Prompt payment in effect for Alberta construction sector
Alberta now joins the list of provinces that have prompt payment laws to mandate the flow of payment.
A truck gets loaded at a Grand Prairie, Alta. construction site. – Government of Alberta
- Alberta’s new rules that enforce prompt payment in construction are now in effect.
- Owners are mandated to pay contracts within 28 days of a proper invoice.
- To avoid going to court, the new rules also feature an adjudication process for disputes.
The Whole Story:
Prompt payment is now the law of the land for Alberta.
Formerly known as the Builder’s Lien Act, the Prompt Payment and Construction Lien Act is now in force.
The prompt payment framework ushers in a new era for Alberta construction with payment timelines and a dispute resolution process.
The new act creates rules for the timing of payments and sets out a streamlined adjudication process for disputes related to payment or work performed as an alternative to court.
Prompt payment is introduced by mandating owners to provide payment to their contractors within 28 days of receiving a proper invoice for construction services and requires that those contractors who receive payment from an owner subsequently pay their subcontractors within seven days.
The new act applies to all private construction contracts in Alberta created on or after Aug. 29, 2022. Current contracts that extend past two years must become compliant with the new rules by Aug. 29, 2024.
According to the act, if a dispute arises regarding work performed under a construction contract, parties to the contract may initiate an adjudication process to resolve the dispute.
Adjudicators are certified and trained through nominating authorities. The province says that it will authorize organizations to serve as Nominating Authorities through an open procurement process.
At the time the contract is signed, project owners and contractors can choose the nominating authority that they would prefer to work with in the event of a dispute.
Legislation around payment has long been a goal for industry leaders.
“Payment practices in Alberta have deteriorated over many years. Accounts receivable frequently in excess of 60 days shifts the burden of project financing to contractors and subcontractor,” said Trevor Doucette, senior vice-chair, Alberta Construction Association (ACA). “This legislation provides certainty of regular payment for work properly performed and invoiced. The new prompt pay provisions will play an essential role in keeping cash flowing through the life of a construction project. Annual release of lien holdbacks will also free up cash much earlier than under the past legislation.”
The Alberta Trade Contractors Association (ATCC) also celebrated the legislation.
“On behalf of the hard-working tradespeople and construction trade business owners of Alberta, we are looking forward to the implementation of prompt payment in our province,” The ATCC was formed in 2014 with the primary purpose of achieving prompt payment legislation and has been advocating to the Alberta government since then for its implementation. On behalf of the 11 trade contractor associations that are ATCC members, we celebrate the government on this great achievement.”
Who and when?
Kerry Powell, a partner Gowling WLG Canada, offered a series of tips to the Alberta Construction Association around who the legislation applies to and when.
Powell explained that while the legislation applies to anyone who is performing work, providing services, or furnishing goods or materials with respect to an improvement in land, it does not apply to Public Works projects, P3’s with the Government of Alberta, Federal Government projects, or operations and maintenance work that does not involve an improvement to the project lands.
The new legislation also applies to suppliers even if they are located outside of Alberta as long their product is being used in an improvement in Alberta.
Powell also stressed the point at which the clock starts ticking.
“The new legislation will apply to subcontracts and supply agreements based upon the date of the contract between the owner and the contractor – NOT the date of that the subcontract or supply agreement is entered into between the subcontractor and the contractor or the supplier or the contractor – so you will need to know the date of the prime contract to know if the new legislation applies to your subcontract or supplier agreement,” wrote Powell in a message to ACA members.
Meanwhile, in other provinces
West of Alberta, in B.C., prompt payment legislation remains elusive. The B.C. Construction Association and other groups in the province have long advocated for legislation but movement by government has been slow. Officials announced earlier this year that they won’t even begin industry engagement on the issue until mid to late next year.
Currently Ontario, Saskatchewan, Nova Scotia also have prompt payment legislation in effect.