If a contractor or subcontractor wasn't paid on time and cut corners on safety to stay solvent, can I hold the owner or GC responsible for my catastrophic injury?

Yes — when owners and general contractors violate New York's Prompt Payment Act by withholding funds, they can create a direct chain of liability if that financial pressure contributed to unsafe conditions that caused your serious injury. Under New York Labor Law Sections 240 and 241, owners and GCs already carry broad, non-delegable duties to maintain safe worksites, and evidence of withheld payments can powerfully reinforce a negligence claim. At Yassi Law PC, we investigate every financial and contractual layer of a construction project to build the strongest possible case for clients who have suffered life-altering injuries.

I suffered a traumatic brain injury on a New York construction site — how does the Prompt Payment Act factor into a multi-million dollar claim against the general contractor?

The Prompt Payment Act can serve as critical evidence in a high-value injury case by demonstrating that a GC's financial mismanagement created hazardous working conditions — strengthening both negligence and Labor Law claims that routinely produce seven- and eight-figure verdicts in New York courts. Courts have recognized that systematic underpayment forces subcontractors to reduce crews, skip safety protocols, and rush work, all of which directly elevate injury risk on a jobsite. A catastrophic injury claim of this magnitude demands an attorney who understands both the construction payment laws and the litigation strategies needed to maximize your recovery.

What should I do first if I was severely injured on a job site where I suspect the contractor was never properly paid for safety-critical work?

Act immediately to preserve evidence — payment records, subcontracts, stop-work notices, and Prompt Payment Act demand letters can disappear quickly once litigation becomes foreseeable, and New York law imposes strict deadlines on personal injury claims, including a three-year statute of limitations for most construction accidents. Contact Yassi Law PC for a free consultation so we can issue litigation holds, secure financial records, and determine whether payment violations contributed to the unsafe conditions that left you seriously injured. The sooner we get involved, the better positioned you are to pursue the full compensation — including lost future earnings and lifetime medical costs — that a catastrophic injury demands.

How New York's Prompt Payment Act Forces Owners and GCs to Pay Contractors on Time

Reza Yassi
5 days ago
8 min read

You're a drywall subcontractor on a hotel renovation in Long Island City. You submitted your fourth requisition 47 days ago. The general contractor keeps saying the owner hasn't released funds. Meanwhile, your crew is still showing up, your supplier is calling about a $180,000 invoice, and your line of credit is maxed out. You don't need a lawsuit two years from now — you need to get paid this month.

That's exactly the problem the New York Prompt Payment Act was designed to solve. Buried in Article 35-E of the General Business Law, the statute gives contractors and subcontractors on private commercial projects a hard set of payment deadlines, statutory interest, and the right to stop work when invoices go unpaid. Most owners and GCs in New York City hope you don't know it exists. This guide explains how the New York Prompt Payment Act actually works, where it overlaps with mechanic's liens and Lien Law Article 3-A trusts, and the mistakes that can torpedo an otherwise winnable claim.

What Is the New York Prompt Payment Act and When Does It Apply?

The New York Prompt Payment Act is a statute that imposes mandatory payment timelines, interest, and remedies on private construction contracts in New York State. It's codified at General Business Law Article 35-E and was enacted to address the chronic cash-flow squeeze that plagues contractors and subcontractors on private jobs — particularly the practice of owners and GCs sitting on invoices for 90, 120, or even 180 days while subs front payroll and materials.

The Act applies to private construction contracts above a statutory threshold. It does not apply to one- and two-family home renovations or to most small residential projects, which is why your Park Slope brownstone gut-renovation is governed by GBL Article 36-A and the home improvement contract rules instead of the Prompt Payment Act. Public projects have their own separate prompt-payment rules under the State Finance Law and Lien Law. The Prompt Payment Act is squarely a private commercial statute — think Class B office buildouts in Midtown, hotel renovations in LIC, retail fit-outs in Williamsburg, and ground-up condo developments in Astoria.

According to the NYC Department of Buildings, the City issues many construction permits each year, and a meaningful share involve private commercial projects of the kind the Prompt Payment Act was written to cover. If your contract is in writing (and under Article 36-A or general contract principles, it almost certainly should be), the Act's deadlines are baked into the project whether or not the contract mentions them.

How Quickly Must You Be Paid Under the Prompt Payment Act?

Under GBL § 756-a, the Act sets specific deadlines that operate in two stages: owner-to-contractor and contractor-to-subcontractor. These deadlines aren't suggestions. They're statutory defaults that override any softer language in the contract unless the contract provides faster payment.

At the top of the chain, an owner must approve or disapprove a contractor's invoice within 12 business days after delivery of the invoice and any required supporting documents. If the owner approves (or fails to timely disapprove), the owner must pay the approved amount within 30 days. If the owner disapproves, the disapproval must be in writing and must state the specific reasons — vague refusals don't count.

Down the chain, once the contractor receives payment from the owner, the contractor must pay each subcontractor its proportionate share within 7 days. The same 7-day pass-through deadline applies between subcontractors and sub-subcontractors. So if you're a tile installer hired by a tile sub, your money should be moving within roughly a week of when the GC gets paid by the owner — not whenever the GC feels like cutting checks.

When those deadlines are missed, GBL § 756-b imposes interest at 1% per month on the unpaid undisputed amount. That's 12% annualized, which is substantially higher than the 9% prejudgment interest rate New York generally awards under CPLR § 5004. For a $400,000 unpaid requisition that sits for six months, that's $24,000 in statutory interest alone — before you ever file a complaint.

What Can You Do When a GC or Owner Refuses to Pay?

If you're not paid within the statutory windows, the Prompt Payment Act gives you three layered remedies: statutory interest, the right to suspend performance, and the right to expedited dispute resolution. Used together, they create real pressure without forcing you to sit through a two-year litigation cycle.

The most underused remedy is the right to suspend work. Under GBL § 756-b, after providing proper written notice and waiting the statutory cure period, a contractor or subcontractor may stop work on an undisputed unpaid amount without committing breach. That's a powerful lever — most GCs will magically find the money rather than watch a critical-path trade walk off a hotel job two weeks before a soft opening. Most contractors miss that the suspension notice must be in writing, must be properly served, and must give the owner or upstream party the statutorily required time to cure; leaving the site without dotting those i's can flip a payment dispute into a breach-of-contract claim against you.

The Act also provides an expedited mediation/arbitration pathway for prompt-payment disputes, designed to resolve the question of whether an amount is truly disputed (in which case payment can be withheld) versus undisputed (in which case it can't). Construction arbitrations administered by the American Arbitration Association generally resolve faster than parallel court cases — and prompt-payment claims are well suited to that forum because the merits often turn on documents rather than witness testimony.

Even when you escalate to litigation, prompt-payment claims pair well with breach-of-contract, quantum meruit, and account stated theories. If you're a contractor who has been wrongfully terminated or stiffed on a final requisition, you'll also want to look hard at lost profits damages on the unfinished portion of the contract, which are recoverable in New York if proven with reasonable certainty.

How Does the Prompt Payment Act Work With Mechanic's Liens and Lien Law Article 3-A?

The Prompt Payment Act sits alongside two other heavyweight statutes — the Lien Law's mechanic's lien provisions and Article 3-A's trust fund rules — and the smart move is to use all three at once. A prompt-payment claim gets you statutory interest and the right to walk; a mechanic's lien attaches to the real property and creates leverage with lenders and title companies; an Article 3-A trust claim follows the money personally to whoever diverted it.

A mechanic's lien under the New York Lien Law must be filed within 8 months of the last date you furnished labor or materials on a commercial project (4 months for a single-family residence). It's filed in the county clerk's office where the property sits — Kings County for Brooklyn, Queens County for Astoria and LIC, New York County for Manhattan, and so on. The filing freezes the title in a real, practical sense: lenders won't release construction draws over an outstanding lien, and the owner can't refinance or sell without paying you off or bonding around the lien.

Article 3-A of the Lien Law goes further. It treats every payment that flows down a construction project as a statutory trust held for the benefit of laborers, subcontractors, and suppliers on that specific project. If your GC takes the owner's progress payment and pays an unrelated debt, that's a trust diversion — exposing the GC's owners and officers to personal liability and, in egregious cases, criminal exposure. We walk through the mechanics in our prior post on Lien Law Article 3-A trust fund claims, and the related theory of conversion of project funds.

When a GC operates through a shell LLC with no real assets, you may also have grounds to pierce the corporate veil and reach the principals personally — a strategy that becomes especially viable when the same individual is running multiple construction LLCs and shuffling funds between them.

What Mistakes Should You Avoid When Asserting a Prompt Payment Claim?

The biggest mistake is assuming the Act will save you from sloppy paperwork. The Prompt Payment Act protects contractors who invoice cleanly, document changes, and serve proper notices — not contractors who tape a handwritten total to a job-site fridge and call it a requisition. Before you assert a claim, audit your file for the four things that trip up otherwise-strong cases:

Defective invoices. Your requisition must include the supporting documents the contract requires — typically AIA G702/G703 forms, lien waivers, and certified payroll where applicable. Missing documents reset the 12-business-day clock.
Unsigned change orders. If you performed extra work on a verbal directive, the owner may legitimately dispute it. New York courts will sometimes allow recovery under quantum meruit or course-of-dealing theories, but the Act protects undisputed amounts most cleanly.
Improper suspension notices. Walking off the job without serving the statutory notice and waiting the cure period can convert your payment claim into a defense against breach.
Missed lien deadlines. The 8-month commercial filing window is jurisdictional. Miss it and you lose the lien remedy permanently, even if your prompt-payment claim is rock solid.

The second mistake is signing away your rights at the contract stage. GBL § 757 voids certain attempts to contract around the Act's core protections, but it doesn't catch everything. Pay-if-paid clauses, for example, remain a thorny issue in New York and can sometimes shift risk onto subs even where prompt-payment deadlines technically apply. We've seen subcontractors sign one-page "master agreements" with NYC GCs that quietly extend payment terms to 90 days and waive interest — and then act surprised when the GC enforces them.

If you're early in a project and the dollars are big, get the contract reviewed before you sign. If you're already deep in a dispute, document everything in writing and stop accepting verbal promises that "the check is coming next week." For broader context on how these payment disputes fit into the universe of common New York commercial litigation cases, and what they typically look like at the $1M-$10M range we handle, see our overview of NY business litigation services.

Does the Prompt Payment Act apply to renovations on a single-family home in Brooklyn?

Generally no. The Act covers private commercial construction contracts and excludes most small residential work. If you're a homeowner who hired a contractor to renovate your townhouse, you're more likely operating under GBL Article 36-A's home improvement contract rules, the Lien Law's residential mechanic's lien provisions, and basic contract law — not the Prompt Payment Act.

Can the parties contract out of the Prompt Payment Act?

Not entirely. GBL § 757 voids contractual attempts to waive or limit the Act's core protections, including the statutory deadlines and the right to interest on undisputed amounts. Parties can, however, agree to faster payment terms or to specific dispute-resolution procedures consistent with the Act.

What interest rate applies to late payments under the Act?

Interest accrues at 1% per month — roughly 12% annualized — on the undisputed unpaid amount, beginning the day after payment was due. That's notably higher than the 9% prejudgment statutory rate under CPLR § 5004 that applies to most other commercial breach claims in New York, which is one reason contractors should always plead prompt-payment claims where the facts support them.

Can I file a mechanic's lien and pursue a Prompt Payment Act claim at the same time?

Yes, and you generally should. The two remedies are cumulative. The lien attaches to the real property to secure your claim, while the Prompt Payment Act gives you interest, the right to suspend work, and an expedited path to resolution. Layering an Article 3-A trust-fund claim on top reaches the money personally where there's been diversion.

The New York Prompt Payment Act is one of the most underused tools in New York construction law. If you're a contractor or subcontractor sitting on six-figure unpaid requisitions, you have more leverage than you think — but only if you preserve it with clean invoices, proper notices, and timely lien filings. The clock starts the day you deliver the requisition, and every step you take before consulting counsel either strengthens or weakens the position you'll occupy six months from now.

If you or your business is dealing with a New York construction payment dispute, mechanic's lien issue, or trust-fund diversion, the team at Yassi Law PC is ready to help. Call us today at 646-992-2138 for a consultation.

Written by Reza Yassi | LinkedIn

This article is for informational purposes only and does not constitute legal advice. Although I am an attorney, I am not your attorney, and reading this article does not create an attorney-client relationship. Laws vary by jurisdiction and may have changed since the publication of this article. For advice specific to your situation, consult a qualified attorney.