117 Prompt Payment

• Jurisdiction: Arizona

Under the prompt payment laws, there are time limits for a general contractor to pay its subcontractors and suppliers, or for the subcontractor to pay its sub-subcontractors and suppliers. General contractors on private projects must pay the subcontractors and suppliers within fourteen calendar days after receiving a progress or final payment. A.R.S. § 32-1129. The same rule applies for subcontractors to pay their sub-subcontractors and suppliers on private jobs. However, the prompt payment law allows parties to avoid these time limits if they agree in writing to different time limits or to no limits at all.

The payment time on public projects is seven calendar days after the contractor or subcontractor receives its payment. A.R.S. § 41-2577. Although the parties may agree to other payment terms in writing, this right is substantially limited on public projects because no construction contract may “materially alter” the rights of any contractor, subcontractor, or supplier to receive prompt and timely payment under the prompt payment laws.

If a contractor fails to pay a subcontractor or supplier within the applicable time periods, interest accrues on the amount due at the rate of 1% per month beginning on the fifteenth day for private construction projects, A.R.S. § 32-1129(E), and on the eighth day for public construction projects, unless the parties have agreed in writing to other payment terms, A.R.S. § 41-2577(F).

The Arizona legislature enacted legislation in 2000 for the first time extending prompt payment requirements to the contract rights of owners on private projects.

The private sector prompt payment scheme is based on a 30-day standard industry payment cycle. A.R.S. § 32-1129.01. The Prompt Pay Law establishes the following “standard” statutory billing and payment cycles for all private construction projects in Arizona:

(a) On all construction projects longer than 60 days, an owner is required to make progress payments.

(b) Progress payments must be made on the basis of a duly certified and approved billing or estimate of the work performed and the material supplied during the preceding 30-day billing cycle.

(c) A billing or estimate is deemed “approved and certified” 14 days after the owner receives the billing or estimate unless before that time the owner or the owner’s agent objects in writing detailing the items that are not approved and certified.

(d) The owner must make progress payments to the contractor within 7 days after the date the billing or estimate is certified and approved.

A.R.S. § 32-1129.01(A).

These standard billing and payment cycles apply to Arizona private construction...