Amendments to the Builders’ Lien Act: What Lenders Need to Know | Denton

Alberta Builders Lien Act is now called the Prompt Payment and Building Lien Act

  • This is not a new law but rather a name change with modifications.
    • It is recommended that previous loan documents referring to the Builders Lien Act be changed to refer to the new name.
  • The changes will apply to documents, including but not limited to credit agreements, letters of commitment and loan guarantee documents, entered into on and after August 29, 2022. Documents entered into before the record date will continue to be governed by the prior rules unless amended to comply with them.

Main amendments

Introduction of prompt payment rules

  • Introduces a mandatory billing and payment system that requires land owners to pay contractors and contractors to pay sub-contractors within a prescribed time frame.
    • The program aims to expedite the payment process to ensure that payment, or an invoice dispute, is swift in the construction process.
    • Contractors who do not have a robust administrative system capable of issuing, reviewing, paying, or reviewing and disputing invoices quickly may find it difficult to meet prescribed deadlines.
    • The consequences of non-compliance with the new requirements are applicable interest on unpaid invoices and/or any orders for costs of an auction.
  • Parties cannot opt ​​out of these rules.

Improved rights of access to information

The amendments expanded access to information rights. A party is no longer required to hold a lien to request information from a lender about a project.

  • Under the previous rules, a party had to have a lien to ask a lender to provide mortgage terms, account statements, payment dates and other relevant information. Under the new rules, trust beneficiaries, contractors and subcontractors are now entitled to receive this information from a lender.
  • This new “discovery-like” process can be onerous for lenders. A lien holder, trust beneficiary, contractor or sub-contractor may choose to request this information before deciding to register a lien. These requests may come more frequently than before, and the lender should be prepared to provide this information to requesters even if they have not registered a lien. The requesting party may request the terms of any mortgage on land on which work is in progress or materials are supplied and/or a statement of account showing the funds advanced and the amount due on the mortgage.
  • If the lender does not provide this information within six days of receiving a written request and the applicant suffers a loss as a result of not receiving this information, the lender is liable to the applicant for the loss suffered.

Longer hold periods

The amendment extends the time for filing liens for general construction work from 45 to 60 days and for concrete fabrication and supply from 60 to 90 days. This means increased hold periods.

  • Owners are still required to set aside 10% of the contract price as a holdback to help satisfy any liens that may be registered. Now owners must hold back for 60 or 90 days, as the case may be, instead of 45 or 60 days.
    • Lenders may need to revise their previous documents if they refer to the specific number of days for hold periods.

New adjudication process

The amendment introduces a non-binding arbitration process. The appointed Adjudicator will have broad authority to decide on the valuation of services or materials provided, payment disputes, or any other matter relating to a construction contract.

  • The dispute period is very short and can range from less than 30 days to a maximum of 68 days. This is intended to speed up the process and reduce the costs associated with construction disputes.

Key points to remember

  • Carefully review your previous documents to ensure references are up-to-date and reflect the changes noted here.
  • Consider the impact of new changes on the terms of transactions with construction industry participants.

Comments are closed.