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Alberta revamps rules around payments for construction work, including new dispute resolution mechanism

Alberta is making changes to speed up payments to companies and workers in the construction sector

Formerly known as the Builder’s Lien Act, the Prompt Payment and Construction Lien Act is now in force, the province said. The new act creates rules for the timing of payments and sets out a streamlined adjudication process for disputes related to payment or work performed as an alternative to court.

“Prompt payment is introduced by mandating owners to provide payment to their contractors within 28 days of receiving a proper invoice for construction services and requires that those contractors who receive payment from an owner subsequently pay their subcontractors within seven days,” the province said.

The new act applies to all private construction contracts in Alberta created on or after Aug. 29, 2022. Current contracts that extend past two years must become compliant with the new rules by Aug. 29, 2024.

“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,” said  Nate Glubish, Minister of Service Alberta. “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.”

Trevor Doucette, senior vice-chair of the Alberta Construction Association, said payment practices have deteriorated over the years.

“Accounts receivable frequently in excess of 60 days shifts the burden of project financing to contractors and subcontractors,” he said. “This legislation provides certainty of regular payment for work properly performed and invoiced. The new prompt pay provisions will play an essential role in keeping cash flowing through the life of a construction project. Annual release of lien holdbacks will also free up cash much earlier than under the past legislation.”

Quick facts

These legislative changes, passed in the fall 2020 and spring 2021 sessions, are now in force:

• A new adjudication process for the construction industry to address payment disputes.
• 28 calendar-day timelines for owners to pay proper invoices from general contractors.
• Contractors and subcontractors are required to pay their own subcontractors within seven calendar days of being paid themselves.

Extended timelines (in calendar days) for registering liens from:

• 45 days to 60 days for the construction industry
• 45 days to 90 days for suppliers within the concrete industry only
• The oil and gas lien period remains at 90 days.
• New language has been added around public-private partnerships:
• Prompt payment rules only apply to construction, not operations and maintenance.
• Municipal public works projects are subject to prompt payment legislation, but provincial government projects under the Public Works Act are not.
• Clarification was added that the prompt payment rules apply to professional consultant (engineers and architects) contracts.