Beginning in 2020 the Virginia General Assembly began instituting and implying mandatory clauses in commercial construction contracts to regulate the flow of payments between owners, general contractors, subcontractors, and material suppliers. Payment is statutorily required within 60 days of presentation of an invoice unless an owner gives 45 days' notice, or a contractor gives 50 days' notice of intent to withhold payments. The owner’s or owing contractor’s notice must be in writing, specifically identify the contractual non-compliance and the dollar amount being withheld.
The General Assembly voided any “pay when paid” or “pay if paid” provisions of commercial construction contracts by a general with a subcontractor and down the contracting tiers. The only time these clauses remain effective is when the party owing money to a contractor is insolvent by court order or under protection of the United States Bankruptcy Code. Interest on nonpayment is construed to begin seven days after presentation of the non-paid invoice to the owner or higher tier contractor and accrues at The Wall Street Journal daily published prime rate. These contractual terms are implied down any, and all tiers provided the project is other than a single-family residence and the value of the project is over $500,000.
Contract provision forcing a lower tier contractor to waive mechanic’s lien claims, payment bond claims or change order claims are void in any construction contract where these remedies are available, prior to furnishing any labor or materials.
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