Construction Payment Disputes in New York.
For Owners, Contractors, and Subcontractors.

Does New York’s Prompt Payment Law Cover Your Project?

Article 35-E of the General Business Law sets payment deadlines for private construction projects in New York. It applies to a construction contract, written or oral, where the aggregate cost of the project, including labor, services, materials, and equipment, equals or exceeds $150,000. N.Y. Gen. Bus. Law § 756(1).

It does not apply to public works projects, to work on an individual one, two, or three family home, or to residential projects of 4,500 square feet or less, among other exclusions. N.Y. Gen. Bus. Law § 756(1). Within those limits, it governs owners, contractors and construction managers, subcontractors, and material suppliers. N.Y. Gen. Bus. Law § 756(2), (3), (4), (5).

The Payment Deadlines

• Invoice approval. Once a contractor delivers an invoice with all contractually required documentation, the owner has twelve business days to approve or disapprove it. An owner who disapproves any part must issue a written statement describing the items not approved. N.Y. Gen. Bus. Law § 756-a(2)(a)(i).
• Payment by the owner. Payment of an approved interim or final invoice is due no later than thirty days after approval. N.Y. Gen. Bus. Law § 756-a(3)(a)(ii).
• Payment down the chain. When a subcontractor has performed, the contractor must pay it the full or proportionate amount received from the owner for its work seven days after receiving good funds, provided all contractually required documentation and waivers are received. N.Y. Gen. Bus. Law § 756-a(3)(b)(ii).
• Interest. A late payment carries interest at one percent per month on the unpaid balance, or at a higher rate if the contract provides one. N.Y. Gen. Bus. Law § 756-b(1).

Suspending Work for Non-Payment

If an owner fails to approve or disapprove an invoice on time, or fails to pay the undisputed amount on time, the contractor may suspend performance after giving the owner written notice at least ten calendar days before the intended suspension. A contractor who suspends this way is not in breach. N.Y. Gen. Bus. Law § 756-b(2)(a). A subcontractor has a parallel right, with written notice to both the owner and the contractor. N.Y. Gen. Bus. Law § 756-b(2)(b).

The notice has to say that payment of undisputed amounts has not been received and that the contractor intends to suspend for non-payment. A suspension that skips a step can turn the party who was owed money into the party in breach.

Contract Clauses New York Will Not Enforce

Section 757 makes certain provisions of a covered construction contract void and unenforceable:

• A clause that makes the contract subject to another state’s law, or requires a dispute to be litigated or arbitrated in another state, except in a contract with a material supplier.
• A clause that bars a party from suspending performance when another party fails to make prompt payment.
• A clause that takes away the expedited arbitration the article provides.
• Payment terms that differ from the payment provisions the article sets.
• Retainage of more than five percent of the contract sum.

N.Y. Gen. Bus. Law § 757. A form contract written for another state often carries more than one of these.

What These Disputes Usually Turn On

Most construction payment disputes come down to the paper. Was the invoice delivered with every document the contract requires? Did the owner disapprove in writing, item by item, within twelve business days? Was the extra work a change order, and was it approved the way the contract says? Was the amount withheld limited to what the statute allows, which is the reasonable cost to cure the defects identified in writing or the line item amount in an agreed schedule of values? N.Y. Gen. Bus. Law § 756-a(3)(a)(iv).

The article also gives the parties a fast track. After written notice of a complaint and an attempt to resolve it, the aggrieved party may refer the matter to the American Arbitration Association for expedited arbitration once fifteen days have passed from verified delivery of the complaint. N.Y. Gen. Bus. Law § 756-b(3).

Review the Contract Before the Job Starts

The least expensive construction dispute is the one the contract prevents. I review construction contracts and subcontracts for a flat fee, quoted within one business day, and I flag the clauses section 757 voids, the payment and documentation terms that will decide the next dispute, and any default that has no cure period. See my page on flat-fee contract review.

If the other side has already sued, see my page for a business sued by a supplier for unpaid invoices and my overview of breach of contract cases in New York.

I do not handle mechanic’s lien foreclosures.

Tell Me About the Dispute.

I handle construction payment disputes where $25,000 or more is at stake. Send me a short description and attach the contract and the invoices, or the summons and complaint if you have been sued, and I will tell you where things stand. The work is quoted as a flat fee for each stage, so you know what each step costs before it starts.

Related pages: Flat-Fee Contract Review  ·  Breach of Contract and Business Disputes  ·  Sued by a Supplier

Attorney Advertising. Prior results do not guarantee a similar outcome. The information on this page is general and is not legal advice. Consult an attorney about the specific facts of your matter. Law Office of Frederic R. Abramson, 160 Broadway, Suite 500, New York, NY 10038. 212-233-0666.

Frequently Asked Questions