Massachusetts Trial Court: Construction Prompt Payment Statute Requires Strict Compliance

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A recent Massachusetts trial court decision ruled that any objections to a payment application are waived unless a reviewing owner or contractor strictly follows the Massachusetts Prompt Payment Statute, Prompt Payment Act, G.L. c. 149, § 29E, which applies to most projects with a prime contract worth more than $3 million. See Tocci v. IRIV Partners, LLC, et al., Suffolk Superior Court, 1984CV000405 (November 19, 2020). 

The Prompt Payment Statute requires that a contractor’s payment application be approved or rejected within 15 days after submission, and payment must be made within 45 days of approval.  A rejection of any part of a payment application requires a written explanation for the factual and contractual basis for rejection and a written certification that the rejection was made in good faith. 

In Tocci, the owner, in response to the contractor’s payment applications, sent the contractor emails requesting backup and analyses of actual costs compared to the budget.  However, the owner did not formally provide written rejections that included an explanation of the factual and contractual basis for rejecting the payment applications with a written certification that the rejection was made in good faith.  As a result, the trial court ruled that the owner waived all rights to deny the payment applications, requiring over $4 million in payments.  Importantly, the owner has filed a notice of appeal and Massachusetts trial court decisions are not binding for other courts to follow.  We will track any appellate decisions and provide any applicable updates.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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