| 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.
Story
continues below ↓
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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 Mechanic’s Liens and Payment Bond Claims, kindly
contact me or the Association.
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