Pennsylvania Strengthens Payment Act (CASPA)

Pennsylvania HB566: Strengthens Contractor and Subcontractor Payment Act (CASPA)

Early June, Pennsylvania enacted amendments to its Contractor and Subcontractor Payment Act (CASPA). The changes will become effective October 10, 2018. Read on to learn more about these amendments and the impacts they may have on you.

Timely Payment = Provisions of CASPA Can’t Be Waived in a Contract

These amendments include a specific clause prohibiting the waiver of CASPA provisions. In fact, the clause is “Prohibition on Waiver.”

“(c) Prohibition on waiver. — Unless specifically authorized under this act, parties to a contract or other agreement may not waive a provision of this act by contract or other agreement.”

Short, sweet & straight to the point.

No Payment, it’s OK to Stop Work, with Proper Notification

Under CASPA, contractors and subcontractors now have statutory support to suspend their work on the project, if they haven’t received payment.

Prior to suspending working, contractors must notify the project owner or the owner’s agent:

“(II) … the contractor shall provide written notice to the owner or the owner’s authorized agent, via electronic mail or postal service, stating that payment has not been made and… (III) … the contractor shall provide at least 10 calendar days’ written notice, via certified mail, of the contractor’s intent to suspend performance to the owner or the owner’s authorized agent.”

The same time frame & requirements apply to subcontractors, however, instead of notifying the project owner, the subcontractor would notify the general contractor.

Withholding if in Good Faith

Project owners can withhold funds, if they have a good faith reason and if they provide “…a written explanation of its good faith reason within 14 calendar days of the date that the invoice is received.” If the owner does not provide the written notification explaining why it is withholding funds, the owner will need to pay the contractor for the full amount of the invoice.

Timely Payment, Kind of Like Prompt Payment?

Section 7 of the statute has been amended as well. If the subcontractor completes work under a contract, the general contractor is to remit payment to the subcontractor “14 days after receipt of each progress or final payment or 14 days after receive of the subcontractor’s invoice, whichever is later.” The same then applies for subcontractors paying sub-subcontractors etc.

Retainage Time Limit

If the contract calls for retainage, the retainage must be released within 30 days after final acceptance.

“(a) If payments under a construction contract are subject to retainage, any amounts which have been retained during the performance of the contract and which are due to be released to the contractor upon final completion shall be paid within 30 days after final acceptance of the work.”

If the project owner is not withholding retainage, the general contractor may withhold retainage from the subcontractor. If the general contractor withholds retainage, the retainage must be released within 30 days after final acceptance. However, if the owner is withholding retainage, the general contractor must release funds to the subcontractors within “14 days after receipt of the retainage.”

Want retainage released prior to final acceptance? OK, but a bond must be posted as security.

“…a contractor or subcontractor may facilitate the release of retainage on its contract before final completion of the project by posting a maintenance bond with approved surety for 120% of the amount of retainage being held.”

In Pennsylvania Strengthens Contractor and Subcontractor Rights and Remedies Relating to Nonpayment in Recent Amendments to CASPA, John Gazzloa warns contractors and subcontractors must comply with these new amendments, or they may forfeit rights.

“In order to perfect these new rights, however, contractors and subcontractors must satisfy the requirements set out in the amendments. To perfect suspension, contractors and subcontractors must follow closely the terms of their contracts and the notice timeline set out above. While the amendments remove much of the risk associated with suspending performance, contractors and subcontractors must follow the conditions of suspension closely and provide notice in the form and manner required. Failure to do so may prevent the contractor or subcontractor from exercising its suspension rights.”

Here’s the Recap

Pennsylvania–HB566–Timely Payment (Private Projects)

The amendments include:

  • if payment is not received, performance may be suspended after giving proper notification;
  • owner and contractor must make payment for successful completion of work under a contract, or provide notice to explain the reason for amounts being withheld;
  • a bond may be posted by the contractor or subcontractor to facilitate early release of retainage;
  • retainage must be paid within 30 days after final acceptance; and
  • the provisions of the Contractor and Subcontractor Payment Act cannot be waived in a contract.

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