Nicholas-Conlon-&-Koby-Kelln-Part-1

New Prompt Payment Legislation in the Construction Industry – Part 1 

By Nicholas Conlon and Koby Kelln

Note: This is the first of two articles that will briefly explain the key points contained in the Prompt Payment Act and the Amendment Regulations (as defined below). This first part will focus mainly on the Prompt Payment Act and its implications on construction projects for owners, contractors, and subcontractors.

On March 1, 2022, Saskatchewan brought into force prompt payment and mandatory adjudication provisions that are aimed at ensuring contractors and subcontractors are promptly paid for contributions they made to construction projects. The prompt payment regime is contained in The Builders’ Lien (Prompt Payment) Amendment Act, 20191 (the “Prompt Payment Act”). The Builders’ Lien Amendment Regulations, 20202 (the “Amendment Regulations”), contains the new provisions and forms that are intended to streamline the dispute resolution process when it comes to the payment (or non-payment) of both contractors and subcontractors. The Prompt Payment Act and the Amendment Regulations both supplement The Builders’ Lien Act3.

The payment ‘cycle’ outlined in the Prompt Payment Act begins with the owner of a project being provided a “proper invoice.” The Prompt Payment Act defines this term to mean “a written bill or other request for payment for services or materials with respect to an improvement under a contract.”4 Such an invoice must contain:

  • The contractor’s name and address;
  • The date of the invoice;
  • The period during which the services or materials were supplied;
  • Information referencing the contract (or other authority) under which the services or materials were supplied;
  • A description of the materials or services that were supplied;
  • The amount payable for the services or materials that were supplied;
  • The Payment terms; and
  • The name, title, phone number and mailing address of the person to whom payment is to be sent.5

The Prompt Payment Act also states that any provision in a contract that makes the giving of a proper invoice conditional on the owner’s prior approval or certification of a payment certifier is of no force or effect.6 Furthermore, a proper invoice must be provided on a monthly basis to an owner, subject to the contract stating otherwise.7

Owner to Contractor Payment Deadline

Upon receipt of a proper invoice from a contractor, an owner must pay the contractor within 28 days the amount payable.8 However, an owner may dispute all or any part of a proper invoice. If this is the case, the owner must provide the contractor with a notice of non-payment (in the form required by the Amendment Regulations) within 14 days of receiving the proper invoice.9

Contractor to Subcontractor Payment Deadline

If a contractor receives full payment from an owner pursuant to a proper invoice, the contractor must, no later than 7 days after receiving such payment, pay each subcontractor who supplied services or materials that were included in the proper invoice.10 However, if a contractor is in receipt of a notice of non-payment from an owner, the contractor is required to make its subcontractors aware of this fact, without delay.11

Upon receiving a notice of non-payment from an owner, a contractor should issue a notice of non-payment to its subcontractor. If this is the case, the contractor is obligated to provide its subcontractor with an undertaking that it will refer the matter between the owner and contractor to adjudication within 21 days of giving the notice of non-payment to the subcontractor.12

Subcontractor to Subcontractor Payment Deadline

As is the case for contractor-to-subcontractor payments, a subcontractor must pay its secondary subcontractors no later than 7 days after it receives full payment for services or materials provided by the same.13 Further, if a subcontractor receives a notice of non-payment, the same analysis from the preceding paragraph applies. This means that the subcontractor must make its subcontractor aware of its receipt of a notice of non-payment in a timely manner.14 Again, if the subcontractor then issues a notice of non-payment to its secondary subcontractor, it is obliged to provide its secondary subcontractor with an undertaking that it will refer the matter to adjudication within 21 days of providing the notice of non-payment.15

Conclusion

Being the dynamic and ever-changing industry that construction is, owners, contractors, and subcontractors all face a multitude of internal and external pressures that influence their ability to pay. The rising costs of inputs, coupled with increasing interest rates, means that parties in the construction industry must be confident that they will be able to meet their fiscal obligations before they undertake to perform work or provide materials to a project. The precise aim of prompt payment legislation in Saskatchewan is to ensure that each party in the construction chain receives timely payment for services or materials they provided to a project. It is the predictable and timely payment of contractors and subcontractors by owners and developers that allow important projects, such as the building of municipal infrastructure such as bridges and hospitals, to be completed.

  1. SS 2019, c 2 [Prompt Payment Act]. ↩︎
  2. Amending The Builders’ Lien Regulations, RRS c B-7.1 Reg 1. ↩︎
  3. SS 1984-85-86, c B-7.1. ↩︎
  4. Prompt Payment Act, supra note 1 at s. 5.1. ↩︎
  5. Ibid. ↩︎
  6. Ibid at s. 5.3(2). ↩︎
  7. Ibid at s. 5.3(1). ↩︎
  8. Ibid at s. 5.4(1). ↩︎
  9. Ibid at s. 5.4(2). ↩︎
  10. Ibid at s. 5.5(1). ↩︎
  11. Ibid at s. 5.51(1). ↩︎
  12. Ibid at s. 5.5(5). ↩︎
  13. Ibid at s. 5.6(1). ↩︎
  14. Ibid at s. 5.51(2). ↩︎
  15. Ibid at s. 5.6(6). This section provides that such an undertaking is not required if the subcontractor’s failure to pay is as a result of non-payment by the owner. ↩︎

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