5.2 Nevada Prompt Payment Law (NRS 624.606–624.630), Pay-If-Paid & Retention
Key Takeaways
Under NRS 624.609, an owner must pay the prime contractor by the date set in a written payment schedule, or within 21 days after a payment request if there is no schedule or the agreement is oral.
Under NRS 624.624, a higher-tiered contractor must pay a lower-tier subcontractor by the scheduled date or within 10 days after it is paid for that work, whichever is earlier.
Retention on private Nevada projects may not exceed 5 percent of each payment (NRS 624.609 and 624.624), and late amounts accrue interest at the contract rate or prime plus 4 percent, whichever is higher (NRS 624.630).
An unpaid contractor or subcontractor may stop work after 10 days' written notice, then terminate on at least 15 days' further notice if still unpaid (NRS 624.610 and 624.626).
Even under a pay-if-paid clause, a lower-tier subcontractor may stop work if not paid within 45 days after the 25th day of the month in which it submitted its request (NRS 624.626(1)(b)).
Purpose and Scope of Nevada's Prompt Payment Law
Cash flow keeps a project moving. Nevada's prompt payment law, NRS 624.606 to 624.630, sets payment deadlines, limits retention and withholding, requires written notices, gives unpaid parties stop-work and termination rights, and charges interest on late money.
Scope Limits: The owner-to-prime sections (NRS 624.609 to 624.622) do not apply to (1) an agreement between a prime contractor and a natural person who owns a single-family residence for qualified services, or (2) a public work contract with a public body (NRS 624.622(4)). Public works follow NRS 338.515 to 338.565 instead.
Owner to Prime Contractor (NRS 624.609)
When Payment Is Due
- Written Schedule: Pay on or before the date set in the schedule for payments in the written agreement.
- No Schedule, or Oral Agreement: Pay within 21 days after the prime contractor submits a request for payment.
What the Owner May Withhold
If it gives proper notice, the owner may withhold:
- Retention authorized by the agreement, not exceeding 5% of the payment.
- The value of work not yet performed or materials not furnished, unless the agreement allows payment for them.
- Costs to correct noncompliant work, to the extent they exceed 50% of the retention withheld.
- Amounts the owner paid, or must pay, under an official notice from a state agency or employee benefit trust fund for which it is liable for the contractor's or subcontractors' obligations.
- Payment until the prime contractor furnishes lien releases under NRS 108.2457.
The Written Notice of Withholding (NRS 624.609(3))
To withhold anything beyond retention, the owner must give written notice on or before the date the payment is due. The notice must:
- Identify the amount withheld;
- Give a reasonably detailed explanation of the reason, citing the specific contract provision and documents, and the building code, law or regulation not met; and
- Be signed by an authorized agent of the owner.
The prime contractor may dispute the withholding in writing in good faith, or correct the condition and give written notice of the correction. After a notice of correction, the owner must pay the withheld amount by the next payment date or object in writing.
Final Payment (NRS 624.620)
Money remaining unpaid is payable within 30 days after the owner occupies or uses the work, or after the work becomes available for its intended use. The contractor must have given a written notice of availability or a certificate of occupancy. Partial occupancy requires payment in proportion to the value of the part occupied. After a notice of correction, the owner must pay or object within 10 days.
Stopping Work and Terminating (NRS 624.610)
A prime contractor may stop work after giving the owner at least 10 days' written notice if the owner:
- Fails to pay as NRS 624.609 requires;
- Fails to give a proper written notice of withholding;
- Withholds an amount the contractor disputes in good faith and for reasonable cause; or
- Fails, within 30 days after a written change-order request, to issue the change order or explain in writing why it is unreasonable or what more is needed.
After stopping work:
- The contractor may terminate by written notice given after stopping work and at least 15 days before termination. If paid before that date, it must resume work.
- If the owner ignored a change-order request, the price and time increase by the amounts requested, and the owner pays with the next payment.
- If the owner's own act or neglect stops work for 15 days or more, the contractor may terminate on 10 days' written notice if the owner does not let work resume.
- On a proper termination, the contractor recovers the cost of all work, overhead, the balance of profit it would have earned, interest, and collection costs.
Higher-Tiered Contractor to Lower-Tiered Subcontractor (NRS 624.624)
| Agreement Type | Payment Due (whichever is earlier) |
|---|---|
| Written, with a payment schedule | The scheduled date, or within 10 days after the higher-tiered contractor receives payment for that work |
| Written without a schedule, or oral | Within 30 days after the subcontractor's payment request, or within 10 days after the higher-tiered contractor receives payment for that work |
- Retention: Not more than 5% of the payment.
- Other Withholding: The same categories as the owner (unperformed work, corrections over 50% of retention, agency or trust-fund notices, lien releases), with a written notice on or before the due date. A copy goes to all reputed higher-tiered contractors and the owner.
- Stop Work (NRS 624.626): A lower-tiered subcontractor may stop work on 10 days' written notice for nonpayment, an improper or disputed withholding, or an unanswered change-order request after 30 days. It may then terminate on 15 days' notice.
The Pay-If-Paid Backstop
NRS 624.626(1)(b) lets a lower-tiered subcontractor stop work if the higher-tiered contractor fails to pay within 45 days after the 25th day of the month in which the subcontractor submitted its payment request. This applies even if the higher-tiered contractor has not been paid and the agreement says it pays only if or when it is paid. Any clause that waives or limits these rights is void (NRS 624.628(3)).
Interest, Notices and Information Requests
- Interest (NRS 624.630): Money due accrues interest from the due date at the higher of the contract rate or the prime rate at the largest bank in Nevada plus 4%. The prime rate is set on the January 1 or July 1 before the agreement was made.
- No Waivers: Clauses that waive or limit these rights, relieve the owner or higher-tier contractor of its duties, or waive claims for unforeseeable delay or disruption are void (NRS 624.622(2), 624.628(3)).
- Delivering Notices: Notices must be delivered personally (with a notarized proof of delivery), by fax plus regular mail, by certified mail, or as the agreement provides.
- Payment Information: Within 5 days after a written request from a lower-tiered subcontractor, the owner or higher-tiered contractor must disclose the date and amount of a specified payment and any amount withheld and why. A prime contractor must also send its lower-tier subcontractors copies of its stop-work notices and notice of payments received (NRS 624.622(1), 624.628).
Retention on Public Works (NRS 338.515 – 338.555)
| Rule | Public Body to Contractor | Contractor to Subcontractor |
|---|---|---|
| Progress Payments | Within 30 days after receiving the progress bill (NRS 338.515(1)) | Within 10 days after the contractor is paid (NRS 338.550) |
| Retention Before 50% Complete | 5% withheld | Not more than 5% (NRS 338.555(1)) |
| After 50% Complete | If progress is satisfactory, may stop withholding and release retention; if it keeps withholding, generally 2.5% maximum after first releasing half of the retention | Same pattern under NRS 338.555(2) |
| Occupancy or Notice of Completion | Remaining balance and retention within 30 days (NRS 338.520) | Passed down within 10 days |
Pay-When-Paid vs. Pay-If-Paid
- Pay-When-Paid: A timing clause, for example payment within 10 days after the contractor is paid. Nevada's statute already requires payment within 10 days after the higher-tier contractor is paid, if that is earlier than the scheduled date.
- Pay-If-Paid: Makes owner payment a condition precedent. Nevada's 45-day backstop lets the subcontractor stop work regardless, and NRS 624.628(3) voids clauses that waive these rights. Mechanic's lien rights also cannot be waived in advance except through the statutory release forms in NRS 108.2457.
Exam Tip: Know the numbers: 21 days (owner, no schedule), 10 days (pass-through), 30 days (sub with no schedule; change-order response; final payment after occupancy), 45 days after the 25th (pay-if-paid backstop), 5% retention, 10-day stop-work notice, 15-day termination notice, and prime + 4% interest.
A prime contractor on a private commercial project in Washoe County has an oral agreement with the owner and submits a payment request. Under NRS 624.609, when must the owner pay?
Within 10 days after the request.
Within 14 days after the request.
Within 21 days after the request.
Within 30 days after the request.
An owner pays a progress payment late, and the contract sets no interest rate. Under NRS 624.630, what rate applies?
The prime rate at Nevada's largest bank on the January 1 or July 1 before the contract, plus 4 percent.
A flat 12 percent per year, compounded monthly from the day the progress payment first became due.
The Federal Reserve discount rate on the date payment was due, plus 5 percent per year, simple interest.
No interest at all, because the contract did not state an interest rate for late progress payments.
A subcontract says the general contractor pays 'only if and when' the owner pays. The subcontractor submitted its payment request on March 10 and has not been paid. Under NRS 624.626(1)(b), when may the subcontractor stop work on 10 days' written notice despite the clause?
Never, because a pay-if-paid clause is fully enforceable in Nevada and shifts all nonpayment risk to subcontractors.
Only after the owner is declared bankrupt or the general contractor formally terminates the subcontract.
If it is not paid within 45 days after March 25, the 25th day of the month in which it submitted the request.
Immediately on March 11, the day after it submitted the request, without giving any written notice.
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