Late payments and unpaid construction invoices can create serious financial problems for contractors and subcontractors. Delayed payments may affect payroll, materials, scheduling and the overall stability of a construction project.
Arizona construction laws provide important protections for contractors dealing with nonpayment issues.
Rights when payment is delayed
Arizona law allows contractors to suspend work or terminate a construction contract in certain situations involving unpaid certified amounts. This protection applies when owners fail to make timely payments for completed and approved work.
Notice requirements before stopping work
Before suspending work or terminating a contract, contractors generally must provide written notice to the owner. In many situations, Arizona law requires at least seven calendar days of notice unless the contract allows a shorter period.
Subcontractors may also have notice obligations involving both the contractor and the project owner, depending on the circumstances of the payment dispute.
Protections for subcontractors
Arizona law also protects subcontractors when payment issues occur between owners and contractors. Subcontractors may have the right to suspend work if approved payments are withheld or if payment delays are unrelated to the subcontractor’s performance.
Recovery of additional project costs
When work is suspended because of nonpayment, contractors and subcontractors may also seek payment for certain shutdown or restart-related expenses.
Importance of proper documentation
Construction professionals should maintain organized records of contracts, invoices, certifications, communications and payment approvals. Written documentation can become critical if disputes arise later.
Arizona law also outlines acceptable methods for delivering written notices, including personal delivery and methods that provide proof of receipt.
Protecting your construction business
Bad customer debts can place significant stress on construction businesses of all sizes. Understanding Arizona payment protection laws can help contractors respond appropriately when payment problems arise.
Seeking reliable legal guidance may also help you better understand your contract rights, notice requirements and options for recovering unpaid construction balances.