Prompt Payment Webinar
On November 17, BILD Alberta hosted a webinar on the changes to the Builders' Lien Act, including the introduction of Prompt Payment, brings changes to invoicing, contracts, and more. This webinar answered questions about the anticipated changes, what members need to be aware of and how BILD Alberta continues to advocate for modifications that reduce the administrative burden on member companies.
What is Prompt Payment?
Prompt payment involves the introduction of legislation that establishes firm timelines for payment of invoices associated with the construction industry. This legislation was introduced in Ontario in 2019 and has been adopted or is being assessed in Nova Scotia, New Brunswick, Quebec, Manitoba, Saskatchewan and British Columbia.
The push for this legislation across Canada comes from trade and construction groups that identified issues with payment timelines exceeding lien periods which then provides them with limited recourse.
History of Prompt Payment in Alberta
Discussions surrounding prompt payment were initiated by the NDP Government in late-2018 and the current government has decided to move forward with legislation due to a growing number of complaints related to late payments on construction projects. This has been supported by multiple trade and construction associations.
From the onset of BILD Alberta’s engagement with Service Alberta on Prompt Payment, the government’s direction and intent was clear:
- They were fully committed to introducing Prompt Payment as part of an overall review of the Builders’ Lien Act.
- Exemptions for residential construction would not be considered.
- Policies would be largely modelled off Ontario’s legislation.
- They would not delay development of the legislation to review the functionality / implications of Prompt Payment in Ontario.
In early 2019, BILD Alberta members completed a survey where more than half of the respondents identified issues with delayed payments. Many commented they had experienced demand for payment terms outside of the 45-day lien period as part of their contracts. Other members indicated that a 28-day pay period does not work with standard invoicing / payment cycles. They stressed concerns that a shorter payment period would increase administrative burden and pose a challenge when dealing with lenders.
Key Elements of Alberta’s Legislation
The following provides a brief overview of elements in the legislation. More details can be found in this summary document with additional Government of Alberta information and resources found here.
- Companies have 28-days from receipt of a ‘proper invoice’ to pay.
- Requirements for proper invoices are detailed in the legislation.
- Non-payment or dispute of invoices will go before an adjudicator.
- The lien period will be extended to 60-days for non-concrete work and 90-days for concrete work.
- Minimum amount to file a lien has increased from $300 to $700.
- Pay-When-Paid clauses have been prohibited.
- Expanded list of those entitled to demand financial information.
BILD Alberta’s Advocacy
When proposed by both the previous and current government, BILD Alberta’s advocacy focussed on delaying any consideration of Prompt Payment legislation in Alberta until a thorough assessment of the impacts in Ontario could be completed. This request was denied repeatedly.
Based on the feedback from members and discussion with the Board of Directors, BILD Alberta’s formal position on Prompt Payment was developed and served as the basis for subsequent advocacy:
BILD Alberta recognizes the success of home builders and land developers depends on strong trade and supplier partners. If trades and suppliers are struggling, the rest of the industry suffers. BILD Alberta’s current focus is on ensuring member companies remain operational post-pandemic to support the continued employment of local trades and suppliers.
BILD Alberta is committed to working with Service Alberta in developing this legislation with a detailed framework that benefits all parties but requests further work be delayed until COVID-19 stabilizes. BILD Alberta is committed to identifying solutions with the Government of Alberta to finalize legislation that protects the payment of trades and suppliers in a manner that considers the modern nature of project financing.
Specific areas of collaboration include:
- Retaining freedom to contract provisions which is crucial for businesses.
- Lengthening the lien period to ensure trades and suppliers have access to adequate legal protections. This will need to consider changes to holdbacks and lien funds to ensure cash flow is not overly restricted.
- Identifying an appropriate ‘prompt payment’ period that is longer than 28-days in order to support standard accounting procedures, financing for larger projects, time required for engineering reviews and bank draws.
- Establishing parameters around an adjudication process that ensures qualified arbitrators are experienced in construction and contracting, contract performance, and construction quality.
To date, these requests have largely been overlooked by Service Alberta. As a result, we anticipate this will create unnecessary new costs and burdens for many member companies. Legislative solutions that provide enhanced protections to trade and supplier members without burdening businesses exist, but that is not what has been presented.
Immediately following announcement of the legislation, BILD Alberta sent a letter to Minister Nate Glubish. Our central focus is to advocate for change to the Prompt Payment period beyond a calendar month. BILD Alberta will continue to engage the Minister’s Office to push for solutions that enhance protection to trade and suppliers without negatively impacting the day-to-day operations of many businesses.