Prompt Payment Act

Arizona has lots of laws that protect contractors.  Different laws will apply depending on whether the project is a residential, commercial or public project and on whether you are a general or subcontractor.  One of the laws protecting contractors is Arizona’s Prompt Payment Act.

Arizona’s Prompt Payment act sets forth time-frames in which contractors must be paid.  Generally, when a contractor or subcontractor sends an invoice, the invoice is deemed certified and approved if the owner or prime contractor does not send written notice stating in reasonable detail the reason(s) why the invoice was not approved.

If no written response is received within 14 days after the invoice is sent, the invoice is certified and approved and payment is due within 7 days thereafter.  If payment is not received, the prime contractor or owner has violated Arizona’s Prompt Payment Act.  At that point, the contractor or subcontractor is entitled to interest at the rate of 18% per year on the outstanding invoice.  Furthermore, if a lawsuit has to be filed to recover on the invoice, the contractor or subcontractor is entitled to recover their attorneys fees and costs.

For residential projects in which you are contracting with an owner-occupant, your invoices must have the following warning:

Attention: Your obligations to pay your contractor are subject to the Arizona prompt pay act. That act is set forth in section 32-1129, Arizona Revised Statutes, and sections 32-1129.01 through 32-1129.07, Arizona Revised Statutes. The full text of the statutes are available at your local public law library or the internet. Under that act, you have the right to withhold all or a portion of a payment to a contractor for a variety of reasons, including defective construction work that has not been corrected. However, in order to do so, you must issue a written statement setting forth in reasonable detail your reasons for withholding payments within fourteen (14) days after the date you receive a billing or estimate. If you fail to issue the written statement within that period, the billing or estimate will be deemed approved. Once the billing or estimate is deemed approved, you must pay the billing or estimate within seven (7) days. Generally, you are limited by the act to withholding only an amount that is sufficient to pay the direct costs and expenses you reasonably expect to incur to protect you from loss for which the contractor is responsible. You are encouraged to read the act in full to know your obligations and rights.

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