The provisions for both suspending work and withholding payment are now more equitable
The Pennsylvania Contractor and Subcontractor Payment Act (“CASPA”) stipulates the procedures that must be followed by contractors, subcontractors and owners when suspending work for non-payment and for withholding payment for non-performance.
The Act was revised on June 12, 2018, when HB566 was signed into law by Governor Tom Wolf. The revisions go into effect on October 10, 2018.
An article in the Babst/ Calland Construction Law Blog outlines the provisions of the new regulations.
Rights provided by CASPA cannot be waived except when the “waiver of the right is expressly permitted by CASPA.” Both contractors and subcontractors “have a statutory right to suspend work for non-payment” if the certain conditions are met.
- The contractor or subcontractor has not received payment within the contractually negotiated time period or in the statutory time period provided by CASPA;
- The unpaid party must wait 30 days before mailing “written notice of non-payment” to the party who has failed to pay them. If payment is not forthcoming,, written notice must be sent to party who has failed to make payment by certified mail indicating “intent to suspend performance in 10 calendar days if payment is not made.” In other words, it can take 70 days to obtain the statutory right to suspend work.
- A contract can stipulate a shorter period of time for the suspension of work for non-payment but “a longer period of time” or a provision that “does not permit suspension in the event of non-payment is unenforceable.”
Conversely, payment may be withheld by providing a contractor or subcontractor with a “written explanation of the reason for withholding within 14 days of receipt of an invoice.”
Babst Calland emphasizes that “the Act expressly provides that failure to provide a written explanation within 14 days will constitute a waiver of the right to withhold and require payment of the invoice in full.”
Payment cannot be withheld because of “an error in an invoice.”
CASPA removes the uncertainty and much of the chicanery from disputes over payment in the construction industry in Pennsylvania. This is a welcome development.
GOVERNOR WOLF SIGNS AMENDMENTS TO CASPA INTO LAW, BABST CALLAND, Attorneys at Law, Construction Law Blog, June 15, 2018.