May 28, 2025
Construction Newsletter – May 2025
Prompt Payment and Construction Lien Act
By David Girard, Dolden Calgary and Elka Dadmand, Dolden Toronto
Q1: There has been a lot of buzz about the changes to Prompt Payment and Construction Lien Act, RSA
2000, c. P-26.4 (the “Act”). What is the Act, and what has changed?
A1: The Act is legislation aimed at improving efficiency in the construction industry. When it was
introduced, it made significant changes to payment timelines and dispute resolution. This has been
a source of conflict, delays and litigation for many years, which the changes to the legislation
seeks to address.
What hasn’t changed much: the deadline to register a builders’ lien is extended to 60
days (90 days for some works), up from 45 days. Progressive release of holdback are now mandatory
for contracts exceeding $10 million with completion schedules longer than a year or phased release
provisions, contingent on no liens being registered.
A key change is the introduction of strict timelines for invoicing and payment. Owners
must pay contractors within 28 days of receiving a “proper invoice”, which is a
written request meeting specific content requirements. Contractors then have 7 days to pay
their subcontractors, who must do the same for their sub-contractors.
Contracts can’t make payment conditional on owner approval or
certification, though testing and commissioning can be prerequisites. Contractors must issue proper invoices at least every 31 days unless work like testing or
commissioning is incomplete.
If an owner disputes an invoice, they must issue a “Notice of Dispute” within 14
days, outlining the unpaid amount and reasons for non- payment. Contractors and
subcontractors must promptly relay dispute notices down the chain. Even if an owner doesn’t
pay, the contractor must generally pay their subcontractors within 35 days of issuing the invoice –
unless a Notice of Non Payment or Dispute is issued within specific timeframes. Similar
rules apply to subcontractor chains, with a 42-day payment deadline if unpaid.
The Act also establishes an optional adjudication process for faster dispute resolution concerning
valuation, payment (including change orders), non- payment notices, release of holdback, and
other agreed-upon contract matters. This process is intended to unfold quickly.
An adjudicator’s determination is binding, subject to court orders, judicial review applications
(which must be filed within 30 days), agreements for arbitration after the determination, or
written agreements resolving the matter after the determination.
Judicial review can set aside a determination on limited grounds like bias, procedural unfairness,
fraud, or the invalidity of the contract. Notably, as under the legislation it replaced, the
Act prevents contracting out of its remedies.
Q2: What kind of decisions have we seen under the Act to date?
A2: Welcome Homes Construction Inc v. Atlas Granite Inc., 2024 ABKB 301, is the first to interpret
the province’s new prompt payment and adjudication regime, introduced in August 2022. To be
clear, there have been many other cases decided in the interim, but they did not
address the new provisions of the Act.
The case involved a dispute between a homebuilder and a granite supplier over the delivery and
payment for marble countertops. The key points from the decision are:
- Independent of the Validity of the Lien: An adjudication determination
is independent of the validity of the underlying lien. The adjudicator’s decision focused on the
contractual dispute rather than the lien itself. - Adjudication is Binding: Unless set aside via arbitration, judicial review or
other court order. - Interim or Final: This remains unresolved.
- Legislative Intent: Are there differences between Ontario and Alberta
legislation? This decision leaves that unresolved.
Q3: Why is there renewed interest in the Act, given that it was introduced back in 2022?
A3: The new Act was introduced in 2022, but the adjudication provisions have not previously been
considered in detail by the Courts.
Recently, Bill 30 – The Service Alberta Statutes Amendment Act, 2024, was introduced
to address several issues with the Act. Key proposed amendments include:
- Commencement of Adjudication: Bill 30 allows adjudication and court actions to proceed
simultaneously if initiated on the same day, unless a court directs otherwise. This change prevents
parties from filing claims to avoid adjudication. - Contract Completion: Bill 30 clarifies that adjudication can now begin 30
days after “Final Payment,” defined as the earlier of the date complete payment is made
or required to be made under specific sections of the Act. - Binding Determinations: Bill 30 strengthens the binding nature of an adjudicator’s
determinations, unless a court directs otherwise, an arbitrator makes an award, or the
parties enter into a written agreement. - Public Works: Bill 30 expands the application of adjudication to public
works, aligning with Alberta’s move to adopt adjudication in construction legislation.
Q4: What does all this mean for the future of construction litigation, both in Alberta but also
across Canada?
A4: The answer depends on the region. Nationally, I expect most provinces, like
Ontario, to adopt a model similar to Alberta if they have not already done so. It is practical
to avoid the need for lengthy court proceedings when adjudication can accomplish the same
objective more quickly. That being said, a lot remains to be sorted out.
In Alberta and other jurisdictions that are very permissive of parallel proceedings,
litigation and adjudication will likely continue to co-exist. It remains to be seen whether parties
to disputes will prefer the adjudication process. It is also likely safe to assume that,
as with any such statutory process, the parties will thoroughly litigate the scope of the
process itself, including jurisdictional issues.
As more provinces adopt new legislation, I expect a shared body of case law to emerge. Of course,
this assumes that the legislation will be largely comparable across all jurisdictions. That being said, there is no reason to believe that it would
not be: after all, until the latest changes in Alberta and Ontario, the Builder’s Lien Acts were
largely comparable across provinces.
Q5: Any final thoughts on the topic?
A5: A lot of questions still linger, including whether other provinces will follow Alberta and
Ontario’s lead, if this proposed solution will truly streamline prompt payment and resolve
related disputes more efficiently than the current system, and how it will interact with insolvent
contractual counterparties. The answers to these questions will define the future of
construction law—stay tuned, the landscape is evolving.
For further information or if you have any questions about the above article, please contact the
authors: David Girard, Dolden Calgary, Email: dgirard@dolden.com and Elka Dadmand, Dolden Toronto: Email: edadmand@dolden.com
