December 15, 2020 Article

Massachusetts Superior Court Strictly Enforces Prompt Pay Statute

Massachusetts Superior Court Judge Michael D. Ricciuti issued an important ruling that an owner's violation of the Prompt Payment Act's requirements would not be considered mere "technical violations." Rather, where the owner failed to follow the Act's rules regarding responding to payment applications, the applications were "deemed approved," and the contractor was entitled to judgement.

This is the first court ruling addressing the issue and offers important clarity on the 10-year old statute.

Prompt Payment Act 101

The Prompt Payment Act, G.L. c. 149 §29 E, sets out a detailed process for responding to payment applications and change order requests.

Owners have 15 days to respond to their contractor's payment applications, and 30 days to respond to change order requests (prime contractors have an additional 7 days when reviewing their subcontractors' applications and requests and the time frame is extended by 8 days for each tier down the chain).

Any rejection of a payment, in whole or in part, must be made in writing and include an explanation of the "factual and contractual" basis for the rejection. The response must approve undisputed items, and be signed and must "certify that the decision is made in good faith. If no proper objection is issued within the applicable time period, the payment application is "deemed approved" and payment must be made within the 45-day period. Rejection can still be issued during the payment period. The Act imposes similar requirements regarding the treatment of change orders.

Tocci Building Corp V. IRIV Partners, LLC

In Tocci Building Corp V. IRIV Partners, LLC, et. al., the court held that IRIV failed to protect Tocci's payment applications within the time period or in the format required by the statute. IRIV responded to the applications by e-mail and letter, but did not otherwise comply with the Act's requirements. As Judge Ricciuti wrote,

While they may have been timely in rejecting some of the Requisitions, they did not specifically reject a Requisition in dispute, did not include an explanation of the factual and contractual basis for the rejection, and did not include a certification that the rejection was made in good faith.

Judge Ricciuti went on to hold that these violations were not merely "technical errors." The requirements go to the very purpose of the statute and should be strictly enforced. As a result, the judge awarded separate and final judgement granting the contractor's contract claims.

The Bottom Line

This Order is only one judge's ruling, and is subject to appeal, but it lays out a well-written rationale and provides clear indication that courts are likely to strictly enforce the Prompt Payment Statute. Owners, contractors, and subcontractors should be keenly aware of the statute's requirements so that they can be prepared to enforce their rights, where necessary.

Firm Highlights

Publication

Owner's Guide to Mitigating COVID-19 Risks in the AIA A201-2017 General Conditions

While the AIA A201-2017 is generally a well-understood contract, COVID-19 presents new logistical and economic risks that can leave owners at risk unless edits are made. This guide focuses on changes to the AIA...

Publication

COVID-19 and Contractual Non-Performance

Managing Risk on Existing Projects In contractual relationships extreme events may occur through no fault of the impacted party, temporarily inhibiting or completely preventing performance. During this pandemic, the inability of businesses to provide...

Publication

Contractor's Guide to Mitigating Risks in the AIA A201-2017 General Conditions

The AIA A201-2017 is generally a well-understood contract document and is used in a significant number of construction projects each year. While this standard contract covers most risks, there are a number of areas...

News

48 Preti Flaherty Attorneys Selected by Peers for Inclusion in Best Lawyers in America 2021, Including 4 “Lawyers of the Year”

Forty-eight Preti Flaherty attorneys have been named to Best Lawyers in America 2021, including four recognized on the inaugural “Ones to Watch” list for attorneys earlier in their careers and four “Lawyer of the...

Publication

Lien Waivers: Understanding the Risks in a Common Form

Lien waivers assure owners that once payment has been made to a contractor, or subcontractor, that contractor cannot obtain a mechanics' lien for that money at a later time. In this article for  Construction Executive , Kenneth...

Publication

Contractor's Guide to Mitigating COVID-19 Risks in the AIA A201-2017 General Conditions

The COVID-19 pandemic has presented new risks and challenges that will affect construction projects for years to come. This business level summary provides specific recommended edits that contractors and construction managers should consider when using...

Publication

Construction Alert: Gov. Baker Clarifies Massachusetts Construction Requirements and Possible Future Impacts for New Hampshire

The state of construction in Massachusetts continues to evolve as Governor Baker issued another order yesterday tightening  the list of types of construction that are allowed to proceed  as "essential services." Under the new...

News

U.S. News – Best Lawyers Ranks Preti Flaherty Among 2021 Best Law Firms

Preti Flaherty has been named among the 2021 Best Law Firms by the U.S. News – Best Lawyers rankings. To be eligible for ranking, a law firm must have at least one attorney named...

Publication

Preti Flaherty COVID-19 Resources

In response to the ongoing COVID-19 pandemic, Preti Flaherty's attorneys have maintained a constant stream of the most up-to-date information and resources for our clients, business partners, and others struggling to navigate these complex...

Publication

NH Gov. Sununu Issues Stay-At-Home Order - Construction Considered Essential Industry

Yesterday, in response to the COVID-19 outbreak, New Hampshire Governor Chris Sununu issued an emergency order shuttering all non-essential businesses in the state effective today. This morning, the governor's office released a list of...