Final Countdown: Top 5 Things to Keep in Mind for Prompt Payment
August 2022 - 4 min read
The Prompt Payment and Construction Lien Act (“PPCLA”) comes into force on August 29, 2022, nearly two years after Bill 37 was first tabled. With only five days left, here are the top five things for all construction companies and contractors to keep in mind with this new legislation.
1. When the PPCLA Applies
All new construction contracts are subject to the PPCLA as of August 29. Existing contracts scheduled to end before August 29, 2024, do not need to be changed to adhere to the PPCLA and are still subject to the current Builders’ Lien Act (“BLA”) unless the parties otherwise agree that the PPCLA will apply.
Parties to existing contracts all need to agree that the PPCLA will apply after August 29. Otherwise, there could be different payment deadlines, lien deadlines, and dispute resolution mechanisms that would be nearly impossible to reconcile. Existing contracts extending beyond August 29, 2024, must comply with the PPCLA by August 29, 2024, but the BLA applies up to August 29, 2024, unless the parties otherwise agree.
2. Invoices Must be “Proper”
To trigger the deadlines in the PPCLA, a party must submit a “proper” invoice. The requirements of a proper invoice are set out in section 32.1 of the PPCLA and are:
- the contractor’s name and business address;
- the date of the proper invoice and the period during which the work was done or materials were furnished;
- information identifying the authority, whether in a written or verbal contract or otherwise, under which the work was done, or materials were furnished;
- a description of the work done or materials furnished;
- the amount requested for payment and the corresponding payment terms broken down for the work done or materials furnished;
- the name, title and contact information of the person to whom the payment is to be sent; and
- a statement indicating that the invoice provided is intended to constitute a proper invoice.
We recommend that all construction companies create template invoice forms containing blanks for all of the above information to ensure nothing is missed.
3. Prompt Payment Timing
All the deadlines in the PPCLA are triggered by receipt of a proper invoice. If a party submits an invoice that isn’t a proper invoice, then the payment deadlines in the PPCLA are not triggered. The payment deadlines are like a waterfall: the first deadline is from owner to contractor, then the subsequent deadlines are triggered when the owner pays the contractor, the contractor pays its subcontractor, etc.
The deadlines are:
- Owner to contractor: 28 days
- Contractor to subcontractors: 7 days after owner pays contractor
- Subcontractor to sub-subcontractor: 7 days after contractor pays subcontractor
Any party can dispute the invoice from the party below them by serving a Notice of Non-Payment, which is a prescribed form under the PPCLA.
What if the owner doesn’t pay the contractor within 28 days but hasn’t served a Notice of Non-Payment? Does the contractor still have to pay its subcontractors?
The answer to this question, commonly asked by general contractors and subcontractors, is no, provided that the contractor complies with the requirements of section 32.3 of the PPCLA.
Suppose an owner fails to pay a contractor but has not served a Notice of Non-Payment. In that case, the contractor must serve a Notice of Non-Payment on its subcontractors within 35 days of the contractor submitting its invoice to the owner, and has to submit the matter to adjudication within 21 days of giving its Notice to its subcontractors. If the contractor fails to provide its own Notice of Non-Payment, then it must pay its subcontractors, regardless of not receiving payment from the owner.
4. The Lien Period
The default time for a party to register a builders’ lien is 60 days from when its work was completed or abandoned, up from 45 days. The 90-day deadline for work performed at an oil or gas well site is unchanged.
The exception to the 60-day deadline is for furnishing concrete or work primarily relating to concrete, which also has a 90-day deadline. An exception to this exception is for ready-mix concrete, which also has a 60-day lien deadline.
Practically, this means that different trades working side by side on the same project will have differing lien registration deadlines, depending on whether they are performing concrete work. This will need to be properly managed by the owner and/or general contractor to ensure that the holdback is appropriately released.
Adjudication is an entirely new concept to Alberta, although it has been in effect for several years in Ontario and is gaining traction there. It is intended as a mid-project, fast-track dispute resolution mechanism.
The practicalities of adjudication remain unclear, but once the nominating authority for the selection of adjudicators is in place, this process will likely be utilized more and more over time as parties adapt to the PPCLA and, in particular, the payment deadlines it contains.
Field Law’s Construction Group can assist construction companies or contractors with questions regarding the PPCLA and how it will operate. Please contact Anthony Burden or Robert Rakochey in Calgary or Jeremiah Kowalchuk in Edmonton if you have concerns about how your contracts will be impacted by the PPCLA.