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Alberta’s Prompt Payment And Construction Lien Act In Force Since August 29, 2022: What You Need To Know (Consolidated) – Construction & Planning


The Prompt Payment and Construction Lien Act(the
PPCLA“) came into force on August 29,
2022.1, along with the accompanying regulations to the
PPCLA, the Prompt Payment and Adjudication Regulation
(the “PPCLA Regulation“)2
which prescribes a new adjudication regime under the PPCLA , and
the Builders’ Lien Forms Amendment
Regulation
(“Forms Regulation“)
which prescribes various forms of notices referenced in the
PPCLA.

The PPCLA and its accompanying regulations follow a growing
trend across Canada to adopt prompt payment and adjudication with
the objective of facilitating timely payment down the construction
pyramid.

This bulletin provides an overview of the PPCLA and PPCLA
Regulation and what you need to know.

Prompt Payment Framework

What is Prompt Payment?

The PPCLA mandates timelines for payments down the construction
pyramid that are triggered by receipt of a “proper
invoice” given by a contractor to an owner. Once the proper
invoice is received by the owner, there are different timelines for
payments as follows (subject to exceptions described herein):

  • by an owner to a contractor (within 28 days after receiving the
    proper invoice)3,

  • by a contractor to a subcontractor (within 7 days after
    contractor receives payment from the owner)4, and

  • by a subcontractor to its subcontractor (within 7 days after
    subcontractor receives payment from the
    contractor)5.

Alberta’s new prompt payment regime does not affect
obligations of a contractor or subcontractor to pay
employees6.

What is a “proper invoice”?

The PPCLA defines “proper invoice”,7 as a
request for payment that is in writing and includes, among other
things, a description of the work done or materials furnished, the
amount requested for payment, the payment terms broken down for the
work done or materials furnished, a reference to the agreement
under which the work or materials were provided, a statement that
the invoice is intended to be a proper invoice, and any other
requirements as may be specified in the contract.

A provision in a contract that makes the giving of a proper
invoice conditional on the prior certification of a person or
approval of the owner is of no force or effect.8
However, a contract may make the giving of a proper invoice subject
to a provision for the testing and commissioning of the
improvement, work completed, or materials
furnished.9

Initiating the Process

By definition, a proper invoice is one given by a contractor to
an owner. A contractor is defined in the legislation as a person
contracting with or employed directly by an owner or owner’s
agent.

To keep the flow of funds moving on a project, the PPCLA
provides that the contractor must give a proper invoice to the
owner at least every 31 days10. Subject to this 31 day
limit11, the owner and contractor may agree to specify
terms when a proper invoice may be delivered.

There is an exception: If a contract includes a provision for
testing and commissioning of the improvement, work done or
materials furnished, and the conditions of such testing or
commissioning are not met, then the proper invoice is not required
to be given every 31 days.12

Prompt Payment: Owner to Contractor

Once a contractor submits its proper invoice to the owner, the
owner must pay the proper invoice within 28 days of receipt unless
the owner disputes payment, in part or in full.13 An
owner who disputes a proper invoice must deliver a notice of
dispute within 14 days after receipt of a proper invoice
(“Owner Dispute Notice“). The notice of
dispute must be in the prescribed form14 and must state
the amount not being paid and reasons for non-payment15
.

A contractor is required to advise its subcontractors of an
Owner Dispute Notice upon receipt and without delay.16
In turn, subcontractors who are advised of an Owner Dispute Notice
are required to advise their subcontractors without
delay.17 A contractor is also required, upon request of
a subcontractor, to provide the subcontractor confirmation on the
date which a proper invoice was given to the
owner.18

Prompt Payment: Contractor to Subcontractor

A contractor who receives full payment of a proper invoice from
an owner must, no later than 7 days after receiving payment, pay
each subcontractor for work completed or materials furnished that
formed part of the proper invoice.19 Where an owner
delivers an Owner Dispute Notice, the subcontractors responsible
for the work or material relating to the dispute will be paid after
other subcontractors who provided work or materials that were not
disputed by the owner. Any subcontractors implicated in the dispute
will be paid on a proportionate basis for any amounts paid by the
owner towards the work done or material furnished by those
subcontractors.20

If an owner fails to pay the contractor for all or part of a
proper invoice, the contractor is still required to pay its
subcontractor for the work or materials that formed part of the
proper invoice within 35 days after the date the proper invoice was
given, regardless of whether the contractor was itself
paid21. There are two exceptions to this, entitling the
contractor to either defer or dispute such mandatory payment
obligation. Each is triggered by a timely notice which the
contractor must deliver to its subcontractor:

  1. For deferral due to owner non-payment, a notice of non-payment
    must be in the prescribed form22 stating that some or
    all of the amount payable to the subcontractor is not being paid
    due to non- payment by the owner to the contractor. The notice must
    specify the amount not being paid and the contractor must provide
    an undertaking to refer the dispute with the owner to adjudication
    no later than 21 days after the notice to the subcontractor. A copy
    of any Owner Dispute Notice must also be given to the
    23

  2. For a disputed payment, a notice of dispute must be in the
    prescribed form24 and specify the amount not being paid
    to the subcontractor and the reasons for non-payment. A notice of
    dispute contests the subcontractor’s entitlement to be paid for
    reasons other than non-payment by the 25

Each of the above notices must be delivered within 7 days after
the contractor receives an Owner Dispute Notice, or if no Owner
Dispute Notice is received, then within 35 days after the proper
invoice is given.26

Prompt Payment: Subcontractor to Subcontractor

The payment process for a subcontractor to its subcontractor is
very similar to the payment process as between a contractor and its
subcontractor. The subcontractor must make payment to its
subcontractor within 7 days of receiving payment from the
contractor27, or if it is not paid by the contractor, 42
days after the proper invoice is given by the contractor to the
owner28.

A subcontractor can also defer or dispute payment by issuing one
of the two forms of notices described above in the prescribed
forms29, with the exception that a subcontractor is not
required to refer the dispute with the owner to adjudication as
part of its notice of non-payment. This is because the
subcontractor has no contractual relationship with the owner and
thus no ability to refer the dispute to adjudication. Each of the
notices must be delivered within 7 days after the subcontractor
receives notice of non-payment from the contractor, or if no notice
of non-payment is provided to the subcontractor, then within 42
days after the proper invoice is given to the
owner.30

Interest

Interest will be charged on any amounts included in a proper
invoice that are unpaid and due.31 The rate of interest
will be in accordance with the parties’ contract, or if no rate
is specified in the contract, then according to the rate provided
for in the Judgment Interest Regulation, which
currently prescribes interest at 0.2% per annum until December 31,
2022.
32

Adjudication Framework

Adjudication

The PPCLA provides for an optional dispute adjudication process
that either party to a contract or subcontract may initiate.
Adjudication is intended to bolster the prompt payment scheme,
providing for faster and less costly resolutions of payment
disputes than a court proceeding.

The following matters may be subject to adjudication: the
valuation of services or materials provided, payment under the
contract including the payment of change orders, disputes that are
the subject of a notice of non payment, payment or non payment of
an amount retained as a major lien fund or minor lien fund and owed
to a party during or at the end of a contract, and any other matter
in relation to the contract that the parties in dispute agree
to.33

Who are the Adjudicators?

The PPCLA provides that the Minister of Service Alberta may
designate one or more Nominating Authorities to qualify and appoint
adjudicators to hear disputes under the PPCLA.34 Among
other duties, a Nominating Authority will develop and oversee
programs for the training of persons as adjudicators35
and establish and maintain a code of conduct for
adjudicators.36 The Minister of Service Alberta will act
as a Nominating Authority on an interim basis until one or more
Nominating Authorities are designated.37

An adjudicator is required to obtain a certificate of
qualification from a Nominating Authority before he or she can act.
An adjudicator must successfully complete all training programs
required by the Nominating Authority that issues a certificate of
qualification to that adjudicator and comply with that Nominating
Authority’s code of conduct.38 An adjudicator must
meet other requirements39, including having at least 10
years of relevant work experience in the construction sector in the
opinion of the Nominating Authority, and having sufficient
knowledge in the areas of dispute resolution, contract law,
legislative interpretation, determination writing, ethics,
jurisdiction, and adjudication process.40

Commencing the Adjudication Process

To refer the dispute to adjudication, one of the parties to the
contract may issue a written notice of
adjudication.41

There are two circumstances in which a party is unable to refer
a dispute to adjudication: where an action in court is commenced on
or before the date that the notice of adjudication is
delivered42, and after the contract or subcontract is
completed, unless the parties otherwise agree to
adjudicate43. It will be interesting to see if the first
of these results in races to commence court actions tactically
undertaken by those wishing to defeat the objective of quick,
cost-effective resolution which lies at the heart of
adjudication.

The written notice of adjudication must include, among other
things, the names and addresses of the parties in dispute, the
nature of the dispute and a brief description including how and
when it arose, the nature of the redress sought, the name of the
Nominating Authority to whom the party serving the notice intends
to submit to, and the name of the adjudicator requested to conduct
the adjudication, if any.44 A copy of the notice must
then provided to the opposite contracting party and the relevant
Nominating Authority on the same day.45 A provision in a
contract that purports to name a person as an adjudicator in the
event of adjudication is of no force and effect.46
Parties may agree to designate a Nominating Authority to which a
notice of adjudication must be submitted.47

Dispute Adjudication Process and Timeline

The adjudication process from commencement to a determination is
expected to take approximately 46 to 56 days. The process involves
submission of a written notice of adjudication by one party and a
response by the opposite contracting party, along with copies of
any supporting documents.

An adjudicator has discretion to issue directions to the
parties, obtain information through independent research, conduct
on-site inspections, and obtain assistance from construction
industry professionals. Parties to a contract can also agree to
their own adjudication procedures that will apply to the extent
they do not conflict with the procedures established in regulations
or by a Nominating Authority.48

The table below provides a summary of the applicable steps and
associated deadlines in the adjudication process. The adjudicator
may extend any of the deadlines by a maximum of 10 calendar
days.49














Step Deadline Total Days from Submission of Notice of
Adjudication
50
Parties may agree on adjudicator51 4 calendar days 4
Failing agreement, Nominating Authority appoints
adjudicator52
7 calendar days after parties fail to agree on adjudicator 11
Once adjudicator is appointed, claimant provides
submission53
5 days from appointment of adjudicator 16
Respondent provides its submission54 12 calendar days after receiving claimant’s submission,
unless directed to provide submission earlier by adjudicator
28
Adjudicator makes its determination55 30 days after receiving claimant’s submission 46



Adjudicator’s Determination

The adjudicator may refer a dispute to court if the adjudicator
does not have jurisdiction to hear the matter or where the
adjudicator is of the opinion that the court is the more
appropriate forum for hearing the matter.56 Assuming the
adjudication proceeds, the adjudicator will then make a
determination at the conclusion of the process. An adjudicator may
make an order directing a party to make payment within a specified
time and allowing the opposite party to stop providing services or
materials if the payment is not made within the specified
time.57

The adjudicator’s determination is binding on the parties
subject to certain exceptions58:

  1. A court order is made in respect of the matter;

  2. A party applies for judicial review;

  3. The parties have entered into a written agreement to appoint an
    arbitrator under the Arbitration Act; or

  4. The parties have entered into a written agreement that resolves
    the

The written agreements to resolve the matter or appoint an
arbitrator above must be made by the parties after the adjudicator
has made a determination.59

The determination of an adjudicator may be set aside by judicial
review on certain limited grounds, including a reasonable
apprehension of bias on the part of the adjudicator, a failure to
follow the appropriate procedures which resulted in prejudice to
the applicant party’s right to a fair adjudication, a
determination made as a result of fraud, and the invalidity or
ceasing to exist of the underlying contract or
subcontract.60

Commencing an application for judicial review prevents
registration and enforcement of an adjudicator’s
order.61 An application for judicial review must be
commenced no later than 30 days after the date of the notice of
determination issued by the adjudicator.62 Upon
registration by the Alberta court, an adjudicator’s order may
be enforced as if it were a court order.63

The PPCLA expressly states that, except in the case of judicial
review, nothing in the PPCLA dealing with dispute adjudication
restricts the authority of the court or an arbitrator to consider
the merits of a matter determined by an adjudicator. The PPCLA
Regulation adds that any party to an adjudication may commence an
action in court within 2 years after the notice of adjudication is
sent.64

The PPCLA expressly provides that an adjudicator’s
determination is binding on the parties, except where a party
applies for judicial review, a court order is made in respect of
the matter, the parties’ agree to appoint an arbitrator, or the
parties agree to resolve the matter65. A contract that
provides for mandatory arbitration as a mechanism for dispute
resolution will not be effective to prevent enforcement of an
adjudicator’s determination in the interim because the
mandatory arbitration was agreed to before the adjudicator’s
determination was made. However, once the parties arbitrate
pursuant to the mandatory arbitration provisions, the
adjudicator’s determination may be subject to the arbitral
decision that reconsiders the merits of the
dispute66.

We expect that judicial guidance will help clarify the nature of
an adjudicator’s determination, in particular, the
circumstances where a court will reconsider the merits of an
adjudicated dispute, and the interplay between mandatory
arbitration provisions in a contract and an adjudicator’s
determination. The existing Builders’ Lien Act
prevents parties from contracting out of remedies available under
the lien legislation. This same restriction will be carried forward
to prevent parties from contracting out of the remedies offered by
the PPCLA.

Lien Registration and Holdback Changes

Progressive Release of Holdback Mandatory on Certain
Projects

The existing Builders’ Lien Act makes release of
holdback contingent on the issuance of a certificate of substantial
performance or completion of the project, and the absence of
builders’ liens registered against the project lands. Proper
invoices will remain subject to existing holdback requirements of
the existing Builders’ Lien Act. However, the PPCLA
mandates progressive release of holdback67, where
the:

  1. The value of the contract exceeds $10,000,00068;
    and

  2. the contract has a completion schedule that is longer than one
    year or the contract provides for phased release of
    holdback.69

The existing requirement that there are no builders’ liens
registered on title for release of holdback to occur will apply to
progressive release of holdback.70

New Lien Registration Deadlines

The deadline for registration of a builders’ lien under the
PPCLA will now be 60 days from the last day the services or
materials were supplied,71 which is up from 45 days in
the existing Builders’ Lien Act. The deadline for registration
of a lien relating to the furnishing of concrete or work relating
to concrete will now be increased to 90 days, up from 45
days.72 The deadline to register a builders’ lien
relating to improvements to an oil or gas well or to an oil or gas
well site remains 90 days.

Application, Transition and Miscellaneous

Application

The PPCLA will not apply to “public works” as defined
in the Public Works Act or agreements to finance and undertake an
improvement to which the provincial Crown or an agent of the Crown
is a party.73 This application is consistent with the
existing Builders’ Lien Act. The provincial Crown is
thus not subject to prompt payment or the other requirements of the
PPCLA. The PPCLA further provides that it will not apply to other
projects or class of persons as may be prescribed.74

Professionals Acting in a Consultative Capacity

The PPCLA will apply to regulated professional engineers and
regulated professional architects who act in a consultative
capacity in respect of an improvement.75

Expanded Right to Information

The PPCLA expands the existing section 33 right to information
in the Builders’ Lien Act. A lienholder, a beneficiary
of a trust, or a contractor or subcontractor working under a
contract may make a request at any reasonable time for production
of the applicable contract and a statement of
accounts.76 A statement of accounts must set out whether
all or a portion of a proper invoice or other invoice has been
paid, the percentage of such invoices that have been paid, and the
date on which the amounts were paid.77 Demands may be
made to the owner, contractor, or a subcontractor, depending on the
information being sought.78

Transition

The old Builders’ Lien Act will continue to apply to
contracts and subcontracts entered into prior to August 29,
2022,79 unless such contracts and subcontracts are
amended in order to conform with the PPCLA.80 There is
one exception: any contracts and subcontracts entered into prior to
August 29, 2022 and scheduled to remain in effect for more than 2
years after August 29, 2022, must be amended to confirm with the
PPCLA before August 29, 2024. The new legislation does not address
a scenario where subcontracts are entered into after August 29,
2022, on an ongoing project where the contract with the owner is
subject to the former Builders’ Lien Act. Parties
ought to be express and clear in any such subcontracts about the
legislation applicable to the contract and subcontract. The
legislature or the courts may resolve this uncertainty in due
course.

Takeaways

These are the key takeaways for construction industry
stakeholders to consider:

  1. The introduction of a prompt payment and adjudication regime
    will change how construction is done in The frequency of invoicing
    and the timing of payments upon those invoices are regulated. Any
    disputes involving payment will potentially be subject to quick
    determinations made in real time, not years after the project is
    completed.

  2. In order to both understand their obligations and their
    potential remedies under this new legislation, parties ought to
    educate themselves and adjust their internal processes as
    necessary. Among other things, there will be notices of non-payment
    and notices to dispute payment which will be required to be
    delivered in prescribed form and within prescribed deadlines.
    Invoicing by contractors to owners will need to conform to the
    “proper invoice” requirements of the

  3. Parties should consider how the new regime may impact their
    project financing. In effect, the requirement to pay parties within
    prescribed time periods means that project financing will reside
    firmly where it belongs, with the

  4. Parties should be aware of the potential impediments to
    adjudication and enforcement sitting with the legislation. An
    adjudication can be thwarted by a party commencing a court action
    on or prior to the date that a notice of adjudication is delivered.
    Enforcement of an adjudicator’s determination can be stalled if
    a party applies for judicial review, which in Alberta will
    typically take 3 months or longer before it is As of the date of
    this article, a half day Justice civil hearing date for both
    Calgary and Edmonton is scheduling into April or May, 2023.

  5. Stakeholders should take careful note of the changes to the
    lien remedy, including the extended lien registration periods and
    the mandatory progressive release of

  6. Existing standard form construction contracts should be
    examined and updated to align with the new legislation. For
    example, contracts should be reviewed to cover any party-specific
    or project-specific additional “proper invoice”
    requirements which the prime contract must contain and which the
    underlying subcontracts should support. Other areas to examine
    include invoice delivery and vetting procedures necessary to enable
    owner review within the timelines prescribed for payment,
    coordination of any testing and commissioning provisions with the
    timing of invoice delivery, payment terms, and any adjudication
    procedures beyond those

Footnotes

1. Builders’ Lien (Prompt Payment) Amendment
Act
, SA 2020, c 30 (“PPAA“), s. 2;
Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4
(“PPCLA”).

2. Prompt Payment and Adjudication
Regulatio
n AR 23/2022 (“PPCLA
Regulation
“); Builders’ Lien Forms Amendment
Regulation
, AR 22/2022 (“Forms
Regulation
“).

3. PPCLA, s 32.2(1).

4. PPCLA, s 32.3(1).

5. PPCLA, s 32.5(1).

6. PPCLA, s 32.7.

7. PPCLA, s 32.1(1).

8. PPCLA, s 32.1(3).

9. PPCLA, s 32.1(4).

10. PPCLA, s 32.1(6).

11. PPCLA Regulation, s. 3.

12. PPCLA, s 32.1(6).

13. PPCLA, s 32.2(1).

14. Forms Regulation, Form 1.

15. PPCLA, s 32.2(2).

16. PPCLA, s 32.4(1).

17. PPCLA, s 32.4(2).

18. PPCLA, s 32.5(10).

19. PPCLA, s 32.3(2).

20. PPCLA, s 32.3(3).

21. PPCLA, s 32.3(4).

22. Forms Regulation, Form 2.

23. PPCLA, s 32.3(5)(a).

24. Forms Regulation, Form 3.

25. PPCLA, s 32.3(6).

26. PPCLA, s 32.3(7).

27. PPCLA, s 32.5(1).

28. PPCLA, s 32.5(5).

29. Forms Regulation, Forms 4 and 5.

30. PPCLA, s 32.5(8).

31. PPCLA, s 32.1(6).

32. PPCLA Regulation, s 3.

33. PPCLA Regulation, s 19.

34. PPCLA, s 33.2(1).

35. PPCLA, s 33.2(1)(d).

36. PPCLA Regulation, s 10.

37. PPCLA, s. 33.3.

38. PPCLA Regulation, s 8.

39. PPCLA Regulation, s 7(2).

40. PPCLA Regulation, s 7(2).

41. PPCLA Regulation, s 20(1).

42. ’42’ target=”/] PPCLA, s 33.4(1),
33.4(3).

43. PPCLA, s. 33.4 (2)

44. PPCLA Regulation, s 20(1).

45. PPCLA Regulation, s 20(2).

46. PPCLA Regulation, s 20(3).

47. PPCLA Regulation, s 21.

48. PPCLA, s 33.5.

49. PPCLA Regulation, s 25(3).

50. These total calculations do not take into account
non-calendar days elapsed where a deadline is calculated using
calendar days. Calendar days are effectively defined to mean
business days in s. 1(b) of the PPCLA Regulation.

51. PPCLA Regulation, s 22(1)

52. PPCLA Regulation, s 22(2).

53. PPCLA Regulation, s 23.

54. PPCLA Regulation, s 24.

55. PPCLA Regulation, s 26(1).

56. PPCLA, s 33.6(2).

57. PPCLA Regulation, 26(2).

58. PPCLA, s. 33.6(5).

59. PPCLA Regulation, s 1(2).

60. PPCLA Regulation, s 34.

61. PPCLA, s 33.61(b).

62. PPCLA, s 33.8.

63. PPCLA, s 33.61(2).

64. PPCLA Regulation, s 33.

65. PPCLA, s. 33.6 (5)

66. PPCLA, s. 33.6 (6)

67. PPCLA, s 24.1.

68. PPCLA, s 24.1(2)(b); PPCLA Regulation, s
2(2).

69. PPCLA, s 24.1(2)(a).

70. PPCLA, s 24.1(c).

71. PPCLA, s 41.

72. PPCLA, s 41.

73. PPCLA, s 1.1.

74. PPCLA, s. 1.1(2), 1.1(3).

75. PPCLA Regulation, s 35.

76. PPCLA, s 33.

77. PPCLA Regulation, s 5.

78. PPCLA, s 33(3).

79. PPCLA, s 74(1).

80. PPCLA, s 74(3).

The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.

© McMillan LLP 2021



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