The Georgia Prompt Payment Act, codified at Title 13, Chapter 11 of the Georgia Code, sets deadlines for construction payments: a property owner has 15 days to pay the contractor after receiving a payment request, and the contractor then has 10 days to pay each subcontractor out of the funds received.1Justia. Georgia Code 13-11-4 – Time Limits for Payments to Contractors and Subcontractors Payments that miss those deadlines accrue statutory interest at 1% per month, and the prevailing party in a payment dispute can recover attorney’s fees.2Justia. Georgia Code 13-11-7 – Interest on Late Payments
Who the Act Covers
A “contractor” under the Act is anyone who contracts with an owner to improve real property or perform construction services. A “subcontractor” is anyone furnishing labor or materials to a contractor or another subcontractor, and the definition explicitly includes materialmen who supply materials and equipment.3Justia. Georgia Code 13-11-2 – Definitions “Owner” covers private parties and government entities at the state, local, and municipal level, so both public and private projects fall under the Act.
Two carve-outs matter. The Act does not apply to residential projects of 12 or fewer units.4Justia. Georgia Code 13-11-10 – Improvements Excepted from Chapter Counties with populations below 10,000 and municipalities under 2,500 (by the decennial census) are not treated as “owners” under the Act, so projects for those small governments fall outside it.3Justia. Georgia Code 13-11-2 – Definitions The Act only reaches contracts entered into on or after January 1, 1995.5Justia. Georgia Code 13-11-11 – Applicability of Chapter
The 15-Day and 10-Day Payment Deadlines
Payment moves in two stages. When a contractor submits a payment request based on completed work, the owner has 15 days to pay. Once the contractor actually receives those funds, the contractor has 10 days to pay each subcontractor the full amount received for that subcontractor’s work and materials. A subcontractor that hires lower-tier subcontractors faces the same 10-day window after receiving funds.1Justia. Georgia Code 13-11-4 – Time Limits for Payments to Contractors and Subcontractors
“Receipt” under the Act means actual receipt of cash or funds in the recipient’s bank account, not the date a check is mailed or an invoice approved.3Justia. Georgia Code 13-11-2 – Definitions The 10-day clock for paying downstream does not start running until the money lands.
These timelines are defaults. The parties can agree to different payment periods by contract, and those terms will control. If a party willfully breaches the agreed-upon payment terms, however, the statutory 1% monthly interest rate applies regardless of what the contract says.2Justia. Georgia Code 13-11-7 – Interest on Late Payments
Retainage
Retainage is the portion of each payment that the owner holds back as security until the project is substantially complete. Under the Act, the owner can withhold a reasonable retainage, but no more than the percentage set out in the contract between the owner and the contractor.6FindLaw. Georgia Code Title 13 Contracts 13-11-5 A contractor or subcontractor can hold retainage from its own subcontractors, but the percentage withheld cannot exceed what the owner is withholding on account of that subcontractor’s work.
When the owner begins releasing retainage, the contractor has 10 days to pass those funds through and must reduce each subcontractor’s retainage proportionally. The pass-through obligation only applies once the subcontractor’s completed work equals at least 50% of the subcontract value (including approved change orders) and the work is proceeding satisfactorily.7Justia. Georgia Code 13-11-6 – Conditions Authorizing Payments
When Payment Can Be Withheld
The Act lists specific grounds that let an owner hold back money from a contractor. Withholding outside these grounds risks interest penalties. The permitted reasons are:
- Unsatisfactory job progress
- Defective construction that has not been remedied
- Disputed work
- Third-party claims that have been filed, or reasonable evidence that one will be filed
- Failure to make timely payments to subcontractors, laborers, or material suppliers
- Damage caused by the contractor to the owner or others on the project
- Reasonable evidence that the contract cannot be completed for the remaining unpaid balance
Contractors and subcontractors can withhold payment from their own subcontractors on the same grounds.6FindLaw. Georgia Code Title 13 Contracts 13-11-5 The “failure to pay” ground does real work in practice: if a subcontractor has unpaid vendors, those vendors may lien the property, and an owner or contractor holding funds until lien waivers are produced is operating within the Act.
Interest and Attorney’s Fees
Late payments accrue interest at 1% per month (12% annually) beginning the day after the payment was due.2Justia. Georgia Code 13-11-7 – Interest on Late Payments There is a catch. The interest is only available if the unpaid party notified the paying party of the statutory interest provision at the time the payment request was submitted. Skip the notice and the interest is forfeit. A one-line reference to O.C.G.A. § 13-11-7 on every pay application is cheap protection.
The second trap sits at the other end of the transaction. Accepting a progress payment or final payment releases all claims for interest on that payment.2Justia. Georgia Code 13-11-7 – Interest on Late Payments If interest is owed, reserve the claim in writing before depositing the check.
In any action or arbitration to enforce a claim under the Act, the prevailing party can recover reasonable attorney’s fees, including fees at trial, on appeal, and in arbitration.8FindLaw. Georgia Code Title 13 Contracts 13-11-8 The statute says “prevailing party,” not “unpaid claimant.” A contractor who withholds payment for legitimate reasons and wins can recover fees too. The remedies under the Act are not exclusive; other rights available under the contract or Georgia law remain intact.9FindLaw. Georgia Code Title 13 Contracts 13-11-9
Pay-When-Paid and Pay-If-Paid Clauses
Construction contracts in Georgia often include contingent payment clauses that can reshape how the Act’s deadlines play out. A “pay-when-paid” clause treats the owner’s payment to the contractor as a timing mechanism: the subcontractor will be paid within a reasonable time after the contractor is paid. A “pay-if-paid” clause goes further, making the owner’s payment a condition precedent to any obligation to pay the subcontractor at all. If the owner never pays, the subcontractor never gets paid.
Georgia courts have recognized pay-if-paid clauses as enforceable when the contract language is clear and unambiguous in establishing owner payment as a true condition precedent. Vague language is typically read as a pay-when-paid clause, which affects timing but not the right to payment. The practical effect of a well-drafted pay-if-paid clause is to shift the owner’s insolvency risk down the chain, so subcontractors should read these provisions carefully before signing.
What to Do When Payment Is Late
Start with a demand letter. Identify the amount owed, the statutory deadline that was missed, and the 1% monthly interest that is accruing, and cite O.C.G.A. § 13-11-7. Many disputes resolve at this stage, because the paying party faces 12% annual interest plus the other side’s attorney’s fees if the matter goes further.
If a demand does not produce payment, the next move depends on the project type. On private projects, a mechanic’s lien under Title 44, Chapter 14 clouds the property title and creates leverage, but the lien must be filed within 90 days after the claimant last furnished labor or materials, and strict content and notice rules apply.10Justia. Georgia Code 44-14-361.1 – How Liens Declared and Created Mechanic’s liens do not attach to government-owned property, so on public works projects the equivalent remedy is a claim against the contractor’s payment bond, available to an unpaid subcontractor 90 days after completing work or the last delivery of materials, with earlier written notice required from parties that lack a direct contract with the bonded contractor.11Justia. Georgia Code 13-10-63 – Pursuit of Claim on Payment Bond or Security Deposit
A breach of contract action under the Prompt Payment Act itself allows recovery of the unpaid amount, statutory interest, and attorney’s fees.8FindLaw. Georgia Code Title 13 Contracts 13-11-8 Because the losing side pays the winner’s legal costs, suit remains a credible option even for smaller amounts.