Recent Case Requires Contractors to Strictly Comply
with the 30-Day Billing Deadline of Arizona's Prompt Pay Act
SK Builders v. Smith
The Smiths contracted with SK Builders, Inc. (SK) to
build their $1.5 million home. The Certificate of Occupancy for the home was
issued on March 22, 2012. On May 1, 2012, SK submitted its Pay Application 19,
claiming $180,289.61 was owed to SK.
Although the Smiths had never timely objected to the Pay
Application, there was concern about interior concrete cracks based on the
absence of wire mesh in the concrete of the back patio work performed by a
subcontractor. On May 5, 2012, the Smiths terminated their contract with SK and
never paid Pay Application 19. SK filed suit against the Smiths, claiming a
violation of Arizona's Prompt Pay Act (APPA), breach of contract, and unjust
enrichment for the amount SK claimed it was owed. The trial court found the
Smiths violated APPA by failing to object in writing to the items in the Pay
Application 19 within 14 days of its submission.
The Smiths appealed. On appeal, the Court noted that the
APPA unambiguously provides that a contractor must base a progress payment on a
"billing or estimate on the work performed and the materials supplied during the
preceding 30-day billing cycle." The Court found this plain language means that
the APPA does not allow relief for work performed or materials supplied outside
the 30-day billing cycle. The Court found that:
for a contractor to benefit from the APPA,
it must comply with the 30-day billing cycle requirement, and
the burden of proof of compliance with the APPA is
on the contractor.
Based on this recent case, if a contractor
seeks to avail itself of the presumptions of statutory interest and attorney fee
provisions found in the APPA, the contractor should ensure that progress
billings are issued within the 30-day billing cycle mandated by the APPA.