As a construction lawyer in New Jersey, I frequently see disputes arise over one key issue: payment delays. Contractors and subcontractors rely on consistent cash flow to keep projects on schedule, pay their labor forces, and purchase materials. To protect them, New Jersey enacted the Prompt Payment Act (N.J.S.A. 2A:30A-1 et seq.), which creates strict rules for how quickly owners and contractors must pay for work performed.
If you are a property owner, contractor, or subcontractor working in New Jersey, understanding the Prompt Payment Act is essential to protecting your rights and avoiding costly disputes.
What Is the New Jersey Prompt Payment Act?
The New Jersey Prompt Payment Act (PPA) is a state law that sets mandatory payment timelines for construction projects. It applies to both private and public contracts and covers owners, general contractors, subcontractors, and suppliers.
The Act ensures that once work is approved and invoiced:
- Owners must pay contractors within 30 days of receiving a proper invoice.
- Contractors must pay subcontractors within 10 days of being paid.
- Subcontractors must also pay their lower-tier subcontractors and suppliers within 10 days.
These deadlines prevent funds from being unfairly withheld and keep projects moving forward.
NJ Prompt Payment Act Deadlines and Requirements
1. Owner to Contractor
Owners must pay contractors within 30 days of receiving a completed invoice. If they intend to withhold payment, they must provide a written statement of reasons for non-payment within 20 days after receiving it, explaining specific bases for withholding payment — such as defective work or incomplete performance. If the owner does not respond to the invoice within the statutory time frame, the invoiced is deemed approved.
2. Contractor to Subcontractor
Once paid by the owner, the general contractor has 10 days to pay its subcontractors and suppliers.
3. Subcontractor to Lower-Tier Subcontractor
Subcontractors must pay their sub-subcontractors or suppliers within 10 days of receiving payment.
Penalties for Late Payment Under the NJ Prompt Payment Act
Failure to comply with the Act has serious consequences.
- Interest – Late payments accrue interest at the prime rate plus 1%, starting the day after payment was due.
- Attorney’s Fees – The prevailing party in a payment dispute can recover reasonable attorney’s fees and costs. There is no “proportionality requirement” which means that attorney’s fees can be greatly higher than the amount of recovery sought by a contractor.
- Work Suspension – In certain cases, contractors and subcontractors may have the right to stop work until payment is made and after giving proper notice.
These penalties make it costly to withhold or delay payments without justification.
Who Is Covered by the New Jersey Prompt Payment Act?
The law protects nearly everyone involved in construction projects, including:
- Property owners and developers
- General contractors
- Subcontractors
- Sub-subcontractors
- Material suppliers
It applies to most public and private projects, but certain government contracts may have additional payment rules.
Common Disputes Under the Prompt Payment Act
Despite the law’s clarity, disputes often arise over:
- Whether an invoice was properly submitted and/or approved
- Claims that work was incomplete or defective
- Owners withholding payment without providing written reasons
- Contractors failing to pay subcontractors after receiving funds
In these cases, courts in New Jersey have consistently enforced the Prompt Payment Act, emphasizing its role in protecting subcontractors and suppliers from unfair delays.
Best Practices for Compliance
Whether you are an owner, contractor, or subcontractor, here are some practical steps to stay compliant:
- Submit accurate invoices – Ensure they meet contractual requirements.
- Respond quickly – If withholding payment, provide written reasons within the required timeframe.
- Pay downstream promptly – Once you are paid, pass funds along within 10 days.
- Document everything – Keep records of invoices, payments, and communications. This would include ensuring that the contract includes a provision that disputes be submitted to mediation and/or arbitration pursuant to N.J.S.A. § 2A:30A-2(f).
- Consult counsel – If a dispute arises, seek legal advice before stopping work or a claim.
Conclusion
The New Jersey Prompt Payment Act provides contractors, subcontractors, and suppliers with powerful legal protections against delayed payments. It also creates clear requirements for owners and contractors motivating them to process invoices promptly.