Chasing Payments in Arizona Construction: Rights and Remedies Under the Prompt Payment Act

Construction companies have payroll to meet, suppliers to pay, and equipment costs to cover. When payments arrive late or not at all, your cash flow suffers, and your projects stall. Arizona’s Prompt Payment Act exists to protect your financial interests.

What Is Arizona’s Prompt Payment Act?

Arizona’s Prompt Payment Act refers to a set of statutes, including Arizona Revised Statutes § 32-1129.02, that govern payment obligations on construction projects within the state. The law applies to commercial construction and dictates when owners, contractors, and subcontractors must make payments for work performed or materials supplied.

When Should Property Owners Pay Contractors in Arizona?

Arizona law gives owners a maximum of 21 days to pay contractors after receiving a billing. Here’s how the timeline works:

• After submitting your billing or payment application, the owner has 14 days to certify and approve it. Once certified and approved, the owner must pay within 7 days.
• The same timeline applies to retention release and final payment. The owner has 14 days to certify and approve, then 7 days to pay.

While most construction contracts use a 30-day billing cycle, your contract can have a different cycle. The payment deadlines apply regardless of the length of your billing cycle.

How Quickly Must Contractors Pay Subcontractors in Arizona?

Contractors and upper-tier subcontractors must pay their subcontractors and material suppliers within 7 days of receiving payment from the party above them. This 7-day deadline applies to progress payments, retention releases, and final payments.

Contractors cannot delay your payment after receiving funds from the owner. When a contractor receives $50,000 from an owner, including $20,000 for your work, that contractor must pay you the amount within 7 days.

What Happens When Payments Are Late?

When a party misses a payment deadline under the Prompt Payment Act, interest begins accruing on the outstanding amount. Arizona law sets the interest rate at 1.5% per month (or 18% per annum), calculated from the date payment was due until you receive full payment.

Can You Recover Attorney Fees in Prompt Payment Disputes?

Arizona Revised Statutes § 32-1129.02 awards costs and attorney fees to the successful party in any action or arbitration brought to collect payments or interest under. This fee-shifting provision makes pursuing payment disputes financially viable, even when the unpaid amount is relatively small. The defaulter pays your legal costs.

In simpler words, this provision prevents larger companies from dragging out payment disputes to exhaust your resources. The law recognizes that you should not have to spend your own money to collect payment you already earned.

How Does FR Law Group Enforce Payment Rights in Arizona Construction?

FR Law group uses multiple enforcement strategies to recover what you’re owed.

1. Demand Letters

We may start with written demand letters that cite the statutory violations, calculate the interest owed, and warn of license complaints and litigation if payment is not made immediately. 

Contractors understand the consequences of noncompliance. Most pay outstanding amounts when served with concrete legal action.

2. License Suspension Complaints

When demand letters don’t work, we may file complaints with the Arizona Registrar of Contractors to trigger license suspension proceedings. Contractors confronted with a license suspension typically pay as soon as possible to resolve the complaint and protect their reputations.

3. Litigation

We pursue litigation to recover your unpaid amounts plus accrued interest. Because Arizona law awards attorney fees to the prevailing party, you can pursue even smaller claims.

4. Mechanics Liens Combined With Payment Enforcement

We also coordinate mechanics liens with statutory payment enforcement. Combining lien rights with prompt payment deadlines creates multiple pressure points that increase your leverage.

Your Advocate for Prompt Payments in Arizona Construction

Chronic late payments are a “silent killer” of construction businesses. They disrupt cash flow, prevent payment of workers and suppliers, slow project progress, and can destroy a company’s reputation and financial stability

The state’s prompt payment statutes give you tools to enforce payment deadlines, recover interest on late payments, and hold upstream parties accountable. FR Law Group has decades of experience using and refining these tools. We’ve recovered millions of dollars for contractors, subcontractors, and suppliers who weren’t getting paid on time.

Contact us to discuss your payment dispute. We’ll review your case, explain your rights, and develop a strategy to recover what you’re owed.

FAQs About Arizona’s Prompt Payment Act

How common are delayed payments in Arizona commercial construction?

Construction firms received late payment on almost half of their invoices in 2022, according to a Creditsafe industry report.

Can I stop work if payments are late?

Yes. Arizona Revised Statutes § 32-1129.04 gives you the right to suspend performance due to late payments. You must, however, send a written notice beforehand. Suspending work lawfully under this statute is not a breach of contract.

How do I file a complaint with the Registrar of Contractors?

You can file a complaint online through the Arizona Registrar of Contractors website or by mail. You’ll need to post a surety bond or cash deposit as a condition of filing. FR Law Group handles the entire complaint process on your behalf and coordinates it with other collection efforts.

Can I charge more than 1.5% monthly interest?

Yes. The statute sets 1.5% per month as the minimum but permits parties to agree to a higher rate. If your contract specifies 2% per month, you can charge that rate on late payments. Include an interest provision in your subcontracts that exceeds the statutory minimum.

Does the Prompt Payment Act help if the owner goes bankrupt?

The Act does not give you priority over other creditors in bankruptcy. However, contractors who received payment from the owner before bankruptcy may still owe you under the Act. FR Law Group can pursue those contractors even when the owner is in bankruptcy.

Will filing a Registrar complaint get me paid faster?

Sometimes. Contractors under threat of license suspension may pay quickly to resolve the complaint. Keep in mind that the administrative process can take months, so consider pursuing other remedies at the same time. FR Law Group files Registrar complaints as part of a complete collection strategy that includes demand letters, lien rights, and litigation.