Unpaid on a Construction Project? Things to Consider
At times, cash flow in a construction project may be stymied resulting in payment issues for various parties involved including contractors, sub-contractors and suppliers. Consequently, an unpaid party may wish to consider various methods to protect its interests and attempt recovery of unpaid monies.
Is the Work Lienable?
An unpaid party who has provided work or materials for the construction of an improvement on lands may register a builders’ lien against those lands. While this may seem simple, whether a builders’ lien right exists is complicated and nuanced and requires strict adherence to the formal requirements pursuant to the current Builders’ Lien Act, RSA 2000, c B-7 (the “Builders’ Lien Act”).
Some factors to consider when canvassing the existence of a builders’ lien right include, but is not limited to: the nature of the construction project and whether the project is actually lienable; the lands and improvement in which work and materials have been provided; the interest in lands held by the owner of the lands or interest; the nature of the work or materials provided to the land; and a party’s last day of work or whether the work or supply of material remains ongoing.
Typically, a party will register a builders’ lien at the Alberta Land Titles Office. However, at times, and specifically where a project involves Crown mines or minerals, a party may need to also register a builders’ lien against a Crown mineral agreement with the Alberta Minister of Energy for work done or materials furnished by that party.
The Builders’ Lien Act will soon change to the Prompt Payment and Construction Lien Act, SA 2020, c 30 (the “PPCLA”). The PPCLA will come into force on August 29, 2022. Stay tuned for a further article on the PPCLA and the changes it is bringing to builders’ lien matters.
Is the Project Bonded?
At times, a construction project may have required a general contractor to obtain a labour and material payment bond. Such a bond is a form of insurance guaranteeing payment to an unpaid subcontractor or supplier for work and/or materials supplied to the general contractor, provided certain conditions required by the bond are met by the unpaid party. Such conditions may include, establishing that the unpaid party is a Claimant under the bond and providing notice of a party’s claim for unpaid amounts in accordance with the strict timelines set out in the bond.
Often a subcontractor or supplier may not be aware of the existence of a labour and material payment bond, as they are not privy to the particulars of the contractual arrangement and obligations between the owner of the construction project and the general contractor. However, making prompt inquiries regarding the existence of such a bond is important to ensure timely notice of a claim on the bond.
Is the Project a Public Works Act Project?
In Alberta, an unpaid party who provides labour, equipment, material or services for a public work pursuant to a contract entered into between a general contractor and the Crown may send notice of that party’s claim to the Crown in accordance with the strict notice requirements set out in the Public Works Act, RSA, c P-46.
Once the Crown receives and investigates the public works claim, the Crown may, among other things, pay to the claimant the amount the Crown considers proper after having provided notice to, among others, the Crown’s general contractor. Such payment is then deducted from any amounts due to the general contractor. In considering a payment to a claimant, the Crown may consider any evidence. Further, any decision by the Crown to make a payment to a claimant becomes final and binding on the Crown’s general contractor.
Takeaway
Facing unpaid amounts on a construction project is stressful and may result in subsequent cash flow issues for an unpaid party. Various methods for recovering those unpaid amounts may exist depending on the facts. Making inquiries early on can mean the difference between capitalizing on an available method of recovery or being out of time. However, navigating the various methods of recovery can be complicated and nuanced. For assistance with tackling the complexities that arise when a party is unpaid on a construction project, please contact Janine Dhaibi.
Material in this article is available for information purposes only and is a high level summary of the subject matter. It is not, and is not intended to be, legal advice. You should first obtain professional legal advice prior to taking any action on the basis of any information contained in this article. This article is copyrighted. For permission to reproduce this article, please email Swainson Miki Peskett LLP: info@smpllp.ca
