The following is an update to our November 2020 and April 2021 bulletins about the introduction of the Alberta Prompt Payment and Construction Lien Act (Prompt Payment Act). Both bulletins highlighted that regulations to further define the Prompt Payment Act had not yet been introduced. At those times, the Prompt Payment Act had also not yet come into force.
On February 25, 2022, the Alberta government announced that the Prompt Payment Act would come into force on August 29, 2022.
Also on February 25, 2022, the Lieutenant Governor in Council filed an Order in Council containing the Prompt Payment and Adjudication Regulation, Alta Reg 23/2022 (Regulation). The Regulation will also come into force on August 29, 2022.
The Regulation contains many important details that were not included in the Prompt Payment Act. Important matters that are now made clear in the Regulation include:
1. The Prompt Payment Act provided that phased payments of holdback amounts would be required for contracts of a certain prescribed value that also met other conditions. The value threshold prescribed in the Regulation is C$10,000,000.
2. The Prompt Payment Act provided that Nominating Authorities could appoint adjudicators pursuant to the Dispute Adjudication process provided for in the Act. Part 2 of the Regulation defines the qualifications required to become an adjudicator.
3. The Prompt Payment Act provided for an adjudication procedure to address construction disputes, with the details of that procedure to be prescribed. The Regulation includes details about this procedure. Among other things:
- The Regulation broadly provides for the voluntary submission of payment disputes to adjudication, including those related to the valuation of services in a written change order and payment or non-payment of funds retained as a major or minor lien fund. The Regulation further permits parties to agree to submit any other matter related to the relevant contract or subcontract to adjudication;
- The Regulation provides for a fast-track adjudication process, with much shorter timelines than in the Court of Queen’s Bench; and
- Consistent with the Prompt Payment Act, the Regulation provides limited grounds pursuant to which the decision of an adjudicator may be set aside through judicial review. The Regulation further provides, however, that any party to an adjudication may commence an action in court within two years after notice of adjudication is sent.
4. The Regulation provides that the 90-day lien period will not apply to industry participants that install or use ready-mix concrete.
5. The Prompt Payment Act provided that the Act would apply to a prescribed class of professionals acting in a consultative capacity. The Regulation defines that to mean regulated professional engineers and regulated professional architects.
6. The Regulation includes transitional provisions providing that any contracts entered prior to August 29, 2022, and which are scheduled to remain in effect for longer than two years after that date will be subject to the new Act. Parties will have two years after August 29, 2022, however, to amend their contract to comply with the Prompt Payment Act and Regulation.
Key takeaways from the Regulation include:
1. The fast-tracked adjudication process provides a potentially useful process to resolve various types of construction disputes, including: (i) smaller lien claims, which previously were required to proceed through the Court of Queen’s Bench; and (ii) disputes about change orders that are required to be resolved while a project is ongoing. Given the fast-track process provided for in the Regulation, the adjudication procedure is likely not appropriate for larger value or more complex claims. Parties must also be careful to agree that the adjudication process is binding, if that is their intent, so that it is not simply an expensive dress rehearsal before a court action.
2. The Regulation broadens the application of the construction lien regime in Alberta to professional engineers and professional architects. This is a significant change.
3. The Regulation provides welcome clarity to industry participants about: (i) when the new rules will come into force; and (ii) the application of the new rules to existing contracts.
For further information, please contact:
David Tupper 403-260-9722
Richard Bell 403-260-9656
Tom Wagner 403-260-9734
Allyson Hopkins 403-260-9789
Mackenzie Comand 403-260-9669
or any other member of our Litigation & Dispute Resolution or Construction Dispute Resolution groups.
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