
- administration of the adjudication process, including eligibility;
- training and associated costs for adjudicators;
- payment of lien holdbacks;
- transition of existing construction contracts; and
- administrative items, including adjudication procedures and timelines, and consolidation of disputes that are subject to prompt payment rules.
The PPCLA will not apply to pre-August 29, 2022, contracts unless and until they are amended to conform to the new provisions of the PPCLA. Under s. 74 of the PPCLA, for such contracts which will remain in effect on or after August 29, 2024, parties are given until August 29, 2024, to amend the contract to conform to the new provisions of the PPCLA.
New adjudication process
One of the hallmarks of the new PPCLA regime is the creation of a binding adjudication process (subject to certain exceptions) to resolve designated disputes in the construction industry. The Prompt Payment and Adjudication Regulation provides for Nominating Authorities to oversee such items as the qualifications, responsibilities, expertise, code of conduct, training, public registry, and fees of adjudicators under the Regulation, as well as the complaints process for accepting and addressing complaints against adjudicators.
The Prompt Payment and Adjudication Regulation provisions also include rules regarding what matters may be adjudicated, the particulars of the adjudication process, and the determination of adjudication matters. Under s. 25(1) of the Regulation, an adjudicator may exercise the following powers in the adjudication process:
- issue directions to the parties involved in the adjudication;
- obtain information through independent research;
- conduct onsite inspections of the subjects that the adjudicator considers necessary; and
- obtain assistance from construction industry professionals.
Only disputes under contracts (including subcontracts and verbal contracts) may be referred to adjudication. Matters that can be referred to adjudication include:
- the valuation of services or materials;
- payment under a contract or subcontract;
- disputes that are the subject of a notice of nonpayment;
- payment or nonpayment 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 or subcontract; or
- any other matter in relation to a contract or subcontract, as the case may be, that the parties in dispute agree to, regardless of whether or not a proper invoice was issued or the claim is lienable.
The timeframe for referring matters to adjudication, and for an adjudicator to resolve disputes, is generally short. An adjudicator will be selected within 7 days of the referral. Parties must submit their documents to the adjudicator within a further 17 days (no more than 5 days for the referring party and no more than 12 further days for the responding party). Matters must be determined by adjudicators in accordance with s. 26(1) of the Regulation by issuing an order within 30 days of receiving the responding party’s documents (or within an extended time under s. 25(3), which provides for the extension by an adjudicator of any deadline in the adjudication process subject to certain conditions). A copy of the adjudicator’s order must be certified by the relevant Nominating Authority and provided to the parties to the adjudication within 7 days after the determination is made.
Referral of a dispute to adjudication does not affect the timelines within which lienholders must register and enforce their liens.
Professionals acting in consultative capacity
The PPCLA will also apply to contractors that are (1) a regulated professional engineer, or (2) a regulated professional architect, who are acting in a consultative capacity in respect of an improvement under the PPCLA.
Lien period exception for ready-mix concrete
Although the PPCLA extends the timeline for registering a lien in the concrete industry from 45 days to 90 days, the Prompt Payment and Adjudication Regulation specifies this does not apply to entities that install or use “ready-mix concrete”. Those entities will be subject to the new standard 60-day lien deadline under the PPCLA.
Major lien fund and minor lien fund holdback
Pursuant to the Prompt Payment and Adjudication Regulation, a progressive release of holdback is required under the PPCLA for contracts that have a completion schedule longer than a year, are valued in excess of $10,000,000.00 and have annual or phased holdback release clauses.
Builders’ lien forms
All builders’ lien forms, including the necessary forms for filing a lien or notice of a dispute under the PPCLA, can be found under the Builders’ Lien Forms Amendment Regulation. These forms include, for example, the following:
- Owner’s Notice of Dispute;
- Contractor’s Notice of Non-Payment;
- Contractor’s Notice of Non-Payment Dispute;
- Subcontractor’s Notice of Nonpayment Where Contractor Does Not Pay;
- Subcontractor’s Notice of Nonpayment Dispute;
- Statement of Lien; and
- Statement of Lien on Interest in Crown Minerals
Important points from the PPCLA regime
One of the most significant additions made by the PPCLA regime is the creation of a relatively fast and binding adjudication process for construction industry disputes. Certain details regarding the dispute process under the PPCLA and the PPCLA Regulations have yet to be released, including who or what organizations will be approved as Nominating Authorities.
CARSCALLEN LLP’S CONSTRUCTION LAW EXPERTISE
Carscallen LLP has an experienced team of constructions lawyers. We have experience in all forms of dispute resolution, including mediation, arbitration and litigation, with respect to various construction projects, including large oil sands projects, commercial high-rise buildings, commercial complexes, residential high-rise buildings, and condominium complexes. Our team also has experience in drafting and reviewing construction contracts for various types of projects. If you have questions about how the new PPCLA regime may affect your business, or any other construction law-related questions, please contact any member of our team.*This update is intended for general information only on the subject matter and is not to be taken as legal advice.