The Government of British Columbia has introduced Bill 20 – the Construction Prompt Payment Act (the Act), which, if enacted, will establish a new prompt payment and adjudication regime for the construction industry in BC. This Act represents the largest change to the construction regime in British Columbia in over 20 years.
Overview
Bill 20 draws on similar prompt payment and adjudication frameworks already in place in Ontario, Alberta, and Saskatchewan, and is designed to ensure all parties in a project are paid in a timely and predictable manner.
What is Prompt Payment Legislation?
On most construction projects, money flows from the top down — starting with the owner and moving through contractors to subcontractors and suppliers. When that flow gets interrupted at any point, it can cause major problems.
Getting paid on time is crucial to keeping the industry healthy. Smaller contractors, trades, and suppliers usually don’t have big cash reserves, so when payments are delayed, it can quickly turn into a crisis — and sometimes even force businesses to shut down. Add in external factors such as tariffs, inflation, and supply chain issues driving up costs, and it’s easy to see why payment delays have become such a big issue.
The proposed legislation is intended to improve cash-flow certainty and keep projects moving by reducing payment delays that have long affected the industry. The Bill also includes consequential amendments to the Builders Lien Act, including the elimination of the nebulous “Shimco lien.”
Key Features of the Proposed Act
- Proper Invoices and Payment Timelines
- Contractors will be required to submit a “proper invoice” to the owner on a monthly basis unless otherwise agreed, where the “proper invoice” must contain certain information related to the work performed
- Owners must pay contractors within 28 days of receiving a proper invoice.
- Payment obligations flow down the contractual chain, with an additional 7 days for each tier (e.g., from contractor to subcontractor, and so on).
- A notice of non-payment must be issued within the prescribed timelines if an invoice is disputed, and if it is disputed in accordance with the rules, the adjudication process may be engaged.
- Likewise, if a contractor or subcontractor is not paid within the required time after issuing a proper invoice, the contractor or subcontractor is entitled to engage the parties in the adjudication process.
- Adjudication of Payment Disputes
- The Act introduces an interim adjudication process to resolve payment disputes (with the intent to have them resolved quickly and efficiently).
- Adjudicators will be appointed under an authorized nominating authority (which has not yet been created by the BC government), and their decisions will be binding on an interim basis, pending final resolution by arbitration or the courts.
- Amendments to the Builders Lien Act
- The Bill eliminates the “Shimco lien”, which previously allowed lien rights against holdback funds, often creating uncertainty for owners attempting to determine their holdback liability.
- Other amendments to the Builders Lien Act align lien and holdback rules with the new prompt payment framework, including by reducing the holdback period to 46 days instead of 55 days.
Implications for Industry Participants
While this new legislation has yet to pass or come into force, it is expected to move forward. At this time, it would be prudent for industry participants to familiarize themselves with the changes, so they understand the implications to their own businesses and are prepared when the Bill becomes law. For example:
- Owners and Developers should prepare for statutory payment deadlines and review contract administration processes to accommodate the new timelines, or in the alternative, they should consider the future revision of primary contracts to reflect the new Act, or to mediate the impact of the Act, where possible.
- General Contractors will need to implement systems to issue compliant proper invoices and manage downstream payment obligations. They should also have their contracts modified to reflect the changes implied by the new Act. Understanding the scope of these changes and having a plan to implement them in advance will be helpful when the time comes.
- Subcontractors and Suppliers should benefit from faster, more predictable payment cycles but must adhere to strict invoicing and notice requirements. Understanding these changes will be key to maximizing benefit.
- All participants should become familiar with the new dispute resolution regime under the Act, as it represents a significant departure from the usual methods of dispute resolution under typical construction contracts, including the CCDC suite of contracts.
What’s Next?
While Bill 20 has already passed both the 1st and 2nd Reading, based on data from other provinces and communications from the government, it is anticipated the 3rd and final Reading of Bill 20 should receive Royal Assent and pass into law sometime in November 2025. The government has also indicated that it may take considerable time from there for the law to actually come into force. This includes the appointment of a regulator and potentially, a measured and phased approach to the proposed adjudication process. Industry participants will need to closely follow developments as they evolve.
We would encourage you to sign up for alerts below as we will provide ongoing guidance and commentary as the Bill passes through to law. If you have any questions on how Bill 20 may affect you or your business, please contact our team directly.