How fast must a Connecticut private construction owner or contractor pay, and what happens if it does not?
Every construction contract must require the owner to pay amounts due to its contractor (or a sub or supplier in direct contract with the contractor) not later than thirty days after a written request for payment, and the contractor to pay its subcontractors and suppliers not later than twenty-five days after receiving the owner's payment covering their work, with the same twenty-five-day flow-down to lower tiers (§ 42-158j(a)). Each payment requisition submitted under subsection (a) must include a statement showing the status of all pending construction change orders, other pending change directives and approved changes to the original contract or subcontract (§ 42-158j(b)). An unpaid party sets forth its claim by registered or certified mail notice; ten days after receipt of that notice the late payer is liable for interest at one per cent per month, and 'Such interest shall accrue beginning on the date any such notice is received' (§ 42-158j(c)(4)). The Appellate Court has held that an owner's contractual right to dispute the claims, exercised in good faith, means no amount was "due and owing" and the court may decline the interest (J. Wm. Foley, Inc. v. United Illuminating Co., 2015). Amounts due from the owner under (c)(1) and (a)(1) are limited to the amount the owner owes the contractor for work performed at the date of the notice. The late payer on written demand must place the amount of the claim plus that interest in an interest-bearing escrow account in a Connecticut bank; one that refuses and is found to have unreasonably withheld payment is liable for the funds, reasonable attorneys' fees and the one per cent interest, and one found to have withheld in bad faith is liable for ten per cent damages. No payment may be withheld from a subcontractor or supplier because of a dispute between the contractor and another contractor, subcontractor or supplier (§ 42-158j(d)), and retainage may not exceed five per cent of a progress payment (§ 42-158k).
The trap
The statutory interest does not run from the due date: it accrues from the date the registered or certified mail notice is received, and liability for it attaches ten days after receipt. The section provides for notice 'by registered or certified mail' and says nothing about any other form of notice. The payer may refuse to escrow on the ground that the work was not substantially performed or the funds are not due. And the scheme reaches only § 42-158i construction contracts: public works, HUD-funded or HUD-insured projects, owner-contractor contracts of $25,000 or less and the subcontracts that result from them, and buildings intended for residential occupancy containing four or fewer units are excluded, and the definition covers construction, renovation or rehabilitation in Connecticut on or after October 1, 1999.
14 authorities
- statuteConn. Gen. Stat. § 42-158jenactment date not established
The words that state the rule
Each construction contract shall contain the following provisions: (1) A requirement that the owner pay any amounts due to any contractor in a direct contractual relationship with the owner, or due to any subcontractor or supplier in a direct contractual relationship with the contractor, whether for labor performed or materials furnished, not later than thirty days after the date any written request for such payment has been made to the owner by such contractor, subcontractor or supplier;
- statuteConn. Gen. Stat. § 42-158jenactment date not established
The words that state the rule
(2) a requirement that the contractor pay any amounts due any subcontractor or supplier, whether for labor performed or materials furnished, not later than twenty-five days after the date the contractor receives payment from the owner which encompasses labor performed or materials furnished by such subcontractor or supplier;
- statuteConn. Gen. Stat. § 42-158jenactment date not established
The words that state the rule
Ten days after the receipt of any notice specified in subdivisions (1), (2) and (3) of this subsection, the owner, contractor, subcontractor or supplier, as the case may be, shall be liable for interest on the amount due and owing at the rate of one per cent per month.
- statuteConn. Gen. Stat. § 42-158jenactment date not established
The words that state the rule
No payment may be withheld from a subcontractor or supplier for work performed or materials furnished because of a dispute between a contractor and another contractor, subcontractor or supplier.
- statuteConn. Gen. Stat. § 42-158kenactment date not established
The words that state the rule
No construction contract may provide for any retainage in an amount that exceeds five per cent of the estimated amount of a progress payment for the life of the construction project.
- statuteConn. Gen. Stat. § 42-158ienactment date not established
The words that state the rule
As used in sections 42-158i to 42-158n , inclusive, unless the context otherwise requires: (1) “Owner” means any individual, corporation, nonprofit corporation, partnership, limited partnership, limited liability company or other business entity that is the owner of record or lessee of real property upon which construction, renovation or rehabilitation is to be or is being performed pursuant to a construction contract regarding such real property. (2) “Construction contract” or “contract” means any contract for the construction, renovation or rehabilitation in this state on or after October 1, 1999, including any improvements to real property that are associated with such construction, renovation or rehabilitation, or any subcontract for construction, renovation or rehabilitation between an owner and a contractor, or between a contractor and a subcontractor or subcontractors, or between a subcontractor and any other subcontractor. “Construction contract” or “contract” does not include (A) any public works or other building contract entered into with this state, the United States, any other state, and any municipality or other political subdivision of this state or any other state, (B) a contract or project funded or insured by the United States Department of Housing and Urban Development, (C) a contract between an owner and a contractor for an amount of twenty-five thousand dollars or less or a subcontract which results from such a contract, or (D) a contract for a building intended for residential occupancy containing four or less units.
- statuteConn. Gen. Stat. § 42-158jenactment date not established
The words that state the rule
Such interest shall accrue beginning on the date any such notice is received.
- statuteConn. Gen. Stat. § 42-158jenactment date not established
The words that state the rule
and (3) a requirement that the contractor shall include in each of its subcontracts a provision requiring each subcontractor and supplier to pay any amounts due any of its subcontractors or suppliers, whether for labor performed or materials furnished, not later than twenty-five days after the date such subcontractor or supplier receives a payment from the contractor which encompasses labor performed or materials furnished by such subcontractor or supplier.
- statuteConn. Gen. Stat. § 42-158jenactment date not established
The words that state the rule
If payment is not made by an owner in accordance with the requirements of subdivision (1) of subsection (a) of this section or any applicable construction contract, such contractor, subcontractor or supplier shall set forth its claim against the owner through notice by registered or certified mail. All amounts due from the owner pursuant to this subsection and subdivision (1) of subsection (a) of this section shall be limited to the amount owed to the contractor by the owner for work performed under the contract at the date such notice is provided.
- statuteConn. Gen. Stat. § 42-158jenactment date not established
The words that state the rule
In addition, such owner, contractor, subcontractor or supplier, upon written demand from the party providing such notice, shall be required to place funds in the amount of the claim, plus such interest of one per cent per month, in an interest-bearing escrow account in a bank in this state, provided such owner, contractor, subcontractor or supplier may refuse to place the funds in escrow on the grounds that the party making such demand has not substantially performed the work or supplied the materials according to the terms of the construction contract or that the funds so demanded are not due under the owner's contract with the contractor.
- statuteConn. Gen. Stat. § 42-158jenactment date not established
The words that state the rule
In the event that such owner, contractor, subcontractor or supplier refuses to place such funds in escrow and such owner, contractor, subcontractor or supplier is found to have unreasonably withheld payment due a party providing such notice, such owner, contractor, subcontractor or supplier shall be liable to the party making demand for payment of such funds and for reasonable attorneys' fees plus interest on the amount due and owing at the rate of one per cent per month. In addition, any owner, contractor, subcontractor or supplier who is found to have withheld payments to a party providing such notice in bad faith shall be liable for ten per cent damages.
- statuteConn. Gen. Stat. § 42-158jenactment date not established
The words that state the rule
Each payment requisition submitted by a contractor or subcontractor in accordance with the requirements of subsection (a) of this section shall include a statement showing the status of all pending construction change orders, other pending change directives and approved changes to the original contract or subcontract.
- statuteConn. Gen. Stat. § 42-158jenactment date not established
The words that state the rule
This section shall not be construed to prohibit progress payments prior to final payment of the contract and is applicable to all subcontractors and suppliers for material or labor whether they have contracted directly with the contractor or with some other subcontractor on the work. Each owner that enters into a contract under this section and fails or neglects to make payment to a contractor for labor and materials supplied under a contract, as required pursuant to this section, shall, upon demand of any person who has not been paid by the contractor for such labor and materials supplied in the performance of the work under the contract, promptly pay the person for such labor or materials. Demand for payment shall be served on the owner and a copy of each demand shall be sent to the contractor by certified mail, return receipt requested to any address at which the owner and contractor conduct business. If the owner fails to make such payment, the person shall have a direct right of action against the owner in the superior court for the judicial district in which the project is located. The owner's obligations for direct payments to the contractor, subcontractors or suppliers giving notice pursuant to this section shall be limited to the amount owed to the contractor by the owner for work performed under the contract at the date such notice is provided.
- case158 Conn. App. 27J. Wm. Foley, Inc. v. United Illuminating Co.Conn. App.decided 2015read it at the source ↗
The words that state the rule
United’s contractual right to dispute Foley’s claims, as well as its good faith basis for doing so, supported the court’s conclusion that United had not withheld an ‘‘amount due and owing’’ from Foley. Therefore, the court’s decision not to award Foley prejudgment interest under § 42-158j was not an abuse of its discretion.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.