Construction subcontractors throughout Illinois face many obstacles to success. One such obstacle these business owners encounter is payment disputes. While some payment disputes are legitimate; property owners, developers and general contractors often withhold payment of several thousands of dollars to subcontractors because of a dispute over a $200 change order or some other, seemingly insignificant reason. Missing a monthly draw payment or waiting on a retainage payment for months on end can be devastating to a subcontractor that is already financing the cost of materials as well as its payroll. Thus, it should come as no surprise that these payment failures can be used to pressure subcontractors into onerous contract changes and, in some instances, drive them out of business to avoid any future payments whatsoever.
Illinois statutes exist to aid subcontractors in this very real struggle. Specifically, the Illinois Contractor Prompt Payment Act, 815 ILCS 603/1 et seq., limits the ability of an owner or general contractor to refuse or delay payment. Under the Contractor Prompt Payment Act, payments must be approved within 25 days after the receipt of a payment application. If any portion of the payment is not approved, the owner must detail the reasons for the rejected portion of the payment within those same 25 days or the dispute is waived. Further, the Act prohibits an owner from withholding payment to the subcontractor of any amounts other than the rightfully, disputed portion of the payment.
The requirements of the Contractor Prompt Payment Act supersede any contrary, contractual terms. In addition, the Act provides a mechanism for a subcontractor to suspend work until overdue payments are received and allows interest to accrue on overdue payments.
The Act does not apply to all construction projects in Illinois, but it can be an effective tool for subcontractors in their battle for timely payments.
The attorneys at Griffin | Williams LLP stand ready to assist construction contractors in all aspects of their business, including payment disputes.