Connecticut Prompt Payment Overview

Connecticut’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 Connecticut prompt payment laws.

Connecticut Prompt Payment for Private Projects FAQs

Prompt Payment Frequently Asked Questions

Do I Have To Send A Letter or File Anything To Qualify For Prompt Payment Penalties or Remedies in Connecticut?

The Connecticut prompt payment act applies upon pursuant to the terms of the contract, and upon the expiration of the timing requirements set forth by the statute – provided that the contract has been substantially performed.

However, to qualify to recover interest, a party must set forth its claim in writing and provide notice to the paying party by registered or certified mail.

What Happens To My Prompt Payment Penalties and Fees if I Get Paid Late? Can I Still Recover The Prompt Payment Penalty in Connecticut?

If payment is received late, and none of the valid reasons for late or extended payment apply, the party to be paid is entitled to recover the interest allowed by law. As a practical matter, it may be difficult to recover amounts in excess of the contractually due amount without filing suit. Attorneys’ fees may only be recovered by a prevailing party in an action to enforce retainage provisions.

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

Connecticut does not set forth specific grounds on which 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.

Can I Include Prompt Payment Fees In My Connecticut Mechanics Liens Claim or Bond Claim?

No. Connecticut law does not allow for the recovery of miscellaneous amounts in a mechanics lien.

Connecticut Prompt Payment for Public Projects FAQs

Prompt Payment Frequently Asked Questions

Do I Have To Send A Letter or File Anything To Qualify For Prompt Payment Penalties or Remedies in Connecticut?

In order to qualify for the protections and remedies provided by the Connecticut prompt pay statute, a properly completed claim is required. If the claim is filled out incorrectly or there is some other defect, the claimant must be notified within 10 days and given a chance to correct the deficiency. If the deficiency is corrected within five business days of being informed of the issue, the original time period for payment still applies.

Can I Include Prompt Payment Fees In My Connecticut Mechanics Liens Claim or Bond Claim?

No. Connecticut 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?

If payment is received late, and none of the valid reasons for late or extended payment apply, the party to be paid is entitled to recover the interest allowed by law. As a practical matter, it may be difficult to recover amounts in excess of the contractually due amount without filing suit. Attorneys’ fees may only be recovered by a prevailing party in an action to enforce retainage provisions.

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

Payment may be withheld:

If no properly completed claim has been given;
If state or federal law requires the payment to be withheld;
If the claim is subject to a good faith dispute and if, before the date of timely payment, notice of the dispute is: (A) sent by certified mail; (B) personally delivered; or (C) sent in accordance with any procedure in the contract

Connecticut Prompt Payment Statutes

Getting informed about prompt payment laws is important. An examination of Connecticut’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. Connecticut’s specific laws can be found in: Conn. Gen. Stat. §§ 42-158i – 42-158j and Conn. Gen. Stat. .§§ 4a-71 – 4a-75, 49-41c, and are reproduced below.

Prompt Payment Statute on Private Projects

42-158i: Definitions

(1) “Owner” means any individual, corporation, nonprofit corporation, partnership, limited partnership, limited liability company or other business entity that is the owner of record or lessee of real property upon which construction, renovation or rehabilitation is to be or is being performed pursuant to a construction contract regarding such real property.

(2) “Construction contract” or “contract” means any contract for the construction, renovation or rehabilitation in this state on or after October 1, 1999, including any improvements to real property that are associated with such construction, renovation or rehabilitation, or any subcontract for construction, renovation or rehabilitation between an owner and a contractor, or between a contractor and a subcontractor or subcontractors, or between a subcontractor and any other subcontractor. “Construction contract” or “contract” does not include (A) any public works or other building contract entered into with this state, the United States, any other state, and any municipality or other political subdivision of this state or any other state, (B) a contract or project funded or insured by the United States Department of Housing and Urban Development, (C) a contract between an owner and a contractor for an amount of twenty-five thousand dollars or less or a subcontract which results from such a contract, or (D) a contract for a building intended for residential occupancy containing four or less units.

(3) “Retainage” means a sum withheld from progress payments to the contractor or subcontractor, otherwise payable to a contractor or subcontractor by an owner conditioned on substantial or final completion of all work in accordance with the terms of a written or verbal construction contract, but does not include any sum withheld due to the contractor’s or subcontractor’s failure to comply with construction plans and specifications

42-158j: Required Contract Provisions RE Timely Payment of Contractors, Subcontractors and Suppliers. Payment Requisition Statement. Remedy for Untimely Payments. Penalties. Escrow Accounts. Withholding Payments Due Because of Disputes Prohibited. Progress Payments. Rights of Action.

(a) Each construction contract shall contain the following provisions: (1) A requirement that the owner pay any amounts due any contractor, subcontractor or supplier in a direct contractual relationship with the owner, whether for labor performed or materials furnished, not later than thirty days after the date any written request for payment has been made by such contractor, subcontractor or supplier; (2) a requirement that the contractor pay any amounts due any subcontractor or supplier, whether for labor performed or materials furnished, not later than thirty days after the date the contractor receives payment from the owner which encompasses labor performed or materials furnished by such subcontractor or supplier; and (3) a requirement that the contractor shall include in each of its subcontracts a provision requiring each subcontractor and supplier to pay any amounts due any of its subcontractors or suppliers, whether for labor performed or materials furnished, not later than thirty days after the date such subcontractor or supplier receives a payment from the contractor which encompasses labor performed or materials furnished by such subcontractor or supplier.

(b) Each payment requisition submitted in accordance with the requirements of subsection (a) of this section shall include a statement showing the status of all pending construction change orders, other pending change directives and approved changes to the original contract or subcontract. Such statement shall identify the pending construction change orders and other pending change directives, and shall include the date such change orders and directives were initiated, the costs associated with their performance and a description of any work completed. As used in this section, “pending construction change order” or “other pending change directive” means an authorized directive for extra work that has been issued to a contractor or a subcontractor.

(c) (1) If payment is not made by an owner in accordance with the requirements of subdivision (1) of subsection (a) of this section or any applicable construction contract, such contractor, subcontractor or supplier shall set forth its claim against the owner through notice by registered or certified mail.

(2) If payment is not made by a contractor in accordance with the requirements of subdivision (2) of subsection (a) of this section or any applicable construction contract, the subcontractor or supplier shall set forth its claim against the contractor through notice by registered or certified mail.

(3) If payment is not made by a subcontractor or supplier in accordance with the provisions of subdivision (3) of subsection (a) of this section, the subcontractor or supplier to whom money is owed shall set forth its claim against the subcontractor or supplier who has failed to comply with the provisions of said subdivision (3) through notice by registered or certified mail.

(4) Ten days after the receipt of any notice specified in subdivisions (1), (2) and (3) of this subsection, the owner, contractor, subcontractor or supplier, as the case may be, shall be liable for interest on the amount due and owing at the rate of one per cent per month. Such interest shall accrue beginning on the date any such notice is received. In addition, such owner, contractor, subcontractor or supplier, upon written demand from the party providing such notice, shall be required to place funds in the amount of the claim, plus such interest of one per cent per month, in an interest-bearing escrow account in a bank in this state, provided such owner, contractor, subcontractor or supplier may refuse to place the funds in escrow on the grounds that the party making such demand has not substantially performed the work or supplied the materials according to the terms of the construction contract. In the event that such owner, contractor, subcontractor or supplier refuses to place such funds in escrow and such owner, contractor, subcontractor or supplier is found to have unreasonably withheld payment due a party providing such notice, such owner, contractor, subcontractor or supplier shall be liable to the party making demand for payment of such funds and for reasonable attorneys’ fees plus interest on the amount due and owing at the rate of one per cent per month. In addition, any owner, contractor, subcontractor or supplier who is found to have withheld payments to a party providing such notice in bad faith shall be liable for ten per cent damages.

(d) No payment may be withheld from a subcontractor or supplier for work performed or materials furnished because of a dispute between a contractor and another contractor, subcontractor or supplier.

(e) This section shall not be construed to prohibit progress payments prior to final payment of the contract and is applicable to all subcontractors and suppliers for material or labor whether they have contracted directly with the contractor or with some other subcontractor on the work. Each owner that enters into a contract under this section and fails or neglects to make payment to a contractor for labor and materials supplied under a contract, as required pursuant to this section, shall, upon demand of any person who has not been paid by the contractor for such labor and materials supplied in the performance of the work under the contract, promptly pay the person for such labor or materials. Demand for payment shall be served on the owner and a copy of each demand shall be sent to the contractor by certified mail, return receipt requested to any address at which the owner and contractor conduct business. If the owner fails to make such payment, the person shall have a direct right of action against the owner in the superior court for the judicial district in which the project is located. The owner’s obligations for direct payments to the contractor, subcontractors or suppliers giving notice pursuant to this section shall be limited to the amount owed to the contractor by the owner for work performed under the contract at the date such notice is provided.

Prompt Payment Statute on Public Projects

4a-71: Prompt Payment by State Departments and Agencies

(a) Except as provided in section 4a-72, each state department and agency shall pay interest at a rate equal to the monthly effective yield for the Short Term Investment Fund administered by the Treasurer pursuant to sections 3-27a to 3-27f, inclusive, on amounts due on written contracts for public works, personal services, goods and services, equipment and travel, whenever such department or agency fails to make timely payment.

(b) For the purposes of this section, payment shall be timely if: (1) A check or warrant is mailed or delivered on the date specified for the amount specified in the applicable contract documents, or, if no date is specified, within forty-five days of receipt of a properly completed claim or receipt of goods and services, whichever is later; or (2) for any amount that is required to be withheld under state or federal law, a check or warrant is mailed or delivered in the proper amount on the date the amount may be released under the applicable law.

4a-72: Prompt Payment. Exceptions

(a) Section 4a-71 shall not apply to the following: (1) Interagency or intergovernmental transactions; (2) amounts payable to employees or prospective employees of state departments or agencies as reimbursement for expenses; (3) claims subject to a good faith dispute, if before the date of timely payment, notice of the dispute is: (A) Sent by certified mail; (B) personally delivered; or (C) sent in accordance with any procedure in the contract; (4) contracts entered into before October 1, 1984; (5) contracts related to highway or road construction, reconstruction or maintenance; or (6) claims, contracts or projects that are to be paid for exclusively with federal funds.

(b) As used in subdivision (3) of subsection (a) of this section, “good faith dispute” means: (1) A contention by the state that goods delivered or services rendered were: (A) Of less quantity or quality than ordered or specified by contract; (B) faulty; or (C) installed improperly; or (2) any other reason giving cause for the withholding of payment by the state until such dispute is settled.

4a-73: Administration of Prompt Payment Provisions

(a) Any state agency required to pay late payment penalties under section 4a-71 shall pay the penalties from funds designated for administrative costs of the agency receiving the public works, personal services, goods and services, equipment or travel. The penalties shall not be paid from other funds of the state.

(b) Any amount of an interest penalty which remains unpaid at the end of any thirty-day period shall be added to the principal amount of the debt and, thereafter, interest penalties shall accrue on that amount.

(c) In instances where a claim is filled out incorrectly or where there is any defect or impropriety in a claim submitted, the state department or agency shall contact the vendor within ten days. An error on the vendor’s claim, if corrected within five business days of his being so contacted and within the payment period as determined pursuant to section 4a-71, shall not result in the vendor being paid after the expiration of the period for timely payment.

4a-74: Governmental Exemption from Public Utility Late Payment Charge

Notwithstanding any regulation or order of the Public Utilities Regulatory Authority which permits the imposition of a late payment charge by a public service company on customer bills, the state and any political subdivision thereof: (1) Shall not be subject to such charge on any bill which accrued on or before June 5, 1975; and (2) shall not be subject to such charge on any bill which accrues after said date, for the first sixty days after the due date of such bill.

4a-75: Payment of Obligations. Department of Administrative Services Revolving Fund

The Comptroller shall prescribe the manner in which claims for supplies, materials, equipment and contractual services purchased or contracted for shall be submitted, examined, approved and paid. There shall continue to be, from the appropriations of the state agencies, a Department of Administrative Services Revolving Fund of such amount as the Commissioner of Administrative Services, with the approval of the Governor, determines to be necessary to defray such current expenses for supplies, materials, equipment and contractual services as will be incurred by the commissioner in anticipation of the future requirements of state agencies or under other conditions necessitating the payment of such expense prior to the determination of the legal or equitable claims to be charged on account of such expenses to the appropriations of such agencies. Claims on account of such expenses shall be paid from said revolving fund. Any such expenses which cannot be specifically allocated to particular state agencies shall be apportioned monthly by the commissioner, with the approval of the Standardization Committee, among the state agencies for which they were incurred in such manner as the commissioner deems equitable. All funds received in payment of such claims shall be credited to said revolving fund.

49-41c: State contractor to make payment to subcontractor within thirty days

Any person contracting with the state shall make payment to any subcontractor employed by such contractor within thirty days of payment by the state to the contractor for any work performed or, in the case of any contract entered into on or after October 1, 1986, for materials furnished by such subcontractor, provided such contractor may withhold such payment if such contractor has a bona fide reason for such withholding and if such contractor notifies the affected subcontractor, in writing, of his reasons for withholding such payment and provides the state board, commission, department, office, institution, council or other agency through which such contractor had made the contract, with a copy of the notice, within such thirty-day period.