Relates to the obligation to subcontractors in construction contracts

Title of bill

An act to amend the general business law, in relation to the obligation to subcontractors in construction contracts

Purpose

The bill would require contractors to submit timely requisitions for payment of invoices for all work performed and materials provided on private construction contracts by subcontractors and/or materialmen, and document in writing the reasons for rejection of such payment, in whole or part.

Summary of provisions

Section 1 states that these provisions shall apply to construction contracts between private parties and are not applicable to public construction contracts.

Section 2 states the purpose of the article is to expedite payments to subcontractors and/or materielmen, and further states that any ambiguities in a private construction contract shall be construed in favor of expedited payment to a subcontractor and/or materielman for work performed or serviced provided in a timely manner.

Section 3 states that an owner or contractor cannot withhold payment to a subcontractor unless there is clear and convincing evidence of deficiencies in the work. This section further states that where a contractor objects to the work, a subcontractor is given reasonable time to cure the defect. In the event the contractor does not accept the cure, the matter shall be sent to expedited arbitration before the American Arbitration Association (AAA).

Section 4 provides that payment from the contractor to the subcontractor shall be immediate.

Section 5 provides for an assumption of good faith on the part of the subcontractor in completing the work or service.

Section 6 provides that performance may be suspended until any disputes regarding payments are resolved.

Section 7 states that where disputes cannot be resolved between the parties the matter shall be referred for expedited arbitration before the AAA, with the contractor required to post a performance bond. Failure to post such bond as required will result in an immediate award to the subcontractor. This section further states that where the arbitrator finds in favor of the subcontractor, the contractor or owner may be subject to attorneys fees and/or punitive damages.

Section 8 establishes the effective date.

Justification

This bill is tailored to mitigate the issues created by contractors electing not to requisition for subcontractor and/or materialman work that has been accepted by the contractor. It would thereby mitigate subcontractor payment issues on private construction projects.

Prior legislative history

None

Fiscal implications

None. EFFECTIVE DATE : This Bill shall take effect on the ninetieth day after it shall have become a law.