Pennsylvania Contractor and Subcontractor Payment Act
What is the purpose of this law?
The Pennsylvania Contractor and Subcontractor Payment Act (PCSPA) was created to assist businesses and individuals collect payment for their construction work. All construction contracts fall under the PCSPA, except for improvements to six or less residential units which are simultaneously under construction.
What are the payment terms?
The act provides a timeframe for payment to be due to contractors and subcontractors, even if the original agreement did not specify payment terms. Specifically, payment of invoices are due either 20 days after the end of a billing period, or 20 days after delivery of the invoice, whichever is later.
When must a contractor pay a subcontractor?
A contractor must disclose to his subcontractors the owner’s payment deadlines. If a contractor does not make this disclosure, the contractor must pay the subcontractor according to the PCSPA deadlines. The statutorily-defined timeline requires a contractor to pay to the subcontractor the full or proportional amount received of the work, either 14 days after receipt of each payment or 14 days after receipt of the subcontractor’s invoice, whichever is later.
What interest can be collected on payments?
When an owner fails to pay their bill, a week after the due date described above, interest begins to accrue on the unpaid debt at a rate of 1% per month. This incentivises owners to pay their bills on time, and partially compensates contractors and subcontractors who are forced to wait for their invoices to be paid.
May an owner withhold payment without penalty?
Oftentimes, an owner may justify their failure to pay by disputing some or all of the work performed by the contractor. The act does allow owners to withhold payment for disputed work, but requires them to pay for any item which is not under dispute. In addition, an owner may only withhold payment for a disputed item if they notify the contractor of their intention to withhold payment within a week of receiving the invoice.
Are damages available under the Act?
If legal action is required to obtain payment, when the contractor succeeds in court they are entitled to a penalty of 1% per month of the amount that was wrongfully withheld. Moreover, the contractor’s attorneys fees will be paid by the unsuccessful owner.