New Jersey Prompt Payment Guide and FAQs

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New Jersey Prompt Payment Overview

New Jersey Prompt Payment Requirements


  • Private Jobs
  • Public Jobs
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30
DAYS
Prime Contractors

For Prime Contractors, progress payment must be made within 30 days after billing date set forth in contract.


10
DAYS
Subcontractors

For Subcontractors, payment due within 10 days after payment received from above. Can be modified by contract.


10
DAYS
Suppliers

For Suppliers, payment due within 10 days after payment received from above. Can be modified by contract.


1%
Interest & Fees

Interest at prime rate plus 1%. Attorneys' fees awarded to prevailing party.

30
DAYS
Prime Contractors

For Prime (General) Contractors, payment due within 30 days after billing date set forth in contract.


10
DAYS
Subcontractors

For Subcontractors, payment due within 10 days after payment received from above. Can be modified by contract.


10
DAYS
Suppliers

For Suppliers, payment due within 10 days after payment received from above. Can be modified by contract.


1%
Interest & Fees

Interest at prime rate plus 1%. Attorneys' fees awarded to prevailing party.

Prompt payment laws are a set of rules that regulate the acceptable amount of time in which payments must be made to contractors and subs. This is to ensure that everyone on a construction project is paid in a timely fashion. These statutes provide a framework for the timing of payments to ensure cash flow and working capital.

Projects Covered by Prompt Payment in New Jersey

New Jersey’s prompt payment provisions cover both private and public projects. The provisions can be found in N.J. Stat. §§2A:30A-1, 2A-30A-2, and 40A:11-16.2. These statutes govern the timing of payments on all construction projects, and impose penalties for late payment in the form of interest.

Payment Deadlines

The due date for all payments from the property owner or public entity to the prime contractor will be determined by the terms of the contract. The owner or entity must release payment within 30 days of the specified due date. Once the contractor receives payment from the owner, they must pay their subcontractors and suppliers within 10 days. However, this deadline can be modified by the contract terms. The same rules apply to all other payments, down the payment chain.

Penalties for Late Payments

If any payments are late or otherwise wrongfully withheld, the unpaid balance will be subject to interest penalties. Interest will begin to accrue the day the payment is past due at a the prime rate plus 1%. Additionally, if the dispute goes to court, the prevailing party will be awarded reasonable costs and attorney fees.

New Jersey Prompt Payment Frequently Asked Questions

New Jersey Prompt Payment Private Projects FAQs

What types of private projects are subject to New Jersey’s prompt payment laws?

The New Jersey prompt payment provisions apply to all private construction contracts entered into after September 1, 2006; as long as work is performed in accordance with the contract provisions.

When do payments become due under New Jersey’s prompt payment laws?

Progress payments will become due on the billing date provided under the terms of the contract as long as the party requesting payment performed in accordance with the provisions of the contract and the work has been accepted by the owner, the owner’s authorized approving agent, or the prime contractor.

When is the deadline for payment under New Jersey’s prompt payment laws?

Payments to prime contractors

Payments by owners to the prime contractor must be made within 30 days of the billing date specified in the construction contract.

Payments to subcontractors

Once payment has been received, the prime contractor must make payments to their subs and suppliers within 10 days of receipt. This applies to payments down the next contracting tier as well.

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

A payment request is considered to be approved and certified by the property owner within 20 days; unless, within that timeframe, a written statement is issued to the GC stating the amount to be withheld and the reasons for the withholding.

The statutes don’t provide any specific reasons to withhold payment, other than performance that isn’t in accordance with the terms of the contract.

If I am paid late according to New Jersey’s prompt payment laws, can I obtain interest or other penalties?

Yes, if payments aren’t made in accordance with the New Jersey prompt payment rule, interest will begin to accrue at a rate equal to the prime rate plus 1%. The prime rate is defined as “the base rate on corporate loans at large US money center commercial banks.”

• See: How is interest calculated under NJ’s prompt payment laws?

Furthermore, if an action is brought to collect payments under the prompt payment laws, the prevailing party will be awarded reasonable costs and attorney fees.

Can I suspend work for late payment in New Jersey?

Yes. Prime contractors, subs, and sub-subcontractors may suspend performance if a written notice is provided at least 7 days prior to suspending work without liability for breach of contract; as long as: the payment is untimely, no written statement of withholding was provided, and the payor isn’t engaged in a good faith effort to resolve the reason for withholding.

• Prompt Payment: When a Contractor Has the Right to Suspend Work

Can I include prompt payment fees in my mechanics lien claim?

No. New Jersey doesn’t allow miscellaneous amounts to be included on the face of a New Jersey construction lien.

• See: Can I add an interest penalty to the lien?

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 along with a Prompt Payment Demand Letter is generally the best method for encouraging parties to make payment. if payment still isn’t forthcoming, a lawsuit may be necessary.

• For more on this, see: How to Make a Claim Under Prompt Payment Laws

New Jersey Prompt Payment Public Projects FAQs

What types of public projects are subject to New Jersey’s prompt payment laws?

The New Jersey prompt payment laws apply to all public works projects within the state. There are some minor difference between state projects, municipal/county projects, and projects commissioned by the NJ Board of Education; which are explained below.

When do payments become due under New Jersey’s prompt payment laws?

Payments on public works projects become due when a request for payment on a periodic billing date as provided in the contract. Additionally, the work must be in accordance with the contract documents and approved/certified by the public entity or prime contractor.

When is the deadline for payment under New Jersey’s prompt payment laws?

Payments to prime contractors

The public entity must make payment within 30 calendar days from the billing date.

However, this time frame doesn’t apply if payments are required to be approved by a vote by the governing body of the public entity. If so, then payment may be approved/certified at the next scheduled meeting an paid during the entity’s next payment cycle.

Payments to subcontractors

Once payment has been received, payments should be made down the contracting chain within 10 calendar days; unless a different payment period was provided in the bid or contract documents.

Furthermore, on State and Board of Education projects upon certification of the amount owed to a subcontractor, the public entity may make payments directly to the subcontractor.

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

A payment request is considered to be approved and certified by the public entity within 20 days; unless, within that timeframe, a written statement is issued to the contractor stating the amount to be withheld and the reasons for the withholding.

The statutes don’t provide any specific reasons to withhold payment, other than performance that isn’t in accordance with the terms of the contract.

If I am paid late according to New Jersey’s prompt payment laws, can I obtain interest or other penalties?

Yes, if payments aren’t made in accordance with the New Jersey prompt payment rule, interest will begin to accrue at a rate equal to the prime rate plus 1%. However, this interest penalty does not apply to Dept. of Transportation projects. The prime rate is defined as “the base rate on corporate loans at large US money center commercial banks.”

• See: How is interest calculated under NJ’s prompt payment laws?

Furthermore, if an action is brought to collect payments under the prompt payment laws, the prevailing party will be awarded reasonable costs and attorney fees.

Can I suspend work for late payment in New Jersey?

Yes. Prime contractors, subs, and sub-subcontractors may suspend performance if a written notice is provided at least 7 days prior to suspending work without liability for breach of contract; as long as: the payment is untimely, no written statement of withholding was provided, and the payor isn’t engaged in a good faith effort to resolve the reason for withholding.

Prompt Payment: When a Contractor Has the Right to Suspend Work

Note, there is no right to suspend work if the project is for the Department of Transportation receiving federal funding and stopping work would jeopardize the federal funding.

Can I include prompt payment fees in my payment bond claim?

No. New Jersey law does not allow for the recovery of miscellaneous amounts in a public project payment bond claim.

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 Make a Bond Claim along with a Prompt Payment Demand Letter is generally the best method for encouraging parties to make payment. if payment still isn’t forthcoming, a lawsuit may be necessary.

• For more on this, see: How to Make a Claim Under Prompt Payment Laws

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New Jersey Prompt Payment Statutes

Getting informed about prompt payment laws is important. An examination of New Jersey’s prompt payment statute, the rules and regulations related to payment timing, is important to know your rights and responsibilities as a party on a construction project. New Jersey’s specific laws can be found in: N.J. Stat. §§ 2A:30A-1, 30A-2; 40A:11-16.2, & 27:7-34 and are reproduced below. Updated as of 2020.

Prompt Payment Statute on Private Projects

§ 2A:30A-1: Definitions

As used in this act:

“Billing” means, in accordance with the terms and definitions of the applicable contract, any periodic payment, final payment, written approved change order or request for release of retainage.

“Prime contractor” means a person who contracts with an owner to improve real property.

“Improve” means: to build, alter, repair or demolish any structure upon, connected with, on or beneath the surface of any real property; to excavate, clear, grade, fill or landscape any real property; to construct driveways and private roadways on real property; to furnish construction related materials, including trees and shrubbery, for any of the above purposes; or to perform any labor upon a structure, including any design, professional or skilled services furnished by an architect, engineer, land surveyor or landscape architect licensed or registered pursuant to the laws of this State.

“Structure” means all or any part of a building and other improvements to real property.

“Owner” means any person, including any public or governmental entity, who has an interest in the real property to be improved and who has contracted with a prime contractor for such improvement to be made. “Owner” shall be deemed to include any successor in interest or agent acting on behalf of an owner.

“Prime rate” means the base rate on corporate loans at large United States money center commercial banks.

“Real property” means the real estate that is improved upon or to be improved upon.

“Subcontractor” means any person who has contracted to furnish labor, materials or other services to a prime contractor in connection with a contract to improve real property.

“Subsubcontractor” means any person who has contracted to furnish labor, materials or other services to a subcontractor in connection with a contract to improve real property.

§ 2A:30A-2: Payment to prime contractor, subcontractor, subsubcontractor, timely payment; exceptions; disputes; resolution

a. If a prime contractor has performed in accordance with the provisions of a contract with the owner and the billing for the work has been approved and certified by the owner or the owner’s authorized approving agent, the owner shall pay the amount due to the prime contractor for each periodic payment, final payment or retainage monies not more than 30 calendar days after the billing date, which for a periodic billing, shall be the periodic billing date specified in the contract. The billing shall be deemed approved and certified 20 days after the owner receives it unless the owner provides, before the end of the 20-day period, a written statement of the amount withheld and the reason for withholding payment, except that in the case of a public or governmental entity that requires the entity’s governing body to vote on authorizations for each periodic payment, final payment or retainage monies, the amount due may be approved and certified at the next scheduled public meeting of the entity’s governing body, and paid during the entity’s subsequent payment cycle, provided this exception has been defined in the bid specifications and contract documents.

b. If a subcontractor or subsubcontractor has performed in accordance with the provisions of its contract with the prime contractor or subcontractor and the work has been accepted by the owner, the owner’s authorized approving agent, or the prime contractor, as applicable, and the parties have not otherwise agreed in writing, the prime contractor shall pay to its subcontractor and the subcontractor shall pay to its subsubcontractor within 10 calendar days of the receipt of each periodic payment, final payment or receipt of retainage monies, the full amount received for the work of the subcontractor or subsubcontractor based on the work completed or the services rendered under the applicable contract. In the case of ongoing work on the same project for which partial payments are made, the amount of money owed for work already completed shall only be payable if the subcontractor or subsubcontractor is performing to the satisfaction of the prime contractor or subcontractor, as applicable.

c. If a payment due pursuant to the provisions of this section is not made in a timely manner, the delinquent party shall be liable for the amount of money owed under the contract, plus interest at a rate equal to the prime rate plus 1%. Interest on amounts due pursuant to this section shall be paid to the prime contractor, subcontractor or subsubcontractor for the period beginning on the day after the required payment date and ending on the day on which the check for payment has been drawn. The provisions of this subsection c. shall not apply to any transportation project as defined in section 3 of P.L. 1984, c.73 (C. 27:1B-3 ), if that project receives federal funding and the awarding agency has been notified by the federal government that it will be classified as a high risk grantee pursuant to 49 C.F.R. 18.12.

d. A prime contractor, subcontractor or subsubcontractor may, after providing seven calendar days’ written notice to the party failing to make the required payments, suspend performance of a construction contract, without penalty for breach of contract, until the payment required pursuant to this section is made, if the contractor, subcontractor or subsubcontractor: is not paid as required by this section; is not provided a written statement of the amount withheld and the reason for the withholding; and the payor is not engaged in a good faith effort to resolve the reason for the withholding. The provisions of this subsection d. shall not apply to any transportation project as defined in section 3 of P.L. 1984, c.73 (C.27:1B-3), if that project receives federal funding and the application of this provision would jeopardize the funding because the owner could not meet the federal standards for financial management systems as outlined in 49 C.F.R. 18.20.

e.

(1) The rights, remedies or protections provided by this section for prime contractors, subcontractors and subsubcontractors shall be in addition to other remedies provided pursuant to any other provision of State law. To the extent that the provisions of this section provide greater rights, remedies or protections for prime contractors, subcontractors and subsubcontractors than other provisions of State law, the provisions of this section shall supersede those other provisions.

(2) No provision of this section shall be construed as restricting in any way the rights or remedies provided by any other applicable State or federal law to an owner who is a resident homeowner or purchaser with respect to the real property being improved.

f. All contracts for the improvement of structures entered into after the effective date of P.L. 2006, c 96 between owners, prime contractors, subcontractors or subsubcontractors shall provide that disputes regarding whether a party has failed to make payments required pursuant to this section may be submitted to a process of alternative dispute resolution. Alternative dispute resolution permitted by this section shall not apply to disputes concerning the bid solicitation or award process, or to the formation of contracts or subcontracts. In any civil action brought to collect payments pursuant to this section, the action shall be conducted inside of this State and the prevailing party shall be awarded reasonable costs and attorney fees.

Prompt Payment Statute on Public Projects

§ 2A:30A-1: Definitions

As used in this act:

“Billing” means, in accordance with the terms and definitions of the applicable contract, any periodic payment, final payment, written approved change order or request for release of retainage.

“Prime contractor” means a person who contracts with an owner to improve real property.

“Improve” means: to build, alter, repair or demolish any structure upon, connected with, on or beneath the surface of any real property; to excavate, clear, grade, fill or landscape any real property; to construct driveways and private roadways on real property; to furnish construction related materials, including trees and shrubbery, for any of the above purposes; or to perform any labor upon a structure, including any design, professional or skilled services furnished by an architect, engineer, land surveyor or landscape architect licensed or registered pursuant to the laws of this State.

“Structure” means all or any part of a building and other improvements to real property.

“Owner” means any person, including any public or governmental entity, who has an interest in the real property to be improved and who has contracted with a prime contractor for such improvement to be made. “Owner” shall be deemed to include any successor in interest or agent acting on behalf of an owner.

“Prime rate” means the base rate on corporate loans at large United States money center commercial banks.

“Real property” means the real estate that is improved upon or to be improved upon.

“Subcontractor” means any person who has contracted to furnish labor, materials or other services to a prime contractor in connection with a contract to improve real property.

“Subsubcontractor” means any person who has contracted to furnish labor, materials or other services to a subcontractor in connection with a contract to improve real property.

§ 2A:30A-2: Payment to prime Contractor; subcontractor, subsubcontractor, timely payment; exceptions; disputes; resolution

a. If a prime contractor has performed in accordance with the provisions of a contract with the owner and the billing for the work has been approved and certified by the owner or the owner’s authorized approving agent, the owner shall pay the amount due to the prime contractor for each periodic payment, final payment or retainage monies not more than 30 calendar days after the billing date, which for a periodic billing, shall be the periodic billing date specified in the contract. The billing shall be deemed approved and certified 20 days after the owner receives it unless the owner provides, before the end of the 20-day period, a written statement of the amount withheld and the reason for withholding payment, except that in the case of a public or governmental entity that requires the entity’s governing body to vote on authorizations for each periodic payment, final payment or retainage monies, the amount due may be approved and certified at the next scheduled public meeting of the entity’s governing body, and paid during the entity’s subsequent payment cycle, provided this exception has been defined in the bid specifications and contract documents.

b. If a subcontractor or subsubcontractor has performed in accordance with the provisions of its contract with the prime contractor or subcontractor and the work has been accepted by the owner, the owner’s authorized approving agent, or the prime contractor, as applicable, and the parties have not otherwise agreed in writing, the prime contractor shall pay to its subcontractor and the subcontractor shall pay to its subsubcontractor within 10 calendar days of the receipt of each periodic payment, final payment or receipt of retainage monies, the full amount received for the work of the subcontractor or subsubcontractor based on the work completed or the services rendered under the applicable contract. In the case of ongoing work on the same project for which partial payments are made, the amount of money owed for work already completed shall only be payable if the subcontractor or subsubcontractor is performing to the satisfaction of the prime contractor or subcontractor, as applicable.

c. If a payment due pursuant to the provisions of this section is not made in a timely manner, the delinquent party shall be liable for the amount of money owed under the contract, plus interest at a rate equal to the prime rate plus 1%. Interest on amounts due pursuant to this section shall be paid to the prime contractor, subcontractor or subsubcontractor for the period beginning on the day after the required payment date and ending on the day on which the check for payment has been drawn. The provisions of this subsection c. shall not apply to any transportation project as defined in section 3 of P.L. 1984, c.73 (C. 27:1B-3 ), if that project receives federal funding and the awarding agency has been notified by the federal government that it will be classified as a high risk grantee pursuant to 49 C.F.R. 18.12.

d. A prime contractor, subcontractor or subsubcontractor may, after providing seven calendar days’ written notice to the party failing to make the required payments, suspend performance of a construction contract, without penalty for breach of contract, until the payment required pursuant to this section is made, if the contractor, subcontractor or subsubcontractor: is not paid as required by this section; is not provided a written statement of the amount withheld and the reason for the withholding; and the payor is not engaged in a good faith effort to resolve the reason for the withholding. The provisions of this subsection d. shall not apply to any transportation project as defined in section 3 of P.L. 1984, c.73 (C.27:1B-3), if that project receives federal funding and the application of this provision would jeopardize the funding because the owner could not meet the federal standards for financial management systems as outlined in 49 C.F.R. 18.20.

e.

(1) The rights, remedies or protections provided by this section for prime contractors, subcontractors and subsubcontractors shall be in addition to other remedies provided pursuant to any other provision of State law. To the extent that the provisions of this section provide greater rights, remedies or protections for prime contractors, subcontractors and subsubcontractors than other provisions of State law, the provisions of this section shall supersede those other provisions.

(2) No provision of this section shall be construed as restricting in any way the rights or remedies provided by any other applicable State or federal law to an owner who is a resident homeowner or purchaser with respect to the real property being improved.

f. All contracts for the improvement of structures entered into after the effective date of P.L. 2006, c 96 between owners, prime contractors, subcontractors or subsubcontractors shall provide that disputes regarding whether a party has failed to make payments required pursuant to this section may be submitted to a process of alternative dispute resolution. Alternative dispute resolution permitted by this section shall not apply to disputes concerning the bid solicitation or award process, or to the formation of contracts or subcontracts. In any civil action brought to collect payments pursuant to this section, the action shall be conducted inside of this State and the prevailing party shall be awarded reasonable costs and attorney fees.

§ 27:7-34: Partial and Deferred Payments for Highway Work; Amount; Deposit

Contracts shall provide for partial payments at least once each month or from time to time as the work progresses on work of construction or maintenance. Two per centum of the amount due on partial payments of the total contract price shall be withheld from the contractor pending completion of the contract, but upon substantial completion of the contract, as defined by rules or regulations of the department 1% shall be withheld. At any time during the performance of the work, if work is not progressing, as defined by the “New Jersey Department of Transportation Standard Specifications for Road and Bridge Construction,” the commissioner may at the commissioner’s discretion, increase the withholding to 4% of the payment due. No retainage shall be withheld on service contracts including, but not limited to, mowing, sweeping, tree trimming and similar contracts. Any partial payments made after substantial completion of the contract shall be made only upon certification by the general contractor to the department that all subcontractors have been paid in the same proportion that he has been paid; however, should the amount owed by a general contractor to a subcontractor be in dispute the department shall be empowered to advance to the general contractor the amount in dispute after a determination by the commissioner.

Contracts may also provide for partial payments at least once in each month or from time to time as the work progresses on all materials placed along or upon the site, or stored at locations approved by the commissioner, which are suitable for the use and execution of the contract, provided the contractor furnishes releases of liens for all materials furnished at the time each estimate of work is submitted for payment, but such partial payments shall not exceed the cost of the material.

When the contract provides that a portion of the work may be deferred with the approval of the commissioner, the sum withheld from the contractor may not be less than 25% of the value of said work.

Any money heretofore or hereafter withheld from contract payments as provided for herein shall be paid by the State to any contractor entitled thereto who shall deposit under terms of an escrow agreement, in a banking institution located in this State and approved by the commissioner, negotiable bonds, acceptable to the commissioner, issued by the State or any political subdivision thereof, said bonds having value equal to the amount of money to be paid to any such contractor. For purposes of this section, value shall mean par value or market value, whichever is lower.

§ 40A:11-16.2: Partial Payments; Deposit Bonds

1. Any contract, the total price of which exceeds $100,000.00, entered into by a contracting unit involving the construction, reconstruction, alteration, repair or maintenance of any building, structure, facility or other improvement to real property, shall provide for partial payments to be made at least once each month as the work progresses, unless the contractor shall agree to deposit bonds with the contracting unit pursuant to P.L.1979, c.152 (C.40A:11-16.1).

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