On October 21, 2020, Service Alberta Minister Nate Glubish tabled the Bill 37, the Prompt Payment and Construction Lien Act, which will amend the Alberta's Builders' Lien Act. We summarized the initial changes here.
On November 4, 2020, the Alberta Government, with input from industry stakeholders, approved significant amendments to Bill 37, the Prompt Payment and Construction Lien Act.
These important revisions are highlighted below:
Mandatory progressive release of holdback
The amended Bill 37 now requires, rather than merely permits, the owner to progressively release the holdback.
This will benefit contractors and subcontractors, who can now expect greater cash flow, but will reduce the lien security for lien claimants. To mitigate this risk, potential lien claimants can invoke section 33 of the Builders' Lien Act to obtain copies of the applicable contracts and the status of payments down the construction chain.
Change payment timelines – An additional 7 days for subs
The amended Bill 37 aligns with Ontario's prompt payment regime by requiring that an owner to pay a proper invoice within 28 days of receipt, but with the change the contractor must pay the subcontractor within 7 days of receiving payment from the owner, and that subcontractor must pay its sub-subcontractors within 7 days of receiving payment from the contractor. This 7-day period will apply down the construction chain.
The changes to Bill 37 will also require the contractor to issue invoices to the owner every 31 days at the latest so payments down the contractual chain will not be delayed. The obligations of payment are of course subject to the rights of parties to dispute that monies are properly due and owing by issuing a Notice of Dispute within 14 days.
A "proper invoice" starts the clock between only the contractor and the owner
The amended Bill 37 requires only a contractor to issue a "proper invoice" in order to start the 28 day payment period. Subcontractors will still have to issue invoices that comply with their sub-contractual requirements in order to be paid 7 days after the contractor has received payment from the owner if the contractor's proper invoice is not disputed by the owner.
Prohibition of pay-when-paid removed
In light of the above changes, including the obligations to pay an undisputed invoice within a set period of time, the Government of Alberta views the prohibition of pay-when-paid clauses to be superfluous, and will remove that prohibition from the Act.
Not all of the construction industry's concerns have been addressed by the amendments. The changes to Bill 37 leave some questions unanswered, including whether the determination of a dispute by an adjudicator will remain final and binding on the parties, subject only to judicial review by the Courts on specific grounds, or whether adjudication disputes can be determined on an 'interim' basis, as is the case in Ontario. We anticipate that this issue, along with others, will be addressed in the Regulations being developed by Service Alberta to accompany the new Prompt Payment and Construction Lien Act when passed.
How Gowling WLG can help
Gowling WLG has been deeply immersed in construction law reforms across the country and in Alberta for more than 25 years. We will be holding several webinars and publishing several articles on Bill 37 and the Builders' Lien Act since the first reading of Bill 142, and will continue to monitor its progress as it becomes the new Prompt Payment and Construction Lien Act.
We are planning several educational webinars and workshops, and additional analysis of the impact of the amendments introduced by Bill 37 over the coming months to help educate and inform our clients and the industry about these changes to our sector.
We would be happy to meet with you or your organization to discuss your questions and concerns about Bill 37 and the Builders' Lien Act.
Please visit our Construction Law Reform website "hub" for updates on the status of Bill 37, and for information and dates about all of our events and activities.