H.B. 380: Proposed Private Owner Prompt Pay Law
Contractors getting paid promptly is crucial on commercial construction projects. Cash flow is king for contractors. Thus, without timely payment from project ownership to the prime contractor and, thereafter, from the prime contractor to its subcontractors and suppliers, the
construction project can grind to a halt, which leads to delays, disruptions, inefficiencies, and additional costs to all parties involved. Plus, a project owner’s withholding of payment from the trade contractors financing the work may cause these contractors serious problems, such as payment defaults, litigation/arbitration, and—on occasion—being forced to shut their doors for good. For these reasons, the Ohio Revised Code currently includes prompt pay provisions that require a public owner to pay its prime contractor for approved amounts within 30 days of invoicing unless a different duration is agreed upon (See R.C. 153.12-153.14; R.C. 5525.19), and which require a prime contractor or subcontractor to pay its subcontractors and suppliers within ten (10) days of its receipt of payment from the owner or upstream contractor on both public and private jobs (See R.C. 4113.61(A)). The Ohio Revised Code, however, presently does not include a law that requires prompt payment from an owner to its contractors on a private project.
Fortunately, Ohio’s General Assembly has recognized this omission from the prompt pay laws. The House Commerce and Labor Committee is currently considering House Bill 380, which, if enacted, will amend R.C. 4113.61 to mirror the prompt pay law on public projects. More specifically, H.B. 380 proposes to create a law that requires any private owner on a nonresidential construction project to pay its prime contractor within thirty (30) days after billing unless the parties agree otherwise. If the private owner fails to comply, the prime contractor will be entitled to eighteen (18) percent interest per annum on the balance due.
Hopefully, H.B. 380 is made law in short order, and the payment delays created by the current hole in Ohio’s prompt pay laws are no longer permitted without penalty.
Author: Alan Dailide is an attorney in the Frantz Ward Construction Group. He can be reached at 216-515-1645 or firstname.lastname@example.org.