Recent Amendments to the Contractor and Subcontractor Payment Act
Recently, on June 12, 2018, Governor Wolf signed HB 566, which significantly amends the Contractor and Subcontractor Payment Act (“CASPA”). CASPA covers work on private, as opposed to public projects.These CASPA amendments will take effect on October 10, 2018.Contractors should consider immediately complying with the new changes to avoid potential legal claims.
The new Act makes the following changes to CASPA:
- Any contract provision waiving rights afforded under CASPA is unenforceable unless waiver of the right is expressly permitted by CASPA.One permissible waiver or change would be modifying the CASPA right to interest at a rate of 1% per month to some other interest rate. Waiving the notice, penalty interest or other provisions would not be enforceable.
- If a contract did not have a provision permitting suspension of work for nonpayment, contractors and subcontractors now have a statutory right to suspend work for nonpayment under the following conditions:
i)Payment has not been made within the period of time required by the contract or the statutory period set by CASPA, whichever is applicable;
ii)After 30 calendar days have passed since payment was due, written notice of the nonpayment is sent via email or US Mail to the person who owes the payment or their authorized agent; and,
iii)After 30 calendar days since the written notice of nonpayment was sent, written notice is sent via certified mail to the company owing payment of the intent to suspend performance in 10 calendar days if payment is not made.
iv)Now, work may be suspended 70 days after payment was due if the required notices are immediately sent under the statutory framework.
v)Parties can contract for a shorter period of time to suspend performance after nonpayment. However, any suspension of work provision that provides for a longer period of time is unenforceable.
- Good faith withholding of payment now expressly requires written explanation of the reason for the withholding within 14 days of receipt of an invoice.Any owner or contractor intending to hold payment for defective or imcomplete work MUST provide written notice of the basis for the non-payment and the amount being withheld within the 14 day period.
- A game changing provision in the new Act is the express provision that failure to provide a written explanation within 14 days will constitute a waiver of the right to withhold and require full payment of the invoiced amount. The amount of the withholding must always be a reasonable estimate of the cost to correct deficient or incompleteworkorother damages incurred.
- These written notice of deficiencies requirements must also be followed for retainage to be withheld beyond 30 days of final acceptance of the work or the right to withhold retainage will also be waived.
- Delay of payment of an entire invoice amount because of an invoicing error is now expressly prohibited. CASPA has always required written notice of invoice errors to be sent within 10 working days of receipt of an invoice. The Act now makes it clear that, once the notice of the error is received by the entity who sent the erroneous invoice, payment of the correct invoice amount or amounts of the invoice not in dispute must be made when due regardless of whether the invoice is corrected.
- Contractors and subcontractors now have the express right to payment of retainage upon substantial completion if a maintenance bond for 120% of the retainage amount is posted by the contractor.
If you have any questions concerning the new amendments to CASPA, feel free to contact Chapter Legal Counsel, Tom Weiers at firstname.lastname@example.org or 412-874-5298.