The Massachusetts Prompt Pay Act was strictly construed by the Appeals Court in the recent case of Tocci Builders Corp v IRIV Partners LLC, et al.  The Court ruled that a construction project owner who fails to reject a contractor’s application for progress payment within the strict timeframes set forth within the Act is deemed to have approved the application for payment .

The Prompt Pay Act (G.L. c. 149 § 29E) seeks to ensure that project owners review and process contractor requisitions in a timely fashion by requiring approval or rejection of periodic payment requests within 15 days, with approved payments due within 45 days thereafter.  If an owner fails to make a proper rejection within 15, days the request is deemed approved.

The Act applies only to private commercial projects with a base contract value of at least $3 million. It also requires that any rejection be in writing; that the owner specify its factual and contractual basis for the rejection; and that the owner certify its reasons as being in good faith.

Tocci Builders was the general contractor on a large project in Boston’s Seaport District. Tocci submitted seven different progress payment applications that the project owner IRIV Partners rejected in writing, though not within the timeframe or manner prescribed in the Act.  For example, IRIV Partners did not explain the factual or contractual basis for its partial rejection of the requisitions, and it did not certify that it was rejecting the requisitions in good faith. 

Contractors on significant commercial projects must therefore make sure that any rejection of a periodic payment requisition is submitted timely, in writing, and with the appropriate details (including whether rejection is partial or total) including certification that payment and-or partial or total rejection is being tendered in good faith.