B.C.’s New Prompt Payment Law: What the Construction Industry Should Know

When an owner delays paying a contractor, that delay can affect subcontractors, suppliers, workers, and the progress of the project itself.

British Columbia’s new Construction Prompt Payment Act is intended to address this problem by setting clear payment deadlines and creating a faster way to resolve certain payment disputes.

The Act has been passed, but is not yet in force. The Province must still finalize the regulations and establish the system that will oversee the new dispute-resolution process.

Clear Deadlines for Payment

The new system will require a contractor to give an owner a “proper invoice.” In simple terms, this means an invoice that includes the information required by the Act and the parties’ contract.

An owner who believes an invoice is missing required information will have seven days to raise that concern. If the owner does not respond within that time, the invoice will generally be treated as “proper”.

Once a proper invoice is received:

• the owner must generally pay the contractor within 28 days;
• the contractor must then pass payment on to its subcontractors within the required timeframe; and
• payment must continue down the construction chain within short deadlines.

The goal is to prevent money from becoming unnecessarily delayed at one level of a project while subcontractors and suppliers wait to be paid.

What Happens When Payment Is Disputed?

An owner will still be able to dispute all or part of an invoice. However, the owner will need to provide a written notice of non-payment within 14 days of the invoice date.

That notice must explain:

• how much is not being paid; and
• why payment is being withheld.

This means that simply delaying payment while a concern is investigated may no longer be an option. Payment issues will need to be identified, documented, and communicated quickly.

A Faster Way to Resolve Disputes

The Act also introduces a process called interim adjudication.

This process will allow certain construction payment disputes to be decided much faster than a typical court case or arbitration. It may be used for disputes involving issues such as:

• whether an invoice meets the required standard;
• whether payment was made on time;
• the value of work or materials;
• notices of non-payment; and
• payment for change orders.

An adjudicator will review the dispute and issue a decision within a short period of time. That decision must generally be followed unless the parties later resolve the matter through a court proceeding, arbitration, or agreement.

Changes to Builders’ Lien Rules

The legislation will also make several changes to B.C.’s existing builders’ lien system.

One important change is that the holdback period will be reduced from 55 days to 46 days. The Act will also remove a type of claim commonly known as a “Shimco lien,” which is a separate lien claim against the statutory holdback.

Looking Ahead

B.C.’s new prompt payment regime will create a major change in how construction payments are managed. The most important difference is not simply that payment will be required sooner. It is that owners, contractors, and subcontractors will have much less time to identify and respond to payment problems.

Businesses that prepare early will be better positioned to avoid missed deadlines, reduce disputes, and manage projects smoothly once the Act comes into force.

McQuarrie’s construction and dispute-resolution lawyers can assist owners, developers, contractors, subcontractors, and other industry participants with reviewing their contracts and preparing for the new prompt payment requirements.

This article is for general information only and is not legal advice.

Article by: Doug Conolly and Armaan Kahlon