Prompt payment rules for construction industry

Prompt payment rules apply to contractors, subcontractors, labourers, and regulated professional engineers and architects who provide materials or consultative services, or who work on construction projects. The new rules apply to construction projects, materials, and work covered previously by the Builders’ Lien Act.

Alberta government project contracts are subject to the Public Works Act. Rules and are exempt from timelines outlined in the Prompt Payment and Construction Lien Act.

Project owner to contractor

Project owners must pay the amount payable to contractors within 28 calendar days of receiving a proper invoice (see Billing and invoices below).

If a project owner disputes an invoice, they must give notice to the contractor within 14 calendar days of receiving the invoice. Once a Notice of Non-Payment is provided, a project owner may withhold payment of all or a portion of the amount invoiced. A Notice of Non-Payment must include the amount that is being withheld, and the reasons for non-payment.

Contractors to subcontractors

Contractors must pay each subcontractor the amount owed within 7 calendar days of receiving payment from the owner. If a subcontractor has not received payment within the required timeline, they may issue a Notice of Adjudication to initiate an adjudication process. Notice of Adjudication forms are available from Nominating Authorities.

Proper invoices

A proper invoice is a written bill or other request for payment of the work done or materials provided under a construction contract.

Proper invoices must contain all of the following:

• Contractor’s name and business address
• Date of the invoice
• The period during the work was done or materials were provided
• A description of the work done or materials provided
• Amount requested for payment
• Payment terms, broken down for the work done or materials provided
• Name, title, and contact information of the person to be paid
• A statement indicating that the invoice provided is intended to be a proper invoice

Proper invoices may be revised if the:

• Parties to the invoice agree to a revision,
• Date of the proper invoice is not changed, and
• Proper invoice continues to meet the requirements

Projects that have a minimum $10 million contract value and exceed 12 months in duration will be able to utilize new rules that allow for quicker release of holdbacks.

Unless the contract allows for progressive or phased releases, holdbacks will be released annually. Phased or progressive holdbacks must be less than one year. The contract must clearly define the phases and if there is any ambiguity, the annual release will apply.

This will ensure that holdbacks are not held for more than one year on a multi-year large scale project.

These new rules will apply to any contracts executed after August 29, 2022. Existing contracts that are scheduled to end before August 29, 2024 do not need to be changed to adhere to new rules. Existing contracts that extend beyond August 29, 2024 will have 2 years to become compliant.

A builders’ lien gives contractors, subcontractors, suppliers, and labourers a way to collect money owed to them for labour and materials used to improve the land, including work on any structures on the land.

Information about how to file a lien, along with timelines for filing, is available on the Register a land title document or plan page.

Alberta Land Titles Builders’ Lien Tutorial Video

Provided they have not already initiated a court application about a dispute, contractors and subcontractors may submit a notice for adjudication for disputes regarding:

• valuation of services or materials provided under the contract or subcontract
• payment
• notices of non-payment
• payment or non-payment of an amount retained as a lien
• any other matter in relation to the contract or subcontract that the parties in dispute agree to

In April 2023, ARCANA (AB) was designated as a nominating authority under the Prompt Payment and Construction Lien Act. This means that they will have the power to nominate adjudicators to resolve disputes under the act.

Nominating Authorities are responsible for:

• certifying and training adjudicators for disputes
• maintaining the public registry of available adjudicators
• establishing and maintaining a code of conduct for adjudicators

ARCANA (AB) contact:

Email: [email protected]

Phone: 780-433-4881 extension 111

Construction Prompt Payment Adjudication (adralberta.com)

Nominating Authority selection

Project contracts may indicate a Nominating Authority to which a notice of adjudication must be submitted in the event of a dispute.

If a Nominating Authority is not named in a contract, the party initiating the adjudication may choose the Nominating Authority they want to manage the adjudication process.

Notice of adjudication

A contractor or subcontractor who wants to initiate a dispute for adjudication must give written notice of adjudication to the:

• other party; and
• selected Nominating Authority.

The Nominating Authority will provide the initiating party with a Notice of Adjudication to fill out and serve to the other party. A notice of adjudication must include all of the following:

• names and addresses of the parties in dispute
• nature and brief description of the dispute, including details of how and when it arose
• nature of remedies sought
• name of the Nominating Authority to whom the party intends to submit notice
• name of the adjudicator requested to conduct the adjudication, if any

Adjudicators are certified by Nominating Authorities, and will hear and make determinations on payment disputes.

Adjudication certificates are issued for a maximum of three years, and may be renewed for additional 3 year periods provided required eligibility is met.

Eligibility

You may be eligible to serve as an adjudicator if you meet the following criteria:

• have at least 10 years of relevant work experience in the construction sector
• have sufficient knowledge and experience in the areas of dispute resolution, contract law, legislative interpretation, determination writing, ethics, jurisdiction, and adjudication process
• are not an undischarged bankrupt
• have not been convicted of an indictable offence in Canada or a comparable offence outside Canada
• pay the required fees to the Nominating Authority
• agree in writing to a Nominating Authority’s code of conduct

Application process

To apply for an adjudication certificate, contact the relevant Nominating Authority. The Nominating Authority will provide guidance on costs and course offerings for accreditation as an adjudicator.

Responsibilities

Certified adjudicators must:

• successfully meet all evaluation criteria and complete any required training programs
• comply with the code of conduct of the issuing Nominating Authority
• pay the required fees to the Nominating Authority

Nominating Authorities are required to set out and maintain publicly available fee schedules on their websites.

Nominating Authorities are required to maintain public registries of adjudicators on their websites.