Prompt Payment on Construction Projects
As any construction industry professional knows, payment disputes are extremely common on both private and public projects. Many times, payment occurs many months (or even years) later. Delayed payment is not only detrimental to a project running smoothly and finishing on time, but it also causes general contractors and subcontractors financial hardship while they balance staying afloat for their daily operations and completing a project. However, many general contractors and subcontractors that are just starting out are unaware that Florida has laws (statutes) which require payment to occur within a specified amount of time—to ensure that all projects are paid in a timely fashion with enough cash flow to keep them running through to completion. These statutes are known as “prompt payment laws.”
Prompt payment laws regulate the amount of time during which payment must be made to contractors and subcontractors. Prompt payment laws cover both public and private construction projects.
Public Projects FAQ
- Statutes regulating prompt payment on public projects include: §§255.0705; 215.422; 218.70; and 337.141, Fla. Stat.
- Payment deadlines on public projects depend on who the public owner is (i.e., it depends on whether the owner is a state, city, county, etc.)
- For local projects (e.g. municipalities, counties, school districts or other political subdivisions), payment to the prime contractor must be made within 25 days of invoice approval or 20 days if no approval needed.
- For state projects, payment is due within 30 days after the public entity receives a request for payment.
- Payments from the prime contractor to its subcontractors must be made within 10 days of receipt of payment. Once the subcontractor has received payment, it must make payment “downstream” (to sub-subcontractors for example) within 7 days. These same timeframes apply to payments made to suppliers and anyone downstream from a supplier.
- Penalties for late payment
- If payment is wrongfully withheld by a public owner, interest will accrue at a rate of 1% per month until the outstanding debt is paid.
- Attorneys’ fees and costs are only available in disputes between contractors, subcontractors, and suppliers, and will only be awarded if payments were withheld without justification (i.e., without any basis in law or fact).
Private Projects FAQ
- Statutes regulating prompt payment on private projects include: §§713.346(2) and 715.12, Fla. Stat.
- Payment deadlines on private projects can be modified by contract
- Once a contractor submits a proper request for payment to the owner, the owner must issue payment to the contractor within 14 days of receiving the contractor’s pay request. However, this timeframe can be modified by the contract between the parties.
- Once the prime contract receives payment, the prime contractor must issue payment to its subcontractors and suppliers within 30 days after payment becomes “due” (after furnishing labor or materials), or after the request for payment was received, whichever is later. This too, can all be modified by the contract between the parties.
- Penalties for late payment
- Any wrongfully withheld payments will be subject to interest accruing at the then-current judgment rates put out by Florida’s Chief Financial Officer.
- If the dispute ends up being litigated in court or in arbitration, the “prevailing party” will be awarded its attorneys’ fees.
Prompt payment laws provide protection to parties on the construction chain and help ensure that projects are funded and seen through to completion. However, because there are many parties involved and numerous timing deadlines, prompt payment provisions can be tough to navigate as a project owner or prime contractor. To learn more contact Kristina Puente at email@example.com.