{"id":900680,"date":"2022-12-12T15:29:45","date_gmt":"2022-12-12T22:29:45","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=900680"},"modified":"2022-12-12T15:29:48","modified_gmt":"2022-12-12T22:29:48","slug":"pay-if-paid-provision-banned-virginia","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/pay-if-paid-provision-banned-virginia\/","title":{"rendered":"New Virginia Law Bans Contingent Payment Provisions in Construction Contracts"},"content":{"rendered":"\n

Nicholas Morello and Jackson Nichols | Cohen Seglias Pallas Greenhall & Furman<\/a><\/p>\n\n\n\n

A new bill has been signed into law in Virginia that prohibits the use of contingent payment provisions on construction projects. The new law amends VA ST \u00a7\u00a7 2.2-4354 and 11-4.6 and provides that \u201c[p]ayment by the party contracting with the contractor shall not be a condition precedent to payment to any lower-tier subcontractor, regardless of that contractor receiving payment for amounts owed to that contractor.\u201d In other words, Virginia will no longer permit \u201cpay-if-paid\u201d provisions<\/a> in construction contracts.<\/p>\n\n\n\n

This change is surprising given Virginia\u2019s reputation for allowing parties to negotiate and agree to almost any terms in a contract. This departure from that policy will remove a contractor\u2019s and a higher-tiered subcontractor\u2019s ability to use \u201cpay-if-paid\u201d or \u201cpay-when-paid\u201d provisions to shift the risk of an owner\u2019s non-payment downstream to lower-tiered subcontractors. The law will become effective for all construction contracts signed after January 1, 2023.<\/p>\n\n\n\n

In addition to the ban on contingent payment provisions, the amendments require any public contract to include a provision that makes a contractor liable for the entire amount owed to the subcontractor, except for \u201camounts otherwise reducible due to the subcontractor\u2019s noncompliance with the terms of the contract.\u201d If withholding funds for non-compliance, the contractor must provide the reason for withholding the funds in a written notice.<\/p>\n\n\n\n

These amendments also enhance prompt payment protections for contractors in private contracts. The new law provides that in prime contracts, the owner shall pay the contractor within 60 days of an invoice of any undisputed portion of the work invoiced. Similarly, in a subcontract, the contractor must pay a subcontractor for undisputed portions of invoices \u201cwithin the earlier of (i) 60 days of the satisfactory completion of the portion of the work for which the subcontractor has invoiced or (ii) seven days after receipt of amounts paid by the owner to the general contractor or by the higher-tier contractor.\u201d The amended law extends the protection of the state\u2019s prompt pay act to private contracts as well, providing that the \u201c[f]ailure of a contractor to make timely payment as provided in this subsection shall result in interest penalties consistent with \u00a7 2.2-4355<\/a>.\u201d<\/p>\n\n\n\n

The main takeaway for contractors and higher-tiered subcontractors is that it will be more important than ever to evaluate the financial condition and reliability of an owner on a project since, in the event of non-payment by the owner, contractors will now be liable for payment to lower-tiered subcontractors. Additionally, all contractors and subcontractors will need to review and revise their contracts to remove any contingent payment provisions.<\/p>\n\n\n\n

With the new law coming into effect on January 1, 2023, contractors and subcontractors should start looking at their contracts, making necessary revisions, and understanding how those revisions affect their operations. If you are a contractor or subcontractor operating in Virginia and would like more information and help in determining how this bill affects your business, contact Jackson Nichols at 202.587.4756 or\u00a0jnichols@cohenseglias.com<\/a>, Nicholas Morello at 267.238.4720 or\u00a0nmorello@cohensglias.com<\/a>, or the Cohen Seglias attorney with whom you work.<\/p>\n\n\n\n

\n\n\n\n

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Nicholas Morello and Jackson Nichols | Cohen Seglias Pallas Greenhall & Furman A new bill has been signed into law in Virginia that prohibits the use of contingent payment provisions on construction projects. The new law amends VA ST \u00a7\u00a7 2.2-4354 and 11-4.6 and provides that \u201c[p]ayment by the party contracting with the contractor shall… Continue reading New Virginia Law Bans Contingent Payment Provisions in Construction Contracts<\/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":[9895,224,7568,357],"class_list":["post-900680","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contract","tag-pay-if-paid-clause","tag-virginia","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nNew Virginia Law Bans Contingent Payment Provisions in Construction Contracts - 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