Prompt Payment Statutes

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BEARD HOBBS & ASSOCIATES
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Beard Hobbs
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Of Counsel
Adam Conzales
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Trial Practice With Emphasis In
Construction Law and Civil Business Litigation


PROMPT PAYMENT STATUTES

PENALTIES LEVIED AGAINST CONTRACTORS FOR NOT MAKING TIMELY PAYMENTS TO SUBCONTRACTORS AND/OR MATERIAL SUPPLIERS and PENALTIES LEVIED AGAINST PROJECT OWNERS FOR NOT MAKING TIMELY PAYMENTS TO GENERAL CONTRACTORS

Business & Professional Code Section 7108.5

Civil Code Section 3260 et. seq.,

Public Contract Code Section 7107,  20104.50, 10853 & 10261.5

Progress Payment from Project Owner to General Contractor: (Private Works) 

Civil Code Section 3260.1, provides in part that a project owner must make a progress payment to the general contractor within 30 days after having received a request for payment.   Failure to make a timely progress payment by the project owner subjects the project owner to a 2% per month penalty in lieu of interest, plus attorney fees and cost.

Retention Payment from Project Owner to General Contractor:   (Private Works) 

Civil Code Section 3260, provides in part that the owner must pay all retention being held within 45 days of the date of completion of the project.   Completion of the project is determined by the date that the building department signs the project off as final.  Generally speaking punch list generated after the project has been signed off as final does not extend completion of the project.    The penalty for not paying retention within 45 days of completion of the project is  2% per month in lieu of interest, plus attorney fees and cost.

Progress Payment from Local Agency to General Contractor: (Public Works) 

Public Works Contract Code Section 20104.50, provides in part that a local agency must make progress payments to the general contractor within 30 days after having received a request for payment.  Failure to make a timely progress payment by the local agency subjects the local agency to a penalty of 10% per annum interest.

Progress Payment from a California State University to General Contractor: 

Public Works Contract Code Section 10853, provides in part that a California State University must make progress payments to the general contractor within 30 days of having received a payment request.  Failure to make a timely progress payment by the University, subjects the University to a 10% per annum interest penalty from the date the payment is due.

Progress Payment from a State Agency to General Contractor: (Public Works) 

Public Works Contract Code Section 10261.5, provides in part that a State Agency must make progress payments to the general contractor within 30 days of having received a payment request.  Failure to make a timely progress  payment by the State Agency, subjects the State Agency to a 10% per annum interest penalty from the date the payment is due.

Retention Payment from a Public Entity to General Contractor: (Public Works) 

Public Works Contract Code Section 7107, provides in part that a Public Entity must tender the contract retention to the general contractor within 60 days after the date of completion of the project.   Failure to tender the retention after completion of the project subjects the Public Entity to a 2% per month penalty in lieu of interest plus attorney fees and cost.

Progress Payment from General Contractor to Subcontractor – Subcontractor to Subcontractor (all tiers):   (Public & Private Works) 

California Business and Professional Code Section 7108.5, provides in part that a General contractor must tender payment to its subcontractors within 10 days of receipt of payment from the owner for the amount allowed by the owner for the subcontractors work.  This statute also applies to payments owed by a subcontractor to a lower tier subcontractor.  The penalty for not tendering allowed progress payments within 10 days of receipt of same is 2% per month, plus interest at the legal rate of 10% plus attorney fees and cost.

Progress Payment from General Contractor to Subcontractor: (Public Works) 

Public Works Contract Code Section 10265.5, provides in part that a general contractor must tender payment to its subcontractors within 10 days of having received payment from the project owner for the amount of work allowed by the owner for the subcontractors work.  The penalty for not tendering allowed progress payments within 10 days of receipt of same is 2% per month, plus interest at the legal rate of 10% per annum, plus attorney fees and cost.

Retention Payment from General Contractor to Subcontractor: (Private Works) 

California Civil Code Section 3260, provides in part that the general contractor must tender retention to its subcontractors within 10 days of receipt of the retention from the project owner.   Failure to tender retention within 10 days of receipt of the retention subjects the general contractor to 2% per month penalty in lieu of interest plus attorney fees and cost.

Retention Payment from General Contractor to Subcontractor:
(Public Works)

Public Works Contract Code Section 7107, provides in part that the general contractor must tender retention to its subcontractors within 10 days of receipt of the retention from the public entity.   Failure to tender retention within 10 days of receipt of the retention subjects the general contractor to a 2% per month penalty in lieu of interest plus attorney fees and cost.

Conclusion 

            Without exception, general contractors and subcontractors are entitled to be paid within very specific and specified time frames.   Keeping track of progress payment request and retention payments, will put you in a better position to apply pressure on either the project owner or general contractor to assure that you receive payments as required by various codes.   Protect your rights by being educated and aware of the rule of law pertaining to progress and retention payments.

This summary of progress and retention payment rights is prepared by Attorney Beard Hobbs a Construction Law Attorney who can be reached by calling 619-698-0977 or 888-232-7314.

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