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.