As this year’s construction projects are in full swing, it’s a good time to review your rights to payment. Since 2014, the Prompt Pay Act has been a tremendous resource for contractors to recover retainage and interest from upstream contractors and owners for failing to timely pay on a project. Here are a few highlights from the Prompt Pay Act.
Limit on Retainage. Retainage may not exceed 10%. And, when the work is 50% complete, no more than 5% of future progress payments may be held as retainage. Nebraska Revised Statute 45-1204
Release of Retainage. Upstream contractors are now required to release retainage within 45 days after the project is substantially complete. Upstream contractors must pay subcontractors within 10 days of receiving retainage payment from the owner. Nebraska Revised Statute 45-1203(3)
Interest. Contractors can demand interest on late payments at the rate of 1% per month. Interest begins to accrue on the date the payment is due. But, interest is only recoverable if the entity charged interest, ie the owner or upstream contractor, has been notified of the provisions of the Prompt Pay Act. Nebraska Revised Statute 45-1205
Attorney’s Fees May be Recovered. Contractors can now recover attorneys’ fees if they pursue a claim under the Act. This is not reciprocal in that the defendant may not recover fees. Nebraska Revised Statute 45-1211
Application. The Act does not apply to residential construction involving less than 4 units. Nebraska Revised Statute 42-1207
Take Away: Nebraska’s updated Prompt Pay Act is a tremendous tool to improve your opportunity to collect amounts owed on construction projects.