We all know that a major problem in the construction industry is payment. A developer or owner wants their building constructed quickly, and in return, the contractor expects timely payment. The developer gets what they want—but often delays payment to avoid drawing on construction loans, paying interest, or simply to pressure the contractor into accepting a lower “settlement.” Sometimes, a tug of war develops.
This is what we call the “golden rule”: he who holds the gold makes the rules.
The Prompt Payment Act in New York mandates that owners and developers pay their contractors promptly.
The law imposes an interest charge of 1% per month on late payments and authorizes the contractor to stop work if payment is not made. Public projects and some housing developments are exempt.
The law also provides for progress payments on contracts lasting more than sixty days. Payment must be made within seven days of submitting a requisition or completing the work.
By definition, a contract includes construction, alteration, repairs, maintenance, removal, or demolition of a building or structure, as well as the development or improvement of vacant land.
The kicker: the owner or developer may withhold payment on written notice if they deem the work unsatisfactory. Payment must then be released once the alleged defects are corrected. And we all know what that can mean in practice.
The law is designed to give contractors more security. But don’t fool yourself—many owners and developers will still delay payment. Procrastination is a habit that dies hard. However, this law gives us leverage: penalties and additional costs if an owner plays games.
Still, none of this replaces the importance of filing mechanic’s liens or initiating legal action when needed. Always file your lien on time and protect your receivables. It’s a simple process that should never be overlooked.
Never let your lien time run out!
For a free pamphlet about Mechanic’s Liens and payment bond claims, feel free to contact me.
