Learning from the Construction Act: Key takeaways for Alberta’s construction industry
By Marin Leci and Arba RadajConstruction Law
It has been four years since Ontario introduced legislation to modernize the Construction Lien Act, ushering in prompt payment and expedited dispute resolution frameworks, among other changes. As Alberta moves toward modernizing its existing construction lien legislation, industry players should apprise themselves of the differences between Bill 37: Builders’ Lien (Prompt Payment) Amendment Act, 2020 (Bill 37), the proposed legislation that will amend the Alberta’s Builders’ Lien Act (BLA)1 and Ontario’s Construction Act (OCA). Understanding the differences between these two pieces of legislation may provide helpful guidance to construction industry players looking for a way to prepare for the upcoming legislative changes in Alberta. Moreover, if the Government of Alberta expects to bring Bill 37 into force in July 2021, it should take advantage of Ontario’s approach in implementing the OCA to streamline Alberta’s modernization of the BLA while minimizing its disruptive impact on Alberta’s construction industry.
Though there are many similarities between the Alberta and Ontario legislation, there are several key differences, some of which are outlined below:
Holdback for finishing work/Minor lien fund:
When a certificate of substantial performance is issued, Bill 37 requires an owner hold back 10 per cent of the value of work and materials for 60 days from the date of completion of either the contract or the subcontract. This period is extended to 90 days where improvements relate primarily to concrete or work done in respect to improvements to an oil or gas well or site. However, Ontario’s OCA extends the holdback period for finishing work until all liens that may be claimed against holdback have expired, been satisfied, discharged, or as otherwise provided in the OCA. There is no specific mention of improvements related to the furnishing of concrete in the OCA.
Most of the prompt payment provisions are similar between the two pieces of legislation. One exception is that the OCA provides that reasons for non-payment may include retention of amounts by set-off by a trustee or by lien set-off. No similar provision exists in Bill 37.
The dispute resolution provisions of the Ontario and Alberta legislation are similar. However, Bill 37 states the nominating authority must arrange hearing by adjudicators, whereas the OCA contains no such requirement. Further, the OCA allows the adjudication authority to set and retain fees, costs and other charges for the administration of adjudication. The OCA contains the provisions that detail referrals of a dispute to adjudication in a dispute, which do not appear in Bill 37. For example, Under the OCA:
- A party to a contract may refer a dispute to adjudication for matters such as: valuations of services/materials; payment under the contract including change order; disputes subject to notice of non-payment; amount retained as set-off by trustee or lien set-off; payment of holdback; non-payment of holdback; and any other matters.
- An adjudication may only address a single matter, unless agreed otherwise.
- A party may refer a dispute to adjudication even if the matter is subject to court action or arbitration under the Arbitration Act, unless the action or arbitration has been finally determined.
- An adjudication may only be conducted by an adjudicator listed in the registry. Parties may agree to a specific adjudicator — who may reject to this request — or request an appointment from the nominating authority. Where a provision in a contract/subcontract designates an adjudicator, they are of are of no force or effect.
- Parties may terminate the adjudication before the adjudicator’s determination is made.
- Generally, under the OCA, an adjudicator is to make determination no later than 30 days after receiving documents, but this period may be extended upon request by adjudicator or agreement between the parties.
The distinctions between the two pieces of legislation are significant. Particularly when, pursuant to the terms of Bill 37, even if a court action is commenced on the same day as an adjudication, the adjudication must be discontinued. In developing associated regulations with Bill 37, Alberta should look to these distinctions for provisions that further its goal of modernizing construction legislation while streamlining the adjudication process.
Minimum amount to register lien:
Bill 37 states no lien shall be registered unless the claims or joined claims amount to or aggregate $700. There is no similar provision in the OCA.
Time for registration of liens:
Bill 37 and OCA contain similar provisions regarding deadlines to file liens. However, Bill 37 contains an extended lien period for the provision of concrete or work relating to concrete. The OCA does not contain any specific extended lien periods for concrete.
Phased Coming Into Force Provisions:
The most fundamental difference between the two pieces of legislation is that the OCA contained provisions that phased its changes, including the adjudication and prompt payment provisions into force over time. While the OCA became law in December 2017, the transformative changes it brought to the construction industry in Ontario did not take effect until October 2019. This phased approach allowed the construction industry in Ontario to properly prepare, acclimatize, and understand the OCA. More importantly, the OCA’s phased approach reduced uncertainty and allowed the construction industry to adequately pivot to minimize the disruptive impact of the OCA’s changes.
Currently, there are no equivalent phase-in provisions in Bill 37. The transitional provisions in Bill 37 state that any contract or subcontract enter into after Bill 37 comes into force is governed by Bill 37.
As a result, when Bill 37 is proclaimed to come into force and the BLA becomes the Prompt Payment and Construction Lien Act, its adjudication and prompt payment provisions, including the new deadlines for liens become law immediately. This could have serious consequences for the construction industry and may lead to significant uncertainty and confusion as industry players scramble to get onside of the new deadlines and the unclear prompt payment and adjudication regimes imposed by Bill 37.
Alberta should consider phasing Bill 37’s changes in over time. In addition to providing a greater degree of certainty, Alberta can take advantage of the body of case law being developed by Ontario courts as they assess and adjudicate disputes under the new OCA, and its transitionary provisions specifically. More importantly, phasing in Bill 37’s changes over time would provide Alberta’s construction industry some much needed breathing room in preparing for the significant disruption that the adjudication and prompt payment provisions will bring.
Marin Leci is a senior associate and Arba Radaj is a summer law student at Borden Ladner Gervais.
Although care has been taken to ensure accuracy, this article should not be relied upon as legal advice.
This article first appeared in the August 2021 edition of On-Site. Click here to read through the full issue.
1 Bill 37 will contain new rules and adjudication procedures that will have a transformative impact on the construction industry in Alberta. Also, Bill 62, the Red Tape Reduction Implementation Act, contains important information and guidance on the adjudication provisions of Bill 37. For more information please see: Borden Ladner Gervais, Alberta’s Builders’ Lien Act — one step closer to prompt payment and adjudication, here