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Amendments To Builders Lien Blog Post

March 2022 Update:

Alberta’s government has passed the Prompt Payment and Construction Lien Act and supporting regulations, Bill 37. These regulations come into force on August 29, 2022, and will replace the current Builders Lien Act. The upcoming changes will impact business processes and timelines to pay invoices and file disputes for adjudication.

Will this effect existing contracts for on-going projects?

The Regulation allows a two-year grace period for transition to the new rules for construction projects underway. All contracts that are still in effect for longer than two years past the proclamation date, must amend their terms to be in alignment with the new legislation and regulations.

Who does the Prompt Payment legislation apply to?

Prompt payment applies to staff associated with construction projects including trades, suppliers, sub-trades, and professional consultants including engineers and architects.

What should now be included in project contracts?

Contracts should include the following information:

  • Calendar date a proper invoice must be submitted
  • Interest rate
  • Selection of Nominating Authority
  • Selecting an adjudicator
  • Delivery method of notice of non payment (manner is specified)

If contracts do not establish particulars prior to the project commencing, the Regulation will become the default. This can include invoices coming in throughout the month and each invoice initiating a 28 day payment period.

Prompt Payment – Payment Flow Timeline

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 & Investors?

Investors and 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, our properties 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.

How Will Bill 37 Changes Impact Condo Corporations who manage their own banks and write their own cheques (vs. in Trust with Magnum York)?

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. The new Bill 37 legislation is 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).

“As a Board member, can vendors put a lien against my unit even if it has nothing to do with the work in question?”

If you are on a Board, and your condo corporation does not pay within the framework in Bill 37, the vendors will likely not only target the condominium corporation for remedy, they will likely put liens against each of the individual board member’s units.

Non-payment under the terms of Bill 37 represents yet another area of potential liability that Condo board members face and one that should be taken very seriously.

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:

  1. The contractor’s name and business address;
  2. The date of the proper invoice and the period during which work was done or materials were provided; 
  3. Information identifying the authority (such as the contract) under which the work was performed, or materials provided;
  4. A description of the work performed, or materials provided;
  5. The amount requested for payment and the payment terms;
  6. The name, title and contact information of the person to whom payment is to be sent;
  7. A statement indicating that the invoice is intended to be a “proper invoice”; and 
  8. Any other information prescribed by the regulations.

In Summary

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.

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