State and Private Construction Contracts - Prompt Payment Requirements
The introduction of HB 1097 addresses long-standing issues in the construction sector regarding delays in payments and lack of transparency. By implementing timely payment requirements, the bill aims to protect contractors and subcontractors from financial strain caused by delayed payments. This legislation is expected to enhance the cash flow for contractors, thereby promoting financial stability within the construction industry. Moreover, it sets an expectation for both parties in the construction contract to maintain communication and provide justifications for payment withholdings.
House Bill 1097, titled 'State and Private Construction Contracts - Prompt Payment Requirements', seeks to establish clear payment timelines and requirements for contracts in the construction industry. The bill mandates that private construction contracts must include provisions that ensure the owner pays the contractor within specified periods. If any payment is withheld, the owner is required to provide written notification to the contractor detailing the withholding reasons. Additionally, the bill stipulates that if a contractor fails to pay a subcontractor as required, interest will accrue on unpaid amounts at a rate of 9% per annum, commencing on the 60th day following the receipt of an invoice.
While HB 1097 has the potential to significantly improve prompt payments within the construction sector, it has also sparked discussions around its implications for contractual relationships. Some stakeholders argue that the bill may impose an additional administrative burden on owners and contractors, particularly regarding the requirement for written notifications when payments are withheld. Concerns have also been raised about how these changes will affect negotiations and the overall dynamics between contractors and subcontractors, especially in cases where compliance may be contested.
The bill is set to take effect on October 1, 2023, if passed, marking a significant legislative effort to improve contract practices in Maryland's construction sector.