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On November 4, 2020, the Alberta Government proposed Amendment A1, which was passed and incorporated into Bill 37. The amendment received royal assent on December 9, 2020, and is expected to come into force on proclamation in Fall 2021. At this time, the piece of legislation will be renamed the “Prompt Payment and Construction Lien Act” to reflect the changes.
The Bill is intended to speed up the payment process, whereby an owner must pay contractors and those contractors must pay their subcontractors within a specific time frame.
What Is Bill 37 – Builders’ Lien Act?
The Builders’ Lien act protects contractors and subcontractors who provide services and do not get paid. The Act allows these contractors and subcontractors to register a claim (lien) on the property on which they completed the work. Currently, construction contracts are not subject to any statutory prompt payment deadlines in Alberta. However, under the new Act, any owners, contractors, and subcontractors who enter into contracts after Bill 37 is proclaimed, will be statutorily mandated to pay within a set timeframe.
How Will These Changes Impact Condo Corporations?
Condo Corporations may need to change their processes for paying contractor invoices. With the new legislation, it will be legally required for payments to be made within the 28-day deadline. Corporations will need to diligently review the invoices in a timely manner and ensure the definitions of the legislation are adhered to. If there is a dispute over the work completed or the invoice, Corporations only have 14 days to serve the “Notice of Dispute” to the contractor.
At Magnum York Property Management, Condos in our Trust accounts already have systems in place to allow us to make payments to contractors well within the 28 days that will be required. Any payment over $10,000 will require the contractor to sign a Statutory Declaration that confirms the vendor has paid their subcontractors.
Condos not in Magnum York Trust accounts (who manage their own bank accounts and signing of cheques) can sometimes stretch their payables beyond 30 days. These rules are meant to change the behaviour of corporations who don’t like to pay on time, like to “hold back cheques,” or have procedures that make it difficult to do so (such as multiple signatures from offsite board members).
What Do The Changes Include?
The coming changes to the payment process will have a significant impact on the current practices within the Condominium industry. These changes will apply to condominium corporations as well as any party receiving labour or materials. Some of the major changes include:
- Property owners (i.e. condominium corporations) must pay the contractor within 28 days of receiving a “proper invoice”;
- Contractors and subcontractors have to pay their subcontractors within 7 days of receiving payment from the property owner;
- If a property owner does not agree with an invoice, they must issue a “Notice of Dispute” within 14 days of receiving the disputed invoice;
- Contractors and subcontractors will have 60 days to register a lien (currently they have 45 days), except for contractors doing concrete work, who will have 90 days to register a lien;
- The minimum requirement to register a lien (the amount owed to the contractor or subcontractor), is increased from $300 to $700;
- New rules for the payment of holdbacks on large, multi-year projects will be introduced; and
- A new adjudication process will be implemented to resolve disputes without the use of the Courts. This is intended to speed up dispute resolutions as well as provide a less expensive process than going to court.
What is considered a “proper invoice”?
A proper invoice must contain the following eight requirements, for it to be considered due and owing:
- The contractor’s name and business address;
- The date of the proper invoice and the period during which work was done or materials were provided;
- Information identifying the authority (such as the contract) under which the work was performed, or materials provided;
- A description of the work performed, or materials provided;
- The amount requested for payment and the payment terms;
- The name, title and contact information of the person to whom payment is to be sent;
- A statement indicating that the invoice is intended to be a “proper invoice”; and
- Any other information prescribed by the regulations.
Project management for construction is no easy task, especially with the new act now introducing the added pressures of builders’ liens and payment deadlines. Corporations will need to work diligently and adjust their process to ensure they comply with all legal requirements.
Magnum York clients in our Trust accounts won’t have to do anything differently; we’ve got you covered.
- Canadian Condominium Institute (CCI): (Please Don’t) Lien On Me – https://www.ccinorthalberta.com/please-dont-lien-on-me/?mc_cid=5dd51f3944&mc_eid=fb04d3e030
- Bill 37: Builders’ Lien (Prompt Payment) Amendment Act, 2020 – https://www.assembly.ab.ca/assembly-business/bills/bill?billinfoid=11872&from=bills
- Alberta: Introducing Promp Payment for Construction Industry – https://www.alberta.ca/introducing-prompt-payment-for-construction-industry.aspx
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