This post was written by Jessica Nolan, a summer associate at Lamson Dugan & Murray, LLP.
The Nebraska Construction Prompt Pay Act, Nebraska Revised Statutes, §§ 45-1201 to 45-1210, was amended and approved by the Governor on April, 16 of this year. The approved changes to the statutes (§§ 45-1201 to 45-1210) will be effective July 17, 2014. Importantly, the changes will only impact contracts entered into after that date. The significant changes are set forth below:
Definition of Contractors and Subcontractors
- The Act excludes from the definition of a contractor an individual or entity that is performing work on a contract for the state or an individual performing work on a federal-aid or state-aid project for a political subdivision and is paid by the state.
- The Act excludes from the definition of a subcontractor an individual or entity that is performing work for the state or performing work for a federal-aid or state-aid project of a political subdivision and is paid by the state.
- The Act defines “Substantially Complete” as the stage when the project is sufficiently complete to allow the owner to occupy or use the project as intended.
Requests for Payment
- Owner’s or their representatives shall release and pay all retainage for completed work, in accordance with the contract, within (45) days (this changed the previous (30) day requirement) after the project or after substantial completion of a designated portion. In addition when a subcontractor has completed work in accordance with the contract and all of the conditions precedent have been met, the contractor shall pay all of the retainage due to the subcontractor within (10) days after the contractor receives the retainage receipt from the owner.
When Payments May be Withheld
- An owner, a contractor, and a subcontractor may only withhold retainage in an amount that does not exceed the specified contract amount, and it shall not exceed a rate of 10%. The Act no longer allows an owner to withhold retainage until the entire project is substantially completed. If the scope of work for the contractor or the subcontractor is 50% complete the contractor may withhold only 5% retainage.
- The Act provides the court may award reasonable attorney’s fees and court costs to a plaintiff that pursues a claim.
These changes should help contractors in limiting retainage and demanding attorney’s fees if they have to hire counsel to get paid for their work.