Arizona’s prompt payment law sets forth the requirements for timely payment of contractors and subcontractors. This law, codified in A.R.S. § 32-1129.01, applies to private construction contracts completed by licensed contractors and subcontractors. Unlicensed contractors have no remedies under this law, and public construction projects have separate payment requirements.
Prompt Payment by Owners
A.R.S. § 32-1129.01 requires owners to promptly pay contractors who have performed work in compliance with their contract. In most cases, progress payments are required every 30 days, based on the contractor’s approved billing or an estimate of the work completed and materials supplied during the thirty-day period. The owner can modify this billing cycle, but must post plain notices of the modifications on each page of the construction contract, including bid plans and construction plans.
The owner is deemed to have accepted the monthly progress billing within 14 days of receipt, and has seven days thereafter to issue the progress payment.
If the owner does not accept the monthly billing statement, he or she must provide a written notice detailing the items that are not approved and certified. The owner can decline to approve of the monthly billing and withhold process payments for the following reasons:
•unsatisfactory job progress;
•defective construction work or materials not remedied;
•disputed work or materials;
•failure to comply with other material provisions of the construction contract;
•third party claims filed or reasonable evidence that a claim will be filed;
•failure of the contractor or subcontractor to make timely payments for labor, equipment and materials;
•damage to the owner; or
•reasonable evidence that the construction contract cannot be completed for the unpaid balance of the construction contract sum.
Late payments without an adequate reason will bear interest at 18% per annum.
If the owner fails to make a payment within seven days of approving the work, the contractor can stop work or terminate the construction contract, provided the contractor gives the owner seven days’ prior written notice.
A contractor who properly stops work under this section and provides adequate notice usually cannot be considered to have breached the construction contract, and they are not responsible for continuing any work on the project until they have been paid for services rendered and materials supplied.
Some of these statutory provisions can be altered by contract, such as the billing cycle, but others cannot.
Chernoff Law handles construction disputes, including failure to timely pay and workmanship disputes. Call us at 480-719-7307 to discuss your case with one of our construction lawyers.