The Massachusetts Prompt Pay Act is set forth in the Massachusetts General Laws, Chapt. 149, Sec. 29E, and provides strict timelines by which the different parties to the contract must make and respond to payment requests and/or change orders, and provide payment. The Massachusetts Prompt Payment Act sets forth some fairly strict requirements for substantial construction contracts, and provides additional ammunition with which parties to the contract can encourage payment. The Prompt Pay Act is set forth in the Massachusetts General Laws, Chapt. 149, Sec. 29E, and provides strict timelines by which the different parties to the contract must make and respond to payment requests and/or change orders, and provide payment.
But, what exactly are these requirements and benefits?
Massachusetts Prompt Pay Act Requirements
So, if the original contract is at least $3 million, not public, and not for the construction of 1-4 residential units, the Prompt Pay Act applies – but what does that mean? First, it means that the party seeking payment under the contract must submit written requests for periodic progress payments. The time period for these written requests may not exceed 30 days.
Second, it means that there are strict time-requirements for the party receiving the request for payment to approve or reject the request, and for payment of the amount approved. For regular periodic payment requests, the party receiving the request must approve or reject the request within 15 days, and payment must be made within 45 days from the approval date. For change-order requests, the request must be approved or rejected within 30 days of the later of the request or the beginning of the work associated with the change-order.
Any rejection of a periodic payment request submission must be in writing, and must “include an explanation of the factual and contractual basis for the rejection and shall be certified as made in good faith.”
If the Prompt Pay Act applies to a specific construction job, parties on that job are provided some excellent additional protection. It’s all well and good that these time requirements have been set forth, but what is the penalty for failing to comply? The penalty can be significant. Under ALM GL ch. 149 Sec.. 29E(c)(iii), “[a]n application for a periodic progress payment which is neither approved nor rejected within the time period shall be deemed to be approved unless it is rejected before the date payment is due.”
Other Protection From the Prompt Pay Act
Additionally, the Prompt Pay Act provides some other useful benefits to parties looking to get paid. Recently, I’ve posted some articles about pay-if-paid and pay-when-paid clauses. In Massachusetts, pay-if-paid clauses are not allowed in contracts subject to the Prompt Pay Act, as “[a] provision in a contract for construction which makes payment to a person performing the construction conditioned upon receipt of payment from a third person that is not a party to the contract shall be void and unenforceable” with certain exceptions.
If the Prompt Pay Act applies to a specific construction job, parties on that job are provided some excellent additional protection. Of course, the most powerful tool in the toolbox is still the mechanics lien, but more payment protection is a good thing.