Prompt payment Bill 27 ensures quicker compensation by HMC Lawyers

PROMPT PAYMENT

Bill 27 ensures quicker compensation

As any experienced construction professional is aware, delays and unexpected complications are common on most projects, large and small. These delays not only affect the overall completion date, but they also often mean that contractors and subcontractors will be paid later than planned. Sometimes payment is held back until the full project is done, meaning professionals can be left waiting months or even years before being compensated for their services or materials.

The Alberta government has recently taken steps to address this with the implementation of Bill 27: The Builders’ Lien (Prompt Payment) Amendment Act, 2020. One of the key pieces of the legislation is a prompt payment process that should go a long way in ensuring contractors and subcontractors receive compensation in a timely fashion.

WHAT WAS THE PROBLEM WITH PAYMENT IN THE PAST?

Prior to the introduction of Bill 27, there was no time limit in place for either customers, contractors, or subcontractors to pay for work. The lack of definitive timelines created what was referred to as a “pay when paid” system, which meant that individual parties would only be paid for their goods or services once payment for the entire project was received. Of course, this meant that if a job was delayed, even if the delay was unrelated to a contractor’s work, that contractor may not receive funds until the delay was resolved. These types of policies put subcontractors at a significant economic disadvantage. While Alberta had not yet legislated payment rules on construction projects, other jurisdictions such as Ontario and Saskatchewan had.

28-DAY PAYMENT DEADLINE

The section of Bill 27 likely to have the most noteworthy impact for people working in the construction industry is the introduction of a mandate that invoices from contractors or subcontractors must be paid within 28 days of receipt. The legislation further prohibits “pay when paid” clauses in contracts.

Contractors submitting invoices for prompt payment are required to submit invoices detailing the work done or materials furnished as well as a reference to a written

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or verbal contract outlining the work that was to be done.

If an owner receives an invoice and wishes to dispute it, they now have 14 days to provide the contractor with notice of, and reasons for, the dispute. Additionally, contractors now have seven days after receiving full payment for work to pay any subcontractors they hired for the project.

The Alberta Construction Association reacted positively to the news, stating, “These mechanisms help timely completion of construction projects, ensure our employees are not impacted by payment delays, and provide better value for taxpayers on public infrastructure projects.”

CHANGES TO LIENS AND THE ADJUDICATION PROCESS

Bill 27 also extends the time period in which liens can be submitted, introducing a 60day time limit (with the exception of concrete projects, which have a 90day time limit). The amount owing before a lien can be registered has also been increased to $700 from a previous limit of $300.

Additionally, Bill 27 provides a dispute resolution process that states parties to a contract may enlist an adjudicator to deal with any conflicts that arise between owners, contractors, and subcontractors. The decisions by adjudicators are binding and final. This section of the Act intends to allow for a quicker and more costeffective way to resolve disputes. n

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