{"id":900083,"date":"2022-06-28T15:38:59","date_gmt":"2022-06-28T21:38:59","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=900083"},"modified":"2022-06-28T15:39:02","modified_gmt":"2022-06-28T21:39:02","slug":"prompt-pay-act-strict-interpretation","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/prompt-pay-act-strict-interpretation\/","title":{"rendered":"Pay Now, Argue Later: Appeals Court Affirms Strict Interpretation of Prompt Pay Act"},"content":{"rendered":"\n<p>Ezra Dunkle-Polier, Jonathan T. Elder and Nina L. Pickering-Cook | <a href=\"https:\/\/andersonkreiger.com\/pay-now-argue-later-appeals-court-affirms-strict-interpretation-of-prompt-pay-act\/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Anderson &amp; Kreiger<\/a><\/p>\n\n\n\n<p>On June 7, 2022, the Massachusetts Appeals Court affirmed a strict reading of the <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/federal-prompt-pay-act\/\">Prompt Pay Act<\/a>, G. L. c. 149, \u00a7\u00a029E (the \u201cAct\u201d) in\u00a0<em>Tocci Building Corp. v. IRIV Partners, LLC<\/em>, Case Nos. 21-P-393 &amp; 21-P-733.\u00a0 That case and its background were featured in a prior\u00a0<em>Punch List<\/em>\u00a0<a href=\"https:\/\/andersonkreiger.com\/owners-beware-failure-to-strictly-comply-with-prompt-pay-act-may-cost-you\/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">post<\/a>.<\/p>\n\n\n\n<p>The trial court concluded that strict compliance was required of the Owner in reviewing payment requisitions, meaning that \u201cunless a rejection, in whole or in part,&nbsp;<em>in compliance with the statute<\/em>&nbsp;is made\u201d within 30 days of the application, \u201cthe application for periodic progress payment is \u2018deemed approved\u2019 by operation of law and must be paid.\u201d In this case, the Owner failed to certify that the payment rejections were made in good faith.<\/p>\n\n\n\n<p>The Owners believed the ruling to be too harsh. On appeal, it disputed the importance of the certification requirement as \u201cmerely ministerial,\u201d but the Appeals Court rejected this argument.&nbsp; \u201cThe Legislature required this certification if a rejection is to be effective, and we are not free to ignore that requirement by deeming it merely ministerial.\u201d And practically, \u201cthe certification requirement ensures\u2026that the owner be deliberate about rejecting applications\u2026it takes care to reject them only in good faith,\u201d and it \u201cprovides a clear indication to the contractor that an application has been rejected.\u201d<\/p>\n\n\n\n<p>However, the Appeals Court went on to set forth a critical holding that where pay applications are deemed approved because of the Owner\u2019s failure to meet the Act\u2019s requirements, the Owner does&nbsp;<em>not<\/em>&nbsp;waive its right to claw back money that may be lawfully owed to it due to defective work or other contractual entitlement to those monies, even if the money is part of one or more of those \u201cdeemed approved\u201d payments.&nbsp; Here, the Owner argued that the contractor breached its contract so it had good reason to not remit payment.<\/p>\n\n\n\n<p>The practical effect is that the Owner must put its own funds at risk.\u00a0 It has to make quick payment and then wait to resolve its back charge claims through a separate action.\u00a0 With\u00a0<em>Tocci<\/em>\u00a0on the books, Owners who choose to flout this process and withhold payment may be opening themselves up to bad faith claims under G. L., c. 93A.\u00a0 Regardless of business strategy, though, one point remains clear: all parties to construction contracts on covered projects ($3 million+ cost of construction at the prime contract level) need to familiarize themselves with the details of the Act\u2019s payment provisions and ensure they have the people and policies in place to process requisitions in strict compliance with the Act\u2019s requirements.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\" target=\"_blank\" rel=\"noreferrer noopener\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Ezra Dunkle-Polier, Jonathan T. Elder and Nina L. Pickering-Cook | Anderson &amp; Kreiger On June 7, 2022, the Massachusetts Appeals Court affirmed a strict reading of the Prompt Pay Act, G. L. c. 149, \u00a7\u00a029E (the \u201cAct\u201d) in\u00a0Tocci Building Corp. v. IRIV Partners, LLC, Case Nos. 21-P-393 &amp; 21-P-733.\u00a0 That case and its background were&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/prompt-pay-act-strict-interpretation\/\">Continue reading <span class=\"screen-reader-text\">Pay Now, Argue Later: Appeals Court Affirms Strict Interpretation of Prompt Pay Act<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[9895,224,520],"class_list":["post-900083","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contract","tag-prompt-pay-act","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Pay Now, Argue Later: Appeals Court Affirms Strict Interpretation of Prompt Pay Act - Advise &amp; 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