New York prompt payment act and retainage rules
On private projects of $150,000 or more, New York's General Business Law gives owners 12 business days to approve an invoice and 30 days to pay, gives subs payment 7 days after the GC is paid, and caps retainage at 5 percent. Public work runs on the State Finance Law and General Municipal Law, also with a 7-day flow-down and a 5 percent base retainage cap.
New York splits its rules by owner. Private jobs are covered by General Business Law Article 35-E (§§ 756 to 758), the private prompt payment act, which applies when the whole project costs $150,000 or more. Owners approve or reject invoices within 12 business days and pay within 30 days after approval, GCs pay subs within 7 days of receiving good funds, late money earns 1 percent per month, and retainage is capped at 5 percent with release 30 days after final approval. State public work runs on State Finance Law § 139-f and § 179-f. Counties, cities, towns, villages, and school districts follow General Municipal Law § 106-b. New York City has its own rules.
| Rule | Private work (GBL § 756 et seq.) | Public work |
|---|---|---|
| Approve invoice | 12 business days, owner and GC alike (§ 756-a) | Contract and agency procedures |
| Owner pays prime | 30 days after approval; if a lender must approve, 7 days after the owner receives good funds (§ 756-a) | State: 30 calendar days, 15 for a small business (SFL § 179-f). Municipal: 30 days from requisition, 45 if an elected official approves (GML § 106-b) |
| Prime pays sub | 7 days after receiving good funds, if required documents and waivers are in (§ 756-a) | 7 calendar days after receiving payment from the public owner (SFL § 139-f, GML § 106-b) |
| Late interest | 1 percent per month, or a higher contract rate (§ 756-b) | Municipal: overpayment rate set by the Commissioner of Taxation and Finance. Subs: same rate as GBL § 756-b(1)(b) |
| Retainage cap | 5 percent of the contract sum; subs never more than the owner actually holds (§ 756-c) | 5 percent of each progress payment; up to 10 percent where full bonds are not provided (SFL § 139-f, GML § 106-b) |
| Retainage release | 30 days after final approval; 1 percent per month if late (§ 756-c) | Punch list within 45 business days of substantial completion, then balance paid less twice the value of open items |
| Void clauses | Out-of-state law or forum, no-suspension, retainage over 5 percent, payment terms that differ from the act (§ 757) | See agency and municipal rules |
Which private jobs the GBL covers
Under § 756, a construction contract is covered when the aggregate cost of the project, including labor, services, materials, and equipment, equals or exceeds $150,000. Contracts awarded by the state are out. So are one, two, or three family homes, residential tract developments of 100 or fewer one or two family dwellings, residential projects of 4,500 square feet or less, and certain subsidized residential projects. A $3,000,000 retail fit-out in Westchester is in. A custom home in Saratoga is not.
Invoices are submitted at the end of each billing cycle, which is the calendar month unless the contract says otherwise, and a final invoice can go out at substantial completion. The owner has 12 business days to approve or disapprove all or part of it. The GC has the same 12 business days on a sub's invoice. Payment then follows 30 days after approval on the owner side. If the owner's lender has to approve, the payment is due 7 days after the owner receives good funds. On written request, the owner must tell a sub within 5 days of making any payment to the contractor, which is useful when a GC says the check has not come.
Interest, suspension, and expedited arbitration
- Interest: 1 percent per month or fraction of a month on the unpaid balance, starting the day after payment is due, or a higher contract rate (§ 756-b(1)). Sub interest applies regardless of any contrary agreement.
- Suspension: a contractor may suspend for nonpayment of undisputed amounts after written notice at least 10 calendar days before the suspension date. Subs can suspend in listed situations with notice to both owner and GC. Suspension under the statute is not a breach, deadlines extend by the length of the suspension, and remobilization costs are negotiated (§ 756-b(2)).
- Disputes: the parties must first try to resolve the matter. An unresolved dispute can go to expedited American Arbitration Association arbitration, no sooner than 15 days after verified delivery of the complaint (§ 756-b(3)).
- Void clauses: contract terms requiring another state's law or forum, barring suspension for nonpayment, blocking expedited arbitration, changing the statutory payment terms, or requiring retainage over 5 percent are void (§ 757).
The no-suspension rule in § 757 is the closest the GBL comes to addressing pay-if-paid clauses: a sub can still stop work when it is not being paid. Whether a pay-if-paid clause can defeat payment altogether is not something these sections settle, so get advice before relying on one.
Private retainage: 5 percent and 30 days
Section 756-c lets the parties agree to retainage of no more than 5 percent of the contract sum. A GC or sub holding from the tier below can also hold up to 5 percent, but never more than the owner actually retained from it. The owner must release retainage no later than 30 days after final approval of the work. Once a GC receives retainage, it must release a proportionate amount to its subs. Anyone who misses the release owes 1 percent per month from the date the retention was due. Say a drywall sub on a $1,400,000 subcontract has $70,000 held; every month that money sits after it is due adds $700.
Public work: state agencies and municipalities
On state contracts, State Finance Law § 139-f requires the GC to pay subs and suppliers within 7 calendar days of receiving payment from the public owner, with interest on late payments owed by the contractor alone. The public owner holds no more than 5 percent of each progress payment, or up to 10 percent where the contractor did not furnish both performance and labor and material bonds, and the GC can hold no more than 5 percent from its subs on the same terms. Within 45 business days after substantial completion, the owner gives a written punch list, then pays the contract balance less twice the value of unfinished items. General payment timing for state agencies comes from § 179-f: 30 calendar days, or 15 for a small business, with 75 days for highway construction final payments.
Municipal contracts follow General Municipal Law § 106-b, which mirrors those retainage and punch list rules for political subdivisions outside New York City. Prompt payment means payment within 30 days of receiving the requisition, or 45 days where an elected official approves progress payments. Late owner payments earn the overpayment rate set by the Commissioner of Taxation and Finance. Before chasing a city agency, also check New York prevailing wage compliance, license rules, and your New York mechanics lien deadlines. Smart Business Automator tracks approval and due dates by invoice and owner type in construction accounts receivable automation.
Frequently asked questions
Does the New York prompt payment act apply to my private job?
It applies when the total project cost is $150,000 or more and the job is not one of the excluded residential types, such as one, two, or three family homes. State contracts are excluded and covered by other laws.
What is the retainage limit in New York?
5 percent of the contract sum on private jobs under GBL § 756-c. On state and municipal public work, 5 percent of each progress payment, or up to 10 percent where the contractor does not provide full bonds.
How fast must a New York GC pay subcontractors?
Private work: 7 days after receiving good funds, if required documents and waivers are in. Public work: 7 calendar days after receiving payment from the public owner.
What interest applies to late private construction payments in New York?
1 percent per month or fraction of a month on the unpaid balance, or a higher rate if the contract provides one, under GBL § 756-b.
When must a New York owner release retainage on private work?
No later than 30 days after final approval of the work. A late release costs 1 percent per month from the date it was due.
Sources
- NY Senate: General Business Law § 756, definitions
- NY Senate: General Business Law § 756-A, invoices and payment
- NY Senate: General Business Law § 756-B, interest, suspension, disputes
- NY Senate: General Business Law § 756-C, retention
- NY Senate: General Business Law § 757, void provisions
- NY Senate: State Finance Law § 139-F
- NY Senate: State Finance Law § 179-F
- NY Senate: General Municipal Law § 106-B
Laws and rates change. Confirm current requirements with the state agency before you bid, file, or pay. This page is general information, not legal advice.
