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Southeast HVAC News Guest Column

The Prompt Payment Act

by Stuart S. Zisholtz, Esq.
In the past, I discussed a recent piece of legislation entitled Prompt Payment Act. The Prompt Payment Act was initially passed to benefit subcontractors and try and remedy a gaping hole in the construction industry which placed most of the financial risk on the subcontractors. However, the Statute was poorly written, contained numerous loopholes and was rarely used.

Recently, however, certain amendments to the Prompt Payment Act have made it slightly more beneficial to the subcontractor. Under the revised and amended Act, a subcontractor can seek an expedited arbitration if the general contractor or owner fails to remit payment timely. Thus, if the parties are unable to resolve their dispute, the subcontractor may, after 15 days notice, refer the dispute to arbitration. The rules of arbitration are identical to the rules that apply if an arbitration clause existed in the contract.

 

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For the reasons stated in past articles, I am not in favor of arbitration. An arbitration proceeding is not appealable and the rules of evidence do not apply. Furthermore, the revised and amended Act requires an owner to make payment on an interim or final invoice within 30 days of receipt. This differs from the prior version of the Act which required payment within 30 days unless the parties agreed otherwise. 

Again, the Legislature attempted to close a loophole in the Statute by directing payment to the contractor in an expedited fashion. With respect to payment by the general contractor to the subcontractor, the Act requires that payment be made within 7 days of the general contractor receiving funds from the owner. This clause is vital because the general contractor cannot hold the funds indefinitely or for an extended period of time.

While there are additional changes to the Act, these changes seem to be the most significant and important. However, because of the unwillingness of many parties to proceed to arbitration, the Act is not used as often as it should be. Never let your lien time run out! For a free copy of a pamphlet pertaining to Mechanicís Liens and Payment Bond Claims, kindly contact me or the Association.

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