Client Alerts
July 24, 2007

To Receive Interest on Late Payments Under the Kentucky Fairness in Construction Act

Stites & Harbison, PLLC, July 24, 2007

by Stites & Harbison, PLLC

The recently enacted Kentucky Fairness in Construction Act offers relief to aggrieved contractors awaiting late payments from dilatory owners, or subcontractors waiting for contractors to pay. The Act provides that owners must pay contractors within 30 business days after receipt of an undisputed payment application, or 12% interest will apply. Likewise, contractors must pay subcontractors within 15 business days after receipt of payment from an owner or 12% interest will apply, except in the case of a good faith dispute.
Contractors should take note, however, that they must take action within 25 business days after submission of a "timely, properly completed and undisputed request for payment" or they will not receive the benefit of the interest rate on late payments provided for in the new statute. The contractor must:

1. Send the owner written notice,
2. Via certified mail, return receipt requested
3. The notice must state when interest begins to run on unpaid sums due
4. And the notice must be sent 25 business days after submission of the application.

It is significant that subcontractors are not required to provide similar notice to contractors before interest attaches.

The Act applies to both private and public projects.

To be forewarned is to be forearmed. If you are a contractor, do not let the notice deadline slip by. If you're an owner, lack of notice may be a defense to interest attaching to late payments under the statute.

Related Capabilities
Health Care - Construction