When a Governmental Entity receives a timely and allowed written Payment request from the General Contractor, then the Entity must pay the amount to the Contractor by the thirty-first (31th) day after: (1) it receives the goods, performance of the services, or receives an invoice for the goods/services, whichever is later; failure to do so is a violation of the Act, unless there is a reasonable basis to dispute the amount owed. Even if there is a dispute, the Governmental Entity cannot withhold more than 100% of the disputed amount.
When a General Contractor receives Payment from the Governmental Entity, the General Contractor must pay each of its Subcontractors the portion of the Entity’s Payment attributable to the Subcontractor’s work performed under its contract with the Entity within ten (10) days of receiving the Payment failure to do so is a violation of the Act, unless there is a reasonable basis to dispute the amount owed. Even if there is a dispute, the General Contractor cannot withhold more than 100% of the disputed amount.
When a Subcontractor receives Payment from a Contractor, the Subcontractor must pay each of its Subcontractors and Suppliers the portion of the Contractor’s Payment attributable to its Subcontractors and Suppliers for work performed under its contract with them within ten (10) days of receiving the Payment from the Contractor failure to do so is a violation of the Act, unless there is a reasonable basis to dispute the amount owed. Even if there is a dispute, the Subcontractor cannot withhold more than 100% of the disputed amount.
Any unpaid amount that is required to be paid pursuant to the Act begins to accrue interest the day after the date that Payment becomes due at one percent above the prime rate for each month the debt remains unpaid.
Inside Tip
Claimants should consider including potential or actual violations of the Prompt Payment Act in the Payment Bond Claim Notices and/or a Payment Demand Letter. All of The Lien Professor’s Payment Bond Claim Kit Notices contain references to the Prompt Payment Act and a demand for accrued interest.
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