Prompt Pay Act: Arizona
legislature overrules S.K. Builders decision
New law will return Arizona's Prompt Pay Act to the
customary understanding of the 30-day payment cycle.
In an early 2019 decision, in S.K. Builders, Inc. v.
Smith, the Arizona Court of Appeals ruled that Arizona's Prompt Pay Act did
not apply to a contractor's monthly pay application that included items not
supplied within "the preceding thirty day billing cycle," even if the owner
failed to timely object or pay the contractor. The Court also held that it was
the responsibility of the contractor to prove that labor and materials contained
in a monthly progress pay application were actually furnished within the
preceding 30 days.
As a result of lobbying efforts by
industry trade groups, on April 29, 2019, Governor Ducey signed S.B. 1397, which
had the effect of "legislatively overruling" the S.K. Builders case. In
fact, the new law specifically states that "the purpose of the change ... is to
make the legislative original intent clear and to overrule legislatively the
S.K. Builders decision."
When it goes into effect on August 27, 2019, the new law
will return Arizona's Prompt Pay Act to the customary understanding of the
30-day payment cycle that existed prior to the S.K. Builders case.
Contractors can continue to assert prompt payment act claims for all invoices
that are submitted within the 30-day interval yet remain unpaid.