The Prompt Payment Amendments to the Builder’s Lien Act, also known as Bill 38, received Royal Assent on May 30, 2023, and went into effect as of April 1, 2025. This amendment was intended to establish a timely flow of funds within a construction project by imposing deadlines on each payor in the construction chain.
One major takeaway from this amendment is that the time to file builders’ liens has been extended from 40 days to 60 days in order to accommodate this new prompt payment timeline.
How it Works
The entire prompt payment timeline starts when the contractor issues a ‘proper invoice’ to the owner. A proper invoice includes:
- The contractor’s name and address, date of the invoice and time period in which the work, services, or materials were provided;
- Information identifying the contract or other authority under the work, services, or materials were provided;
- A description of the work, services, or materials that were provided by the contractor and its subcontractors, including quantity if appropriate.
- The amount invoiced for the work, services, or materials that were provided and the payment terms;
- The name, title, telephone number and mailing address of the person to whom the payment is to be sent; and
- Any other information required by the regulations.
A proper invoice should be sent to the owner each month unless the construction contract for the project states a different timeline. It’s important that the proper invoice is sent out regularly, adhering to whatever timeline was agreed to by the parties.
Once the proper invoice is issued to the owner, the owner then has 28 days to pay the amount owing. If the owner disputes all or some of the amount invoiced, they can provide a Notice of Non-payment to the contractor within 14 days of receiving the proper invoice. This notice should include the reasons for non-payment, and it then suspends the payment deadline along with the consequences for missing that deadline.
An important note is that if only part of the invoice is in dispute, the part that is agreed to must still be paid within the 28-day timeline.
If the contractor receives a Notice of Non-Payment from the owner, they must do two things. First, they must give notice to their subcontractors of this. The contractor must pay their subcontractors within 7 days of receiving the funds from the owner or within 35 days of the proper invoice if they were not paid by the owner. The contractor can suspend the 35-day timeline if they provide the Notice of Non-payment to the subcontractors. The contractor can also issue their own Notice of Non-Payment to the subcontractor if the contractor takes issue with the amount invoiced by the subcontractor. The second thing the contractor must do if they receive a Notice of Non-Payment from the owner is commit to referring the dispute with the owner to adjudication within 21 days of giving this notice to the subcontractor. This notice must be given to the subcontractor within 7 days from the Notice of Non-payment from the owner or before the 35-day expiry if the contractor did not receive a notice from the owner.
Subcontractors then must tell their subcontractors of the Notice of Non-payment they received. The subcontractor has 7 days to pay their subcontractors or if they do not get paid then the subcontractor has 42 days from the date the contractor submitted the proper invoice.
For each level of subcontractors, 7 days is added to the timeline starting from when the proper invoice was issued.
Adjudication Process
Another new system implemented by this Bill is the adjudication process of payment issues in the construction contract. The goal of adjudication is to speed up the dispute resolution process and avoid construction projects coming to a halt because of it.
Adjudication can be unilaterally initiated, meaning if one party does not pay, the other party can submit the dispute to adjudication without the non-paying party’s approval. A decision should be made within 30-35 days. The decisions that are made are “interim and binding” and have to be paid within 10 days of the decision being made. However, these decisions can be overturned later in court if there is litigation over the contract and it could also be reviewed in a later arbitration. If payment is not made within the 10 days, contractors or subcontractors may cease work on the project.
The following issues can be referred to adjudication:
- A dispute related to a notice of non-payment given by the owner, contractor, or subcontractor;
- A failure to submit a proper invoice;
- A failure to make a payment in accordance with the Amendments;
- A dispute in respect of a payment under a contract or subcontract, including in respect of a change order, whether approved or not, or a proposed change order;
- A dispute in respect of a set-off claimed by a party in accordance with the Amendments;
- Any other matter agreed to by the parties to the adjudication; and
- Any other matter set out in the regulations.
The adjudication process is missing many important details as to how the process will work and the specifics that will govern the process. Further regulations will set out the process in further detail and is expected to be refined as the process is used.
Exclusions
Though other provinces have chosen to exclude particular industries from this system, architects and engineers are the only groups exempt from the prompt payment and adjudication structure in Manitoba.
If you have any questions or need assistance in your matter, please contact us.
By: Arieana Daniels & Grant Driedger