Changes to The Pennsylvania Contractor and Subcontractor Payment Act (“CAPSA”) Are Coming, Effective November 18, 2018

The Pennsylvania Contractor and Subcontractor Payment Act 73 P.S. §501, et seq. (“CASPA”) is a means to ensure that contractors and/or subcontractors who make improvements to real property are paid in a timely manner, whether under the terms of a contract or under statute.  CASPA allows for interest, penalties, attorneys’ fees and expenses.  Originally enacted in 1994, CASPA is undergoing some changes to give the Act more teeth to contractors and subcontractors, and to close some loopholes.

CASPA provides that contractors and subcontractors are entitled to payment from the party with whom they contracted.  The Act specifies that the owner of the property must pay the contractor according to the terms of the contract.  It was enacted to cure abuses within the building industry involving payments due from owners to contractors and subcontractors and to encourage fair dealing among the parties to a construction contract.  Lomas v. Kravitz, 130 A.3d 107 (Pa. Super. 2015), appeal granted 147 A.3d 517, 637 Pa. 207, affirmed 170 A.3d 380.  However, it was time that the law be revised to correct some abuses still taking place.  One area that needed to be tweaked regards the written notice required for withholding payment due to “deficiency items.”

The text of the Act 27 of 2018 containing the revisions can be found here:  http://www.legis.state.pa.us/cfdocs/legis/li/uconsCheck.cfm?yr=2018&sessInd=0&act=27

Here is a summary of the changes:

  • Prohibition of Waivers. Except as specifically allowed under CASPA, the parties cannot waive rights allowed under the ACT.  Such waivers would be considered void.
  • Suspension of work.  An unpaid contractor or subcontractor can suspend performance without penalty if it is not paid in accordance with the Act’s requirements, and proper notice is provided.  Any contract provision exceeding the Act’s payment provisions will be unenforceable.
  • Deficiency items. Owners or contractors seeking to withhold payment for deficiencies must now do so in writing, extending the time from 7 days to 14 days under the amendments.  The written explanation must provide a good faith reason for non-payment,  and be in a reasonable amount.  Failure to comply with this provision “… shall constitute a waiver of the basis to withhold payment and necessitate payment of the contractor in full for the invoice.
  • Retainage.  If retainage is to be withheld beyond 30 days after final acceptance of the work, then an owner or contractor must provide written notice as required for deficiency items.  Alternatively, “Upon reaching substantial completion of its own scope of work, a contractor or subcontractor may facilitate the release of retainage on its contract before final completion of the project by posting a maintenance bond with approved surety for 120% of the amount of retainage being held.”

The changes take effect on November 12, 2018.