5.5 The Arizona Prompt Payment Act

Why Prompt Payment Is Its Own Statute

Quick Answer: Arizona's Prompt Payment Act, at A.R.S. §§ 32-1129 through 32-1129.07, puts a clock on private construction payments. A billing is deemed certified and approved 14 days after the owner receives it unless the owner objects in writing; payment is due 7 days after certification; and an unpaid contractor may suspend performance after 7 calendar days' written notice.

Every other payment remedy in this guide is slow. A mechanics' lien takes 20-day notices, a recording, and a foreclosure suit. A ROC complaint takes an investigation. The Prompt Payment Act is the fast lane: it converts silence into approval and gives the contractor a lawful way to stop work rather than financing the project.

The Act governs private construction. Public work runs on a parallel scheme in A.R.S. Title 34 for state and local projects.

The Core Clock

The 14-day deemed-approval rule is the heart of it. An owner who wants to withhold money must write down what is being withheld and why, in a statement that reaches the contractor inside the window. An owner who simply does not respond has approved the billing by operation of statute — silence is not a withholding.

Two refinements worth knowing:

• The statement must be specific. A blanket "we dispute this invoice" does not identify items; the statute contemplates a list of the items not approved, with reasons.
• Amounts not in dispute keep moving. An owner may lawfully withhold the contested line and must still pay the rest on schedule.

Suspension and Termination

The remedy that actually changes behavior is the right to stop. A contractor who has not been paid when payment is due may suspend performance or terminate the contract after giving written notice at least seven calendar days in advance.

Do it correctly:

1. Confirm the money is actually due. Count the 14 days to certification and the 7 days to payment from the date the owner received the billing, not from the date you mailed it.
2. Send written notice identifying the unpaid certified amount and stating the date on which work will stop if payment is not received.
3. Wait the full seven calendar days. Calendar days include weekends.
4. Document the site condition on the day you stop — photographs, stored materials, weather protection — so the suspension does not become a defect claim later.
5. Return promptly on payment. A contractor who stays off the job after being paid converts a protected suspension into abandonment, which is a ROC disciplinary ground under § 32-1154.

Warning: abandonment is one of the fastest routes to ROC discipline in Arizona. The Prompt Payment Act is the difference between a lawful suspension and an abandonment finding, and the difference is the seven-day written notice and a genuine unpaid certified balance.

Flow-Down Down the Chain

The Act is not just an owner-to-general rule. Once a contractor is paid for a subcontractor's work, that money must move on — the statute gives subcontractors and suppliers the same structure of certification, payment, and notice against the party that hired them.

That interacts directly with pay-if-paid and pay-when-paid clauses discussed in Section 5.2:

• A pay-when-paid clause is generally read as a timing device — it postpones payment for a reasonable period, it does not eliminate the obligation.
• A pay-if-paid clause attempts to shift the risk of owner non-payment onto the subcontractor entirely, and Arizona courts read such clauses narrowly, requiring clear language before treating owner payment as a true condition precedent.

Either way, the general contractor who has been paid cannot sit on a subcontractor's money. Withholding then requires the same thing it requires upstream: a written, itemized reason.

Contract Modification — Read Before You Rely

The statutory deadlines are defaults. The Act contemplates that the parties may modify the certification and payment periods by contract, which means a heavily negotiated commercial agreement can lengthen them.

Practical implications:

Exam tip: the numbers to carry into the exam are 14 / 7 / 7 — fourteen days to certification, seven days to payment, seven calendar days of notice before suspending. Distractors typically offer 10/10/10 or 30/30/30, which are common contract-drafted periods rather than the statutory defaults.