Arizona’s Prompt Pay Act sets hard deadlines for construction payments: on private projects, an owner has 14 days to approve or object to a billing and then 7 days to pay it, and every contractor and subcontractor who receives those funds has 7 days to pass the money down to the people they hired.1Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1129.01 Progress Payments Miss the deadline and interest starts accruing automatically at 1.5% per month on private work or 1% per month on public work. The rules reach every tier of the chain, so a second- or third-tier subcontractor has the same statutory protection as the prime.
Private Project Deadlines
Private commercial and residential construction is governed by A.R.S. § 32-1129.01. The payment clock runs in two steps.
Step one is review. When a contractor submits a billing or estimate, the owner has 14 days to either approve it or send a written objection explaining what is not approved and why.1Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1129.01 Progress Payments Silence counts against the owner. If nothing happens in 14 days, the billing is deemed certified and approved by operation of law. That rule exists to stop owners from stalling simply by ignoring invoices.
Step two is payment. Once the billing is certified and approved, whether expressly or by the 14-day default, the owner has 7 days to pay.1Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1129.01 Progress Payments The outside window for a clean invoice is therefore 21 days. The same 7-day deadline applies to retention release and final payment after their own billings go through the review cycle.
Payments must flow down the chain on their own 7-day clock. When a contractor or subcontractor receives a progress payment, retention release, or final payment, they have 7 days to pay the full amount owed to their own subcontractors and material suppliers, provided those parties have submitted a conforming billing and a conditional lien waiver for the work billed.2Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1183 Diverting funds received for subcontractor work is grounds for discipline by the Registrar of Contractors.
Public Project Deadlines
Public works projects run under a separate statute, A.R.S. § 34-221. Progress payments on certified estimates are due within 14 days after the estimate is certified and approved. The contractor then has 7 days after receiving each progress payment to pay subcontractors, design professionals, and material suppliers, unless the parties agree in writing to a different timeline.3Arizona Legislature. Arizona Revised Statutes Title 34 – Section 34-221
Retainage on public work is capped by statute. The agency withholds 10% of each progress estimate until the project reaches 50% completion with satisfactory progress, at which point the rate drops to 5% on subsequent payments. The 10% rate can be reinstated if progress later becomes unsatisfactory. Retained funds must be released within 60 days after final completion and acceptance, and any hold beyond 60 days requires a written explanation from the agency.3Arizona Legislature. Arizona Revised Statutes Title 34 – Section 34-221
Private-project retainage is looser. The owner may withhold a “reasonable amount” with no statutory percentage cap, and release follows the same 14-day deemed-approved review and 7-day payment clock as any other billing.1Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1129.01 Progress Payments
When Payment Can Be Withheld
Not every invoice has to be paid in full. A contractor or subcontractor can withhold all or part of a billing for a defined set of reasons, including unsatisfactory progress, defective or disputed work, failure to comply with other material contract terms, filed third-party claims or reasonable evidence that one is coming, the subcontractor’s own failure to pay for labor or materials, damage to the contractor or another subcontractor, and reasonable evidence that the remaining contract balance is not enough to finish the work.4Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1129.02 Performance and Payment If the owner has withheld retention from the contractor, the contractor’s retention withholding on a given subcontractor cannot exceed what the owner actually retained on that subcontractor’s work.
There is a procedural catch. The party withholding payment must issue a written statement within 14 days detailing the specific reasons for the deduction.4Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1129.02 Performance and Payment A vague notice or a late one weakens the justification. If you are the party being shorted, that 14-day deadline is worth watching.
Interest for Late Payment
Late payments carry mandatory statutory interest. On private projects, the rate is 1.5% per month, or roughly 18% annually, on the unpaid balance, or a higher rate if the contract specifies one.1Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1129.01 Progress Payments Contract language that tries to eliminate or reduce the statutory rate does not override it. Interest starts the day after the deadline passes, and for downstream payments it begins on the eighth day after a contractor or subcontractor receives funds.2Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1183
On public projects, the rate is 1% per month, or roughly 12% annually, and it applies to late payments at both the owner-to-contractor level and the contractor-to-subcontractor level.3Arizona Legislature. Arizona Revised Statutes Title 34 – Section 34-221 Either rate accrues automatically. You do not have to demand it or file anything for the obligation to exist.
Making Sure the Clock Starts
The statutory protections only engage when the billing is submitted correctly. Progress payments are based on a certified estimate of work performed and materials supplied during the preceding 30-day billing cycle, or whatever cycle the contract specifies.1Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1129.01 Progress Payments A proper billing shows completed tasks, materials stored on site, and the supporting documentation the contract requires, including conditional lien waivers where applicable.
Delivery matters as much as content. The invoice has to reach the specific person, office, or portal identified in the contract. If it goes somewhere else, the owner can argue the 14-day approval clock never started, which effectively hands them unlimited review time. This looks like paperwork until you try to collect interest and discover the deadline you were counting on never began.
Collecting When Payment Does Not Come
Arizona gives unpaid contractors and suppliers several enforcement options. Which one fits depends on the project type, the amount, and how much leverage you need.
Registrar of Contractors Complaint
Subcontractors and material suppliers can file a non-payment complaint with the Arizona Registrar of Contractors when a licensed contractor owes more than $750.5Arizona Registrar of Contractors. Non-Payment Complaint Form Filing requires posting a surety bond or cash deposit of $500 or half the amount owed, whichever is less. If the Registrar finds the complaint meritless and frivolous, the deposit is forfeited, with half going to the respondent and half to the state. A meritorious complaint can result in suspension or revocation of the contractor’s license, which is real leverage when you are trying to get paid.2Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1183
Mechanic’s Lien
Anyone who furnishes labor, professional services, materials, or equipment for a construction project has the right to record a mechanic’s lien against the improved property under A.R.S. § 33-981. A lien ties the debt to the real estate itself, so the owner has to deal with it regardless of where the payment broke down. Two restrictions sink a lot of claims: an unlicensed contractor who was required to be licensed has no lien rights, and anyone who was required to serve a preliminary 20-day notice must have actually delivered it to preserve the lien.6Arizona Legislature. Arizona Revised Statutes Title 33 – Section 33-981 Missing that preliminary notice is one of the most common ways subcontractors lose lien rights entirely.
Suspending Work
The Act preserves a subcontractor’s right to suspend performance or terminate the contract for nonpayment under A.R.S. § 32-1129.04.4Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1129.02 Performance and Payment Typically an unpaid party sends a notice of intent giving the defaulting party a window to cure before stopping work. Work stoppage creates schedule disruption that can invite counterclaims, so it tends to be a last step rather than a first one.
Lawsuit or Arbitration With Fee-Shifting
Recovering the unpaid principal and the accrued interest usually requires a lawsuit or arbitration. The statute includes a fee-shifting provision: the successful party in any action brought to collect payments or interest under A.R.S. § 32-1129.01 is awarded reasonable attorney’s fees and costs.1Arizona Legislature. Arizona Revised Statutes Title 32 – Section 32-1129.01 Progress Payments That provision cuts both ways. The cost of hiring a lawyer to collect what you are owed can be added to the judgment, and a party who brings a weak claim and loses can end up paying the other side’s legal bills. The symmetry is what pushes most legitimate disputes toward settlement.