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Prompt Pay Statute - A.R.S. §32-1129


The Arizona Legislature recently made significant changes to the laws dealing with contracts on private construction projects in the State of Arizona. The new laws govern timing of payment from the owner to the general contractor; from the general to the subcontractors; and from subcontractors to suppliers. The Prompt Pay Statutes also give contractors and subcontractors the right to suspend or terminate work for non-payment. Some of the highlights of the Statutes are set out below.

A. Prompt Pay Statute - Owner payments

An owner must pay the contractor within seven calendar days after the contractor's billing or estimate is certified and approved.

A billing or estimate is deemed approved and certified 14 days after the owner receives the billing or estimate, unless before that time the owner or owner's agent issues a written statement detailing those items that are not approved or certified.

B. Prompt Pay Statute - Payments by Contractor and Subcontractor

A contractor must pay its subcontractors and material suppliers within seven days after receipt of payment from the owner.

Subcontractors must pay their sub-subcontractors and suppliers within seven days after receipt of payment from the general contractor.

However, the Prompt Pay Statute states that payment shall be made for the full amount received for such subcontractor's work and materials supplied based on work completed or materials supplied under the contract.

The statute can be read to require the contractor to pay the subcontractor only those amounts it actually receives from the owner. However, the statute also says a subcontractor or supplier is entitled to payment from the party with whom it contracts, which means that even if the owner hasn’t paid the contractor, the contractor is still obligated to pay its subcontractors and suppliers.

C. The contract can change the timing of payments

An owner may make progress payments later than seven days after the date the billing or estimate is certified and approved if the contract clearly states this and the contract contains a "Notice of extended payment provision" stating when such payments will be made.

The contract can also extend the time for the owner to approve and certify billings and estimates.


If payments from the owner to the general contractor are delayed, then payments from the general to the subcontractors and suppliers will be delayed. The same is true for the timing to approve and certify billings or estimates.

D. When payment can be withheld

The owner or general contractor may withhold payment to a subcontractor or supplier for:

* Unsatisfactory Job Progress

* Defective Construction Work or Materials Not Remedied

* Disputed Work or Materials

* Failure to Comply With Other Material Provisions Of the Contract

* Third Party Claims Filed or Reasonable Evidence That A Claim Will Be Filed

* Failure of the Contractor or a Subcontractor to Make Timely Payments for Labor, Equipment and Materials

* Damage to the Owner

* Reasonable Evidence that the Construction Contract Cannot be Completed for the Unpaid Balance of the Construction Contract Sum or a Reasonable Amount for Retention

E. Disciplinary action for failure to timely pay

Failure of a general contractor or subcontractor to make prompt payment is grounds for suspension or revocation of license by the Registrar of Contractors.

F. Right to Stop Work - General Contractor

The Prompt Pay Statute provides that a contractor may suspend work on a construction contract or terminate the contract if the owner doesn't make timely payment of the amount certified and approved.

A contractor shall provide written notice to the owner at least seven calendar days before the contractor's intended suspension or termination.

A contractor shall not be in breach of contract for suspending performance or terminating the contract for non-payment.

G. Right to Stop Work - Subcontractor

1. Failure of Owner and Contractor to Timely Pay

A subcontractor may suspend performance or terminate a contract if the owner fails to make timely payment of amounts certified and approved for the subcontractor's work and the contractor fails to pay the subcontractor for the certified and approved work.

A subcontractor shall provide written notice to the contractor and owner at least three calendar days before the subcontractor's intended suspension or termination.

2. Failure of Contractor to Timely Pay

A subcontractor may suspend performance or terminate a contract if the owner makes timely payment but the contractor fails to pay the subcontractor for the certified and approved work.
A subcontractor shall provide written notice to the contractor and owner at least seven calendar days before the subcontractor' intended suspension or termination.

3. Failure of Owner to Approve and Certify Work

A subcontractor may suspend performance or terminate a contract if the owner declines to approve and certify portions of the contractor's billing or estimate for that subcontractor's work, but the reasons for the failure of the owner to approve and certify are not the fault of or directly related to subcontractor's work.

A subcontractor shall not be in breach of contract for suspending performance or terminating the contract for non-payment.

4. No Further Work Required Until Payment Made

A contractor or subcontractor that suspends performance is not required to do any further work until it has been paid the amount that was certified and approved.

A contractor and subcontractor is also entitled to any costs incurred for mobilization resulting from shutdown or start-up of a project.

H. Written Notice Under Prompt Pay Statute

Written notice either be delivered in person to the person for which it is intended or must be delivered or sent by any means that provides written, third party verification of delivery to the last business address known to the party giving notice.