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Your Rights Under the Prompt Pay Act

Your Rights Under the Prompt Pay Act

(ARS 32-1181 – ARS 32-1188)

Arizona has a prompt pay act that allows a contractor to suspend work or even terminate a construction contract where the owner does not promptly pay the amount certified and approved. ARS 32-1182 and ARS 32-1185. Certification and approval can occur without the owner’s knowledge. The act provides that, under such circumstances, a contractor will not be deemed in breach of the contract.

This law could have unintended consequences for owners who, in good faith, withhold payment due to poor performance or non-performance by the contractor. Unless withholding payment is done properly according to ARS 32-1182, the contractor could quit and abandon the job without being in breach.

ARS 32-1182 gives instructions for objecting to a billing. The owner or the owner’s agent must submit a written statement stating in detail the owner’s reasons for not certifying or approving all or a portion of a billing or estimate. This must be done within 14 days of the owner receiving the billing or estimate.  If written objection is not made within this 14 day window, the payment will be deemed certified and approved.

ARS 32-1182 lists reasons why an owner might not approve a billing or estimate:

  • 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 file or reasonable evidence that a claim will be filed
  • Failure of a contractor or a subcontractor to make timely payments for labor, equipment, and materials
  • Damage to the owner
  • Reasonable evidence that the construction contract cannot be completed for the unpaid balance of the construction contract sum.

It is not unusual for an owner to be dissatisfied with a contractor. Before withholding money to use as a negotiating lever, it is important to know your rights under the Prompt Pay Act.

If you have questions about your contract rights, you may schedule a complimentary conference with one of our experienced lawyers by filling out the form below or contacting any of our staff at 602-277-4441.

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