The Arizona “Prompt Pay Act” requires an owner of a construction project to send a detailed, written objection to the contractor within 14 days of receipt of the contractor’s billing or the pay application is deemed “approved.” A written objection must identify the factual dispute and at least one of the following:
- Unsatisfactory job progress;
- Defective construction work or materials not remedied;
- Disputed work or materials;
- Failure to comply with other material provisions of the construction contract;
- Third party claims filed or reasonable evidence that a claim will be filed;
- Failure of the contractor or a subcontractor to make timely payments for labor, equipment and materials;
- Damage to Owner;
- Reasonable evidence that the construction contract cannot be completed for the unpaid balance of the construction contract sum.
If an owner fails to timely send the written objection detailing the items not “approved,” the pay application is “deemed approved and certified” and payment must be made seven days after that “approval” date. If not paid, the “deemed approved” amount bears interest of one and one-half percent (1½%) per month.
Even if the pay application fails to meet contract requirements or overstates the amount due, Arizona courts have enforced the statute and the obligation to pay the “deemed approved” sum. Until this law is changed, owners should carefully review billings and promptly send written objections identifying all problems. Call one of our construction attorneys if problems occur, as this statute has been enforced even when the billing contractor was terminated for breaching its obligations.
