PROMPT PAY LAWS

AUBURN-OPELIKA SEMINAR

BY GULLAGE, TICKAL, & FELLOWS

1) ALABAMA PRIVATE PROMPT PAY LAW 8-29-1

a)    Time limits for Owner to pay Contractor and for Contractors to pay their Subs

b)   DOES NOT APPLY TO

i)      Residential homebuilders.

ii)   Improvements to real property intended for residential purposes which consist less than 17 units.

iii)            Contracts, subcontracts, or sub-subcontracts in the amount of ten thousand or less.

iv)Contracts with the state or local governments of the State of Alabama.

c)    TIME LIMITS TO PAY

i)      Whatever is set out in contract.

ii)   If not set out, then

(1)                        Owner has 30 days from pay request to pay

(2)                        Contractors have 7 days from receipt of payment to pay subs.

d)   PENALTIES FOR UNTIMELY PAYMENT

i)      Interest of 1% per month

e)    RETAINAGE

i)      Retainage percentage withheld from subs below you cannot exceed the percentage withheld by payor above you.  CAN’T BE WAIVED BY CONTRACT

(1)                        If excess is withheld then sub whose money was wrongfully withheld should be paid 1% per month on the excess amount held.

f)     EXCUSES FOR WITHHOLDING PAYMENT-   bona fide dispute regarding

(1)                        Unsatisfactory job progress.

(2)                        Defective construction not remedied.

(3)                        Disputed work.

(4)                        Third party claims filed or reasonable evidence that a claim will be filed. (liens,etc)

(5)                        Failure of the contractor, subcontractor, or sub-subcontractor to make timely payments for labor, equipment,and materials.  (people underneath the claimant)

(6)                        Property damage to owner, contractor, or subcontractor.

(7)                        Reasonable evidence that the contract, subcontract, or sub-subcontract cannot be completed for the unpaid balance of the contract or contract sum.

(8)                        In the event that there is a bona fide dispute over all or any portion of the amount due on a progress payment from the owner, contractor, or subcontractor then the owner, contractor, or subcontractor may withhold payment in an amount not to exceed 2 times the disputed amount.

ii)   If Payor disputes a request they must notify the requesting party w/i

(1)                        15 days if he’s an owner

(2)                        5 days if he’s a contractor w claims from a sub.

g)    LAWSUIT DAMAGES

i)      Amount owed

ii)   Interest

iii)            Attorneys Fees

iv)Court Costs

v)   Reasonable Expenses of Litigation

2)   ALABAMA PUBLIC CONTRACTS PROMPT PAY LAWS 41-16-3

a)    Contractor shall pay sub upon receiving payment from the state within time set in contract.

i)      If no time in contract, then within 7 days

b)   Retainage withheld by Contractor cannot exceed amount withheld by owner.

c)    EXCUSES

i)      Bona fide disputes- but sub should be notified of dispute w/i 5 days of making pay request

(1)                        No more than 2 X disputed amount may be withheld

3) FEDERAL PROMPT PAY

a)    WHEN IS PAYMENT DUE:

i)      To GC-  w/I 30 days  of receiving proper pay request, unless contract says otherwise

(1)                        14 days if it’s a progress payment request that has already been approved

b)    A “PROPER” PAY REQUEST

i)      Itemized- $ requested, work done, Total $ in contract, Amounts pd to subs, etc.

ii)   Certified

(1)                        Performance had been done.

(2)                        All debts to subs/suppliers up to date from prior payments.

iii)            Change Order Approval must precede invoice for same item.

iv)Gov’t had 7 days to dispute “properness of invoice”

c)    FAILURES

i)      Can result in interest but it must be requested in writng or be lost.

ii)

d)   FEDS HAVE MANY MORE HOOPS TO JUMP THROUGH TO GET ANY CONSEQUENCES FOR THEIR PAYMENT FAILURES.

i)      ASK THE GOV’T AGENCY TO PROVIDE YOU WITH ALL THE REQUIREMENTS OF PROMPT PAY PROVISIONS AT TIME OF CONTRACT.
-Mike Fellows