News

New York's Prompt Payment Act Amendments

The purpose of New York’s Prompt Payment Act (“the Act”) is to expedite payment of all monies owed to those who perform contracting services pursuant to construction contracts. The Act applies to all construction contracts exceeding $150,000 and renders void and unenforceable any contract provisions inconsistent with the Act. N.Y. Gen. Bus. Law §§756, 757.

On November 17, 2023, amendments to the Act were signed into law by Governor Kathy Hochul and effective immediately.

Amendment to §756-c of the Act

1. Limits retainage under the construction contract to no more than 5% of the contract sum, in contrast to the prior law that permitted the owner to retain a “reasonable amount” of the contract sum as retainage. N.Y. Gen. Bus. Law §756-c.
2. The owner is still required to release the retainage no later than 30 days after the final approval of the work under a construction contract.
3. In the event that the owner fails to release retainage in accordance with the Act, the owner must pay the contractor interest in the amount of 1% per month, starting on the date the retention came due.

Amendment to §756-a of the Act

4. Contractors may now submit “a final invoice for payment in full upon reaching substantial completion, as such term is defined in the contract,” in contrast to the prior law that entitled the contractor to submit a final bill and seek release of retainage only upon the final completion of the construction contract. N.Y. Gen. Bus. Law §756-a (emphasis added).

The recent amendments to New York’s Prompt Payment Act give construction contractors and others important rights and impose new burdens on owners and project developers.