Understanding Prompt Payment and Construction Lien Rules in Alberta’s Construction Industry

Understanding Prompt Payment and Construction Lien Rules in Alberta’s Construction Industry

Alberta’s construction industry is a cornerstone of the province’s economy, generating billions of dollars and creating thousands of jobs for Albertans. To ensure fair and timely payments across the sector, the Prompt Payment and Construction Lien Act came into effect on August 29, 2022. These rules are designed to streamline payment timelines, resolve disputes efficiently, and protect the rights of contractors, subcontractors, and workers.

Here’s what you need to know:

Who Do the Rules Apply To?

The Prompt Payment rules apply to:

  • Contractors
  • Subcontractors
  • Labourers
  • Regulated professional engineers and architects
  • Suppliers of materials or consultative services

These rules cover construction projects, materials, and work previously governed by the Builders’ Lien Act. However, Alberta government projects under the Public Works Act are exempt from these timelines.

Key Payment Timelines

  1. Project Owner to Contractor
    • Project owners must pay contractors within 28 calendar days of receiving a proper invoice.
    • If disputing an invoice, owners must issue a Notice of Non-Payment within 14 calendar days, specifying the amount withheld and reasons for non-payment.
  2. Contractor to Subcontractor
    • Contractors must pay subcontractors within 7 calendar days of receiving payment from the owner.
    • Subcontractors can initiate an adjudication process by issuing a Notice of Adjudication if payment is delayed.

What is a Proper Invoice?

A proper invoice must include:

  • Contractor’s name and business address
  • Invoice date and payment terms
  • Description of work or materials provided
  • Amount requested for payment
  • Contact information of the payee
  • A statement confirming the invoice is intended as a proper invoice

Holdbacks on Large Projects

For contracts valued at $10 million or more and lasting over 12 months, new rules allow for quicker release of holdbacks:

  • Holdbacks can be released annually unless the contract specifies phased or progressive releases.
  • These rules apply to contracts executed after August 29, 2022.

Resolving Disputes Through Adjudication

If a payment dispute arises, parties can initiate an adjudication process. Key points:

  • Adjudicators are certified through Nominating Authorities, such as ARCANA AB.
  • A Notice of Adjudication must be submitted to the other party and the chosen Nominating Authority.
  • Adjudicators will hear disputes related to payment, non-payment, or valuation of services.

How to File a Builders’ Lien

Contractors, subcontractors, and suppliers can file a builders’ lien to secure payment for work or materials. Timelines and instructions are available on the Alberta Land Titles website.

What’s Next for Existing Contracts?

  • Contracts ending before August 29, 2024, do not need to comply with the new rules.
  • Contracts extending beyond August 29, 2024, must become compliant by that date.

Stay Informed and Protect Your Rights

Understanding these rules is crucial for everyone in Alberta’s construction industry. Whether you’re a contractor, subcontractor, or supplier, knowing your rights and responsibilities under the Prompt Payment and Construction Lien Act can help you avoid disputes and ensure timely payments.

For more information on adjudication, lien filing, or dispute resolution, visit the Alberta Construction Prompt Payment Adjudication website.