If you were to ask most persons involved in construction, “what is the new Massachusetts Prompt Pay Statute all about”, most would say, “the timing of construction payments.” This oversimplification, while certainly true, fails to recognize some of the more powerful provisions of the statute and its underlying theme. It is the underlying theme of the statute which makes it the most important piece of legislation affecting the construction industry enacted in the past twenty years!
The most important goal of the Massachusetts Prompt Pay Statute is that it demands the timely notification, consideration, approval or rejection, and potential payment of claims between all parties to a construction project. In doing so, the statute avoids the postponement of issues to a time when claims might be stale and records have become remote. Prompt pay, in its essence, translates into prompt attention, early disposition, and the avoidance of controversy, converting the shield of postponement into a sword of early resolution. Without such prompt resolution, all parties in the construction arena, whether by design or through unintentional neglect, operate to the disadvantage of their business partners. Setting aside issues to a later date inhibits the flow of ideas and funding, and can ultimately compromise the successful completion of the project.
While prompt payment is certainly a byproduct of the new law, the statute contains built-in remedies which necessitate the prompt resolution of claims. Readers of this article, including Architects, Engineers, Owners, General Contractors, and Subcontractors, must become familiar with the “outer limits” of the time standards considered “prompt” by the statute. These time standards differ, and are dependent upon which tier your activity occurs during the project. Your company’s failure to comply with the outer time limit applicable to your tier can not only affect your claim, but can also determine your ability to respond to the claims of others. Thus, depending upon your tier, your failure to respond promptly may actually bar you from making a claim while at the same time serving as the de facto approval of a claim against you. Clearly, prompt attention is entirely critical to the implementation of this statute.
For the foregoing reasons, we highly recommend that your company chart the time standards applicable on each of the projects undertaken by your firm. Individual project charts will provide your key personnel with ready reference to the outer limit for timely action so that no deadlines are missed. Finally, where this statute is somewhat complex, a well diagrammed chart may also aid in the determination of what action is not only timely, but appropriate. Regardless, recognizing that this new law requires the prompt resolution of construction issues will go a long way to ensuring compliance with its provisions. Time is not on your side with respect to construction issues covered by this statute, so do not be afraid to seek assistance when issues are too complicated for a quick resolution. Should any reader of this article want a copy of the Prompt Pay Statute, or have any other questions with regard to the statute, please call our office.
Mel Nash and Ross C. Wecker, Nash & Wecker, Attorneys at Law.
