Passed in 2010, the Massachusetts Prompt Pay Statute imposed specific requirements on owners, contractors and subcontractors of private projects over $3M with regard to submitting, processing and approving requests for payment and change orders. A recent decision by the Massachusetts Superior Court entitled, Tocci v. IRIV Partners, LLC, et. al. has confirmed that Massachusetts Courts intend to strictly construe the Statute’s terms. In Tocci, the Court ordered the owner to pay the contractor disputed monies simply because the owner failed to timely and properly object to the contractor’s invoices. This decision will have serious and far reaching implications in the way large private construction projects in Massachusetts will be managed.
Overall Take-aways: The MA Construction Bar has been waiting for a decision interpreting how strictly the Statute would be interpreted since it was first adopted. Here, it is clear that MA court’s intend to strictly construe its terms. This decision is thus a loud warning bell for owners, their construction agents, their project managers and design professionals (who have construction phase responsibilities) to pay close attention to the Statute’s requirements. I believe that it will have serious and far reaching implications in the way private construction projects in Massachusetts (that are subject to the Statute’s requirements) will be managed. For your benefit, the following thoughts are prepared in a LESSONS LEARNED format:
- Pay attention to the Statute’s detailed requirements: E-mails vaguely objecting to or commenting upon deficiencies in a contractor’s pay requisitions are simply not enough to satisfy the Statute’s requirements.
- Underlying entitlement is not a factor in the Statutory analysis: While it is not clear from the decision as to whether the contractor was truly entitled to full payment on each requisition, the Court’s reasoning demonstrates that entitlement is not a factor that will be considered when analyzing the Statute’s applicability and enforcement.
- Pleading the Statute’s violations is not a requirement to enforcement: I was a little surprised by this. Nevertheless, it appears that even a failure to plead the Statute’s application or its remedy is not an obstacle to recovery.
- Unpaid contractors can’t waive the Statute’s applicability: It appears that a contractor need not insist that an owner provide the statutorily required explanation for its non-payment in order to take advantage of the Statute’s protections.
- An owner who fails to comply with the Statute waives its right to assert contract-based objections to payment: This is huge. The decision states on the bottom of p.12 that “whatever objections a project owner may have had under the Contract to the Requisitions were waived.” (Emphasis added). Thus, to the extent a contractor installs work that fails to follow the plans or specs and bills for its defective or non-conforming work, it will nevertheless be entitled to payment just because the owner missed a deadline, failed to include an adequate explanation as to why it is not paying, or failed to certify its rejection as being in good faith.