Written by: Michael Geib & Mackenzie Krochak In Alberta there are various pieces of legislation that govern issues relating to the construction industry. As most in the industry are aware, the Builders’ Lien Act (the “BLA”), has played a central role in the rules, rights and obligations for participants in the construction industry. Among other things, the BLA prescribes various rules, procedures, and deadlines for registering a builders’ lien in Alberta. Beginning on August 29, 2022, the Prompt Payment and Construction Lien Act (the “PPCLA”) and its related Regulation will come into force. The PPCLA and its related regulations will usher in a marked and substantial set of changes to several aspects of the construction industry. However, the core vehicle of a builders’ lien will generally remain intact, albeit with extended filing deadlines. In the weeks leading up to, and in the months after, the PPCLA comes into force, Parlee McLaws LLP will release a series of information graphics and articles. This is the first article in that series, and we will begin with a general overview of builders’ liens and highlight some of the key upcoming changes. What is a Builders’ Lien? A builders’ lien is an interest that can be registered on title. Generally, a builders’ lien can be registered against land by anyone who performed work that enhanced the value of the land or provided materials that were incorporated into the land. Where a party has done something to enhance the value of land but remains unpaid for work done or services furnished, the lien functions as a practical and often highly effective mechanism to resolve a payment dispute. When the PPCLA comes into full force at the end of August it is going to introduce concepts and frameworks known as prompt payment and dispute resolution into Alberta’s construction industry. Prompt payment legislation is an additional mechanism that has been developed in some common law jurisdictions as an additional dispute resolution tool, and ideally prompt payment is a time and cost effective tool. There are numerous new deadlines and procedures that will be introduced, and we will go into more detail in subsequent articles. For now, at a general level, the most important thing to be aware of is that owners will have 28 days (and that means days literally, not just business days), from receiving a proper invoice – which is a specific form of invoice required by the PPCLA to pay the party issuing the invoice. Failure to pay a proper invoice can lead to a process being triggered, where the parties end up before a neutral adjudicator for a decision on the validity of a disputed proper invoice. This process will occur outside of the Court system, but it does not replace the Courts as a forum for adjudicating construction related disputes. Key Developments and Deadlines This new legislation comes into effect on August 29th, 2022 – new construction contracts captured under the PPCLA formed on or after that date are governed by the new legislation, while construction contracts formed before August 29, 2022 will be governed by the rules and procedures set out in the BLA, unless the project continues for two years beyond the date the PPCLA comes into full force, at which point the PPCLA will then apply. Who does the new legislation apply to? Anyone performing work or supplying materials with respect to improvements to land – that includes all sectors and trades; It applies regardless of the method of delivery – contract, design build, etc.; The Act applies to project owners, project developers, contractors, and everyone else onsite down the chain on a construction project; and The legislation applies to large scale projects and small projects The new Act does not apply to: Federal government projects Provincial projects governed by the Public Works Act Note, this is different than in Ontario where similar legislation was enacted Public-private partnership projects involving the provincial government [need to confirm] Operation and maintenance portions of any public private partnership projects Prompt Payment Generally The concept of prompt payment has been applied in the UK and in Ontario. Prompt payment is a process where a series of payment timelines for the entire construction pyramid on a project are triggered by the owner receiving a proper invoice from the contractor. Payment Obligations – Timeline Generally, the prompt payment requirements are set out as follows: Parties Payment Deadline Notes/Exceptions Statutory Basis Owner/GC [or contractor on a smaller project) Within 28 days of the owner receiving a proper invoice Parties can agree to shorter deadlines Section 32.2 Contractor [or GC] and a subcontractor Within 7 days after the contractor receives payment from the owner Section 32.3 Sub Contractor to its Subcontractor Within 7 days of the subcontractor receiving payment from the contractor Section 32.5 Proper Invoice Proper Invoice is a term defined in section 32 of the PPCLA, and that section prescribes certain conditions that must be met for an invoice to be proper: In writing; Description of work done or materials furnished; The amount for payment; Payment terms; A reference to the contractor to which the parties are governed by; Indication that the invoice is intended to be a proper invoice; and Other requirements agreed to by the parties, if applicable, so long as the said additional requirements do not conflict with the PPCLA or its regulations. What if I, as the contractor, do not want to issue an invoice (at least) every 28 days? You will not be in compliance with the PPCLA; Payments could be delayed; Parties down chain may be adversely impacted and that could visit consequences on the party who fails to issue the proper invoice. In advance of August 29 industry players should work to familiarize themselves with the Act and its regulations. We will continue to post throughout the coming months and explore the new procedures and rules occasioned by the Act, and the legal challenges and opportunities arising from the changes.