Minnesota Prompt Payment Guide and FAQs

Ready? Build Your Free Minnesota
Prompt Payment Now

Make Your Payment Demand Now
Minnesota-Prompt-Payment-Payment

Minnesota Prompt Payment Overview

Minnesota Prompt Payment Requirements


  • Private Jobs
  • Public Jobs
  • Top Links
MONTHLY
Prime Contractors

For Prime Contractors, payments due monthly. Can be modifed by contract.


20
DAYS
Subcontractors

For Subcontractors, payment due within 20 days of receipt of payment from above.


20
DAYS
Suppliers

For Suppliers, payment due within 20 days of receipt of payment from above.


1.5%
/ MONTH
Interest & Fees

Interest at 1.5% month. Attorneys' fees awardable if party requesting payment prevails in a civil action - so presumably settlement or payment after demand does not warrant attorneys' fees.

35
DAYS
Prime Contractors

For Prime (General) Contractors, progres spayments due monthly (can be modified by contract); within 35 or 45 days of invoice for localities depending on if the do/don't have regularly scheduled meetings; payment due 30 days after invoice for projects for University of MN.


10
DAYS
Subcontractors

For Subcontractors, payment due within 10 days of the receipt of payment from above. Only applicabl;e to first-tier subs.


10
DAYS
Suppliers

For Suppliers, payment due within 10 days of the receipt of payment from above. Only applicabl;e to first-tier subs.


1.5%
/ MONTH
Interest & Fees

Interest at 1.5% month; attorneys' fees who prevails in a civil action and shows bad faith by non-paying party.

Minnesota’s prompt payment statutes set forth specific timeframes when general contractors, subcontractors, suppliers, and others involved with a construction project must be paid.  This page provides an overview of these regulations, and addresses some frequently asked questions related to the Minnesota prompt payment laws.

Minnesota Prompt Payment Frequently Asked Questions

Minnesota Prompt Payment Private Projects FAQs

Do I have to send a letter or file anything to qualify for Prompt Payment Penalties or Remedies in Minnesota?

In order for the prompt payment statutes to apply to progress payments, the work must be progressing. Further, the applicability of the prompt payment statutes to payment to subcontractors requires (1) Undisputed services being furnished; or (2) Notice to the paying party that the subcontractor remains unpaid.

In order to collect (the mandatory award of) attorney’s fees, a subcontractor must prevail in an action to recover interest penalties according to the prompt pay statutes.

Can I include Prompt Payment Fees in my Minnesota Mechanics Liens Claim or Bond Claim?

No. Minnesota doesn’t allow miscellaneous amounts to be included on the face of a mechanics lien.

What happens to my Prompt Payment Penalties and Fees if I get paid late? Can I still recover the Prompt Payment Penalty in Minnesota?

Minnesota does not statutorily specify any proactive steps that must be taken for interest or other penalties to apply.

Are there reasons for which payment may be withheld past the general deadline?

Minnesota does not specifically identify reasons for which payment may be withheld, so it is likely that the contract between the parties, and case law, will govern the particular reasons payment may be withheld.

What is the best practice for making a demand to a non-paying party to get Prompt Payment Fees?

Sending a notice of intent to lien and prompt payment demand is generally the best method for encouraging parties to make payment.

Minnesota Prompt Payment Public Projects FAQs

Do I have to send a letter or file anything to qualify for Prompt Payment Penalties or Remedies in Minnesota?

Minnesota requires an invoice for the completed furnishing of labor and/or material for the prompt pay statute to apply. If an invoice is incorrect, the paying party must give notice of the deficiency to the invoicing party within 10 days.

Can I include Prompt Payment Fees in my Minnesota Mechanics Liens Claim or Bond Claim?

No. Minnesota law does not allow for the recovery of miscellaneous amounts in a bond claim.

If I am paid late according to Prompt Payment Statutes, can I obtain interest or other Penalty Payments?

Minnesota does not statutorily specify any proactive steps that must be taken for interest or other penalties to apply. However, interest does not accrue on amounts not paid due to a disagreement with the invoicing party (provided the dispute is settled timely), or for amounts delayed due to a dispute regarding the fitness of the labor and/or materials furnished or the invoicing party’s compliance with the contract.

Are there reasons for which payment may be withheld past the general deadline?

Minnesota does not specifically identify reasons for which payment may be withheld, so it is likely that the contract between the parties, and case law, will govern the particular reasons payment may be withheld. Note, however, that payments withheld for reasons of the disputes mentioned above may cause interest to not accrue on the disputed amounts.

Need More Help with Minnesota Prompt Payment? We're Here

Get Free Expert Advice

Check Out Our Payment Experts

Minnesota Prompt Payment
Recent Questions & Answers

Minnesota Prompt Payment Statute FAQs

Getting informed about prompt payment laws is important. An examination of Minnesota’s prompt payment laws, the rules and regulations related to payment timing, is important to know your rights and responsibilities as a party on a construction project. Minnesota’s specific laws can be found in: Minn. Stat. § 337.10, 15.71-74;137.3

Prompt Payment Statute on Private Projects

337.10: Building and Construction Contracts; Prohibited Provisions

Subdivision 1. Application of laws of another state. Provisions contained in, or executed in connection with, a building and construction contract to be performed in Minnesota making the contract subject to the laws of another state or requiring that any litigation, arbitration, or other dispute resolution process on the contract occur in another state are void and unenforceable.

Subd. 2. Waiver of lien or claim. Provisions contained in, or executed in connection with, a building and construction contract requiring a contractor, subcontractor, or material supplier to waive the right to a mechanics lien or to a claim against a payment bond before the person has been paid for the labor or materials or both that the person furnished are void and unenforceable. This provision shall not affect the validity of a waiver as to any third party who detrimentally relies upon the waiver.

Subd. 3. Prompt payment to subcontractors. A building and construction contract shall be deemed to require the prime contractor and all subcontractors to promptly pay any subcontractor or material supplier contract within ten days of receipt by the party responsible for payment of payment for undisputed services provided by the party requesting payment. The contract shall be deemed to require the party responsible for payment to pay interest of 1-1/2 percent per month to the party requesting payment on any undisputed amount not paid on time. The minimum monthly interest penalty payment for an unpaid balance of $100 or more is $10. For an unpaid balance of less than $100, the party responsible for payment shall pay the actual penalty due to the party requesting payment. A party requesting payment who prevails in a civil action to collect interest penalties from a party responsible for payment must be awarded its costs and disbursements, including attorney fees incurred in bringing the action.

Subd. 4. Progress payments and retainages. (a) Unless the building and construction contract provides otherwise, the owner or other persons making payments under the contract must make progress payments monthly as the work progresses. Payments shall be based upon estimates of work completed as approved by the owner or the owner’s agent. A progress payment shall not be considered acceptance or approval of any work or waiver of any defects therein.(b) Unless the building and construction contract provides otherwise, an owner or owner’s agent may reserve as retainage from any progress payment on a building and construction contract an amount not to exceed five percent of the payment. An owner or owner’s agent may reduce the amount of retainage and may eliminate retainage on any monthly contract payment if, in the owner’s opinion, the work is progressing satisfactorily.(c) This subdivision does not apply to contracts for professional services as defined in sections 326.02 to 326.15.

Subd. 5. Definition.  For the purpose of this section, “building and construction contract” has the meaning given the term in section 337.01.

Prompt Payment Statute on Public Projects

15.71: Public Contracts; Definitions

Subdivision 1. Scope. For the purposes of sections 15.71 to 15.74 unless the context clearly indicates otherwise, the terms defined in this section have the meanings given them.

Subd. 2. Public contract.  “Public contract” means any purchase, lease or sale by a public agency of personal property, public improvements or services, other than agreements which are exclusively for personal services.

Subd. 3. Public agency. “Public agency” or “public contracting agency” means any agency of the state of Minnesota or any of its political subdivisions authorized by law to enter into public contracts.

Subd. 4. Public improvement.  “Public improvement” means any construction of improvements on real property or highways by or for a public agency.

Subd. 5. Retainage.  “Retainage” means the difference between the amount earned by the contractor on a public contract and the amount paid on the contract by the public contracting agency.

15.72: Progress Payments on Public Contracts; Retainage
Subdivision 1. Monthly payments. Unless the terms of the contract provide otherwise, a public contracting agency shall make progress payments on a public contract for a public improvement monthly as the work progresses. Payments shall be based upon estimates of work completed as approved by the public contracting agency. A progress payment shall not be considered acceptance or approval of any work or waiver of any defects therein.
Subd. 2. Retainage. A public contracting agency may reserve as retainage from any progress payment on a public contract for a public improvement an amount not to exceed five percent of the payment. A public agency may reduce the amount of the retainage and may eliminate retainage on any monthly contract payment if, in the agency’s opinion, the work is progressing satisfactorily.
15.73: Alternative form of Retainage

Subdivision 1. Contractor’s option.  At the option of the contractor, retainage shall be paid to the contractor in accordance with this section.

Subd. 2. Security.  The contractor may deposit bonds or securities with the public contracting agency or in any bank or trust company to be held in lieu of cash retainage for the benefit of the public contracting agency. In that event the public agency shall reduce the retainage in an amount equal to the value of the bonds and securities and pay the amount of the reduction to the contractor. Interest on the bonds or securities shall be payable to the contractor as it accrues.

Subd. 3. Approval required.  Bonds and securities deposited or acquired in lieu of retainage, as permitted by subdivision 2, shall be of a character approved by the commissioner of management and budget, including but not limited to:(1) bills, certificates, notes or bonds of the United States;(2) other obligations of the United States or its agencies;(3) obligations of any corporation wholly owned by the federal government; or(4) indebtedness of the Federal National Mortgage Association.

Subd. 4. Recovery of additional costs.  If the public agency incurs additional costs as a result of the exercise of the option described in this section, the agency may recover the costs from the contractor by reducing the final payment due under the contract. As work on the contract progresses, the agency shall, upon demand, inform the contractor of all accrued costs.

15.74: Exceptions to Application

Sections 15.71 to 15.73 apply to all public contracts except those contracts in which receipt of federal financing is conditioned on adherence to terms and conditions which are inconsistent with sections 15.71 to 15.73.

137.36: Prompt Payment to Subcontractors

Each university contract must require the prime contractor to pay any subcontractor within ten days of the prime contractor’s receipt of payment from the university for undisputed services provided by the subcontractor. The contract must require the prime contractor to pay interest of 1-1/2 percent per month or any part of a month to the subcontractor on any undisputed amount not paid on time to the subcontractor. The minimum monthly interest penalty payment for an unpaid balance of $100 or more is $10. For an unpaid balance of less than $100, the prime contractor shall pay the actual penalty due to the subcontractor. A subcontractor who prevails in a civil action to collect interest penalties from a prime contractor must be awarded its costs and disbursements, including attorney fees, incurred in bringing the action.

471.425: Payment of Local Government Bills

Subdivision 1. Definitions. For the purposes of this section, the following terms have the meanings here given them.(a) “Contract” means any written legal document or documents signed by both parties in which the terms and conditions of any interest or other penalty for late payments are clearly stated.(b) “Date of receipt” means the completed delivery of the goods or services or the satisfactory installation, assembly or specified portion thereof, or the receipt of the invoice for the delivery of the goods or services, whichever is later.(c) “Governing board” means the elected or appointed board of the municipality and includes, but is not limited to, city councils, town boards and county boards.(d) “Municipality” means any home rule charter or statutory city, county, town, school district, political subdivision or agency of local government. “Municipality” means the Metropolitan Council or any board or agency created under chapter 473.

Subd. 2. Payment required.  A municipality must pay each vendor obligation according to the terms of the contract or, if no contract terms apply, within the standard payment period unless the municipality in good faith disputes the obligation. Standard payment period is defined as follows:(a) For municipalities who have governing boards which have regularly scheduled meetings at least once a month, the standard payment period is defined as within 35 days of the date of receipt.(b) For municipalities whose governing boards do not regularly meet at least once a month, the standard payment period is defined as 45 days after receipt of the goods or services or the invoice for the goods or services, whichever is later.(c) For joint powers organizations organized under section 471.59, the standard payment period is within 45 days of the date of receipt.

Subd. 3. Invoice errors.  If an invoice is incorrect, defective or otherwise improper, the municipality must notify the vendor within ten days of the date of receipt. Upon receiving a corrected invoice from the vendor, the municipality must pay the obligation within the standard payment period defined in subdivision 2.

Subd. 4. Payment of interest on late payments required.  (a) Except otherwise provided in this section, a municipality shall calculate and pay interest to a vendor if the municipality has not paid the obligation according to the terms of the contract or, if no contract terms apply, within the standard payment period as defined in subdivision 2. The standard payment period for a negotiated contract or agreement between a vendor and a municipality which requires an audit by the municipality before acceptance and payment of the vendor’s invoice shall not be begun until the completion of the audit by the municipality.(b) The rate of interest calculated and paid by the municipality on the outstanding balance of the obligation not paid according to the terms of the contract or during the standard payment period shall be 1-1/2 percent per month or part of a month.(c) No interest penalties may accrue against a purchaser who delays payment of a vendor obligation due to a good faith dispute with the vendor regarding the fitness of the product or service, contract compliance, or any defect, error or omission related thereto. If such delay undertaken by the municipality is not in good faith, the vendor may recover costs and attorney’s fees.(d) The minimum monthly interest penalty payment that a municipality shall calculate and pay a vendor for the unpaid balance for any one overdue bill of $100 or more is $10. For unpaid balances of less than $100, the municipality shall calculate and pay the actual interest penalty due the vendor.

Subd. 4a. Prompt payment to subcontractors.  Each contract of a municipality must require the prime contractor to pay any subcontractor within ten days of the prime contractor’s receipt of payment from the municipality for undisputed services provided by the subcontractor. The contract must require the prime contractor to pay interest of 1-1/2 percent per month or any part of a month to the subcontractor on any undisputed amount not paid on time to the subcontractor. The minimum monthly interest penalty payment for an unpaid balance of $100 or more is $10. For an unpaid balance of less than $100, the prime contractor shall pay the actual penalty due to the subcontractor. A subcontractor who prevails in a civil action to collect interest penalties from a prime contractor must be awarded its costs and disbursements, including attorney’s fees, incurred in bringing the action.

Subd. 5. Applicability. This section applies to all goods, leases and rents, and contracts for services, construction, repair and remodeling. Purchases from or contracts for service with a public utility as defined in section 216B.02 or a telephone company as defined in section 237.01 that has on file with the public utilities commission an approved practice regarding late fees are not subject to this section.

Trusted by Thousands of Minnesota Contractors Like You
For Help With Prompt Payment