LAKELAND - A new course of action to address payment timelines and disputes in the construction industry is aiming to help both contractors and subcontractors in Alberta.
On Aug. 29 the Prompt Payment and Construction Lien Act was implemented to address decades of concerns from industry professionals who had been calling for legal changes to support the industry in the province, said Nate Glubish, Alberta’s Minister of Service.
“Albertans in the construction industry have been advocating for prompt payment legislation for nearly 10 years, so I am excited to celebrate this important milestone,” Glubish said, during the implementation announcement.
“I am proud of the work that Alberta’s government did, collaborating over the last three years with members of the construction industry to develop and pass legislation that will protect jobs and unlock cash flow in this multibillion-dollar industry that employs hundreds of thousands of Albertans.”
New payments laws
The new legislation, which was formally known as the Builder’s Lien Act, will require all private contractors to be paid in full within 28 days of issuing an invoice to clients. Afterward, any affiliated subcontractors must also be paid within seven days.
It’s a positive move, considering previous legislation created business challenges for contractors who at times received payments almost two months later, which in turn would affect other business opportunities, said Trevor Doucette, senior vice-chair of the Alberta Construction Association, during the announcement.
“Payment practices in Alberta have deteriorated over many years. Accounts receivable frequently in excess of 60 days shifts the burden of project financing to contractors and subcontractors,” said Doucette.
Along with the new payment timelines, the new legislation also includes an adjudication process meant to streamline legal services. Two major additions will help simplify not only settling construction payments but also support more work opportunities for construction companies, said Preet Saini, a Litigation and Disputes Resolution lawyer specializing in the construction and infrastructure sector at McMillan LLP.
“It's going to allow for a cost-effective and fast way to resolve disputes outside of court and it will offer legislative time frames by which payments are made down the constructions pyramid. I think it’s going to be beneficial for all participants in the construction industry and it will hopefully provide for a more streamlined construction project,” the Calgary-based lawyer said.
The legislation, which Saini admits is dense with information will take time for the construction industry and clients to fully grasp.
He explains for private construction businesses who don’t receive a payment within 28 days or subcontractors who aren’t paid within the time allotted time frame, the new adjudication rules will help transform disputes.
“Parties that haven’t been paid can use that mechanism to get a cost-effective and fast resolution to their dispute,” said Saini. “This is a very large change. It’s the largest change in at least the last 20 years. It will completely change how disputes are adjudicated and how payments are made.”
Saini adds, “If it works how it’s intended to... it will ensure that participants down the pyramid chain are getting paid on a timely basis and it will provide a faster and more cost-effective way to resolve disputes. The intended effect will certainly make it a more streamlined process, hopefully, for everyone involved.”
Legislation roll out
The Prompt Payment and Construction Lien Act is in effect for all private construction contracts established as of Aug. 29, 2022. Any projects created prior to the act coming into effect will have until Aug. 29, 2024, to comply with the legislative rules.
The act does not include provincial public works contracts, however, municipal public works projects will have to follow the new legislation, along with private projects.