The Pennsylvania Contractor and Subcontractor Payment Act

Background

73 P.S. § 501, et. seq. is known as the Contractor and Subcontractor Payment Act (“CASPA”) is a statute that was enacted in 1994 “to cure abuses within the building industry involving payments from contractors to subcontractors and to encourage fair dealing among the parties to a construction contract.” Zimmerman v. Harrisburg Fudd I, L.P., 984 A.2d 497, 500–501 (Pa.Super.2009). CASPA is a remedial statute and it is accorded “liberal construction to effect its objects and to promote justice.” Id., at 502 n. 8. CASPA applies to all construction projects in Pennsylvania involving the construction, except for residential construction of six or less units. 73 P.S. § 503(a). CASPA requires that contractors pay subcontractors within fourteen days of receiving the subcontractor’s invoice. Recent amendments to CASPA, require that if a contractor is refusing to pay a subcontractor within fourteen days, it must give written notice to a subcontractor within that fourteen-day period. If a contractor fails to give written notice to the subcontractor within that fourteen-day timeframe, it waives all defenses to payment and payment is immediately owed. To further incentivize contractors to promptly pay their subcontractors, CASPA imposes 1% interest per month and 1% penalty per month on the amounts outstanding. Finally, CASPA mandates the award of attorneys’ fees and expenses to a subcontractor that successfully pursues a claim under CASPA.

CASPA mandates payment within fourteen days

Section 507(b) of CASPA mandates that before a subcontract is executed, a contractor is required to disclose to a subcontractor the due date for receipt of payments from the owner of the Project. 73 P.S. § 507(b). If a contractor fails to disclose those due dates to a subcontractor then the contractor is deemed to have received payment from the owner. Id. Section 507(b) states, in relevant part, “if a contractor or subcontractor fails to accurately disclose the due date to a subcontractor, the contractor or subcontractor shall be obligated to pay the subcontractor as though the due dates established in section 5(c)1 were met by the owner.” 73 P.S. § 507(b). This means that when a contractor fails to disclose those due dates to a subcontractor the contractor cannot use lack of payment from the owner as an excuse for non-payment to its subcontractor.

Section 507(c) of CAPSA, mandates that a contractor shall pay a subcontractor within fourteen days of it receiving or being deemed as receiving payment from the project owner. 73 P.S. § 507(c). In sum, if a contractor fails to disclose the dates it expects payment form the project owner, CASPA requires payment within fourteen days, whether a contractor has received a payment or not from its client.

Waiving the defense that payment is withheld because of defective work

Under Section 504 of CASPA, “[p]erformance by a contractor or a subcontractor in accordance with the provisions of a contract shall entitle the contractor or subcontractor to payment from the party with whom the contractor or subcontractor has contracted.” 73 P.S. § 504. Under Section 511(b)(1) of CASPA, “if a contractor or subcontractor withholds payment from a subcontractor for a deficiency item, the contractor or subcontractor withholding payment must notify the subcontractor and the owner in writing of the good faith reason for the withholding within the time period specified in the construction contract or 14 calendar days of the date after receipt of the notice of the deficiency item.” 73 P.S. § 511(b)(1). CASPA defines a “deficiency item” as “[w]ork performed but which the owner, the contractor or the inspector will not certify as being completed according to the specifications of a construction contract. 73 P.S. § 502. Importantly, if a contractor fails to comply to Section 511(b)(1) it “shall constitute a waiver of the basis to withhold payment and necessitate payment to the subcontractor in full for the invoice.” 73 P.S. § 511(b)(2).

Supplemental Conditions