Examining the New York Prompt Payment Act

June 30, 2025

For businesses and contractors working in the construction trade in New York, getting paid on time is not just good practice, it is law. The New York Prompt Payment Act (The Act) was enacted to promote fairness in private construction contracts by setting clear timelines and requirements for payments.

The Act, codified in General Business Law §§ 756–758, established mandatory payment timelines for construction contracts in the private sector. The primary purpose of The Act is to ensure that contractors, subcontractors, and suppliers are paid for their work in a timely manner and to provide certain remedies when they are not. 

The Act covers contracts, whether written or oral agreements, with a value of at least $150,000. It is important to note it does not apply to all construction contracts. While it covers contracts between owners, contractors, subcontractors and suppliers, it does not apply to any public projects or any residential contracts involving four or fewer units.

Rules for Making Payments

Contractors: Owners have 12 business days following receipt of an invoice to challenge/disapprove all or some portion of the invoice. This must be done in writing and must include a detailed accounting of what has been disapproved. Once 12 days have passed, if the owner has not submitted a written disapproval to the contractor, the invoice is deemed to be approved, and payment must be made to the contractor within 30 days.

Subcontractors: Contractors must pay subcontractors within seven days of receiving payment from the owner, provided all contractually required documentation has been received.

Final Payment: Thanks to an amendment passed in late 2023, contractors are allowed to “submit a final invoice to the owner for payment in full upon reaching substantial completion.” Substantial completion is based on what is “defined in the contract or as is contemplated by the terms of the contract.”

Retainage
Under The Act, owners can withhold a maximum of five percent of each contract as retainage. Those monies must be released no later than 30 days after final approval of the work.

As we know, there is always the possibility of a dispute arising that cannot be amicably resolved. Under The Act, parties can resolve payment disputes through expedited arbitration, a considerably more efficient alternative to litigation. If, after completing that process, it is determined that payment was wrongfully withheld for any reason, the unpaid party may be entitled to recover interest, legal fees and arbitration costs, in addition to the original money owed.

At Gross Shuman P.C.  we have decades of experience handling construction disputes. If your business needs assistance, give us a call.  716.854.4300 ext. 201 | [email protected]