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The Massachusetts “prompt pay law” and what it means for architects

On August 10, 2010, the Massachusetts legislature and Governor Deval Patrick enacted House Bill 4271, titled “An Act Promoting Fairness in Private Construction Contracts.”  The new law significantly affects payment provisions in private construction contracts, which gives the law its popular “prompt pay law” moniker. The “prompt pay law” created a new Section 29E in Chapter 149 of the Massachusetts General Laws and went into effect on November 8, 2010. The “prompt pay law” applies to prime construction contracts entered into on or after the effective date with an original contract price of greater than $3 million (except one- to four-unit residential projects). Although the law is primarily directed at general contractors and their subcontractors, design professionals involved in private construction contracts and performing contract administration services should review the law carefully to become familiar with its requirements. 

Summary of the law

Payment applications. The new law creates a timetable for periodic progress payments. Periodic-payment requests must be accepted every 30 days, and the law provides a 15-day deadline for approval or rejection after the submission, with an additional seven days for every tier below the prime contractor. Payment must then be made within 45 days of approval. If a payment application is neither approved nor rejected within the required time period, it is deemed approved unless it is rejected prior to the date for payment. The law requires that any rejection be made in writing with an explanation of the “factual and contractual basis” for the rejection, and be “certified as made in good faith.”

Change orders. The new law creates a 30-day time limit for approval or rejection of a request for an increase in the contract price. Similar to payment applications, if a change-order request is neither approved nor rejected within the required time period, it is deemed approved. If deemed approved, the change order may be submitted for payment in the next pay request. Any rejection must be made in writing with an explanation of the “factual and contractual basis” for the rejection and be “certified as made in good faith.”

Other provisions. The new law invalidates “pay-if-paid” clauses (contract provisions conditioning payment to one party on receipt of payment from a third party, such as the owner) as void and unenforceable, with two minor exceptions. Additionally, the new law provides that any contract provision requiring a party to continue performance when a payment is overdue by at least 30 days is “void and unenforceable” except for disputes regarding quality of work or default notices.

Architects and design professionals

Architects and other design professionals providing contract administration services on private projects will need to exercise increased diligence to comply with the law’s time frames to review, approve or reject contractors’ invoices and change orders, and should also be certain to provide a reasonable written explanation for the rejection of any payment request or change order. Otherwise, a design professional may be liable for claims arising from delayed reviews and/or unwarranted rejection of invoices without reasonable written explanations. 

Andrew Baldwin  is an attorney at the Law Offices of Richard A. Glaser, P.C. and former public policy manager for the Boston Society of Architects.