Page 32 - Network Magazine Spring 2019
P. 32

      CASPA the Friendly Law (For Contractors)
JOSHUA A. GILDEA, ESQ.
FITZPATRICK LENTZ & BUBBA, P.C.
For more than twenty years the Contractor and Subcon- tractor Payment Act (CASPA) has been a law in Pennsyl- vania providing a tool for Contractors and Subcontractors to get paid. Conflict between Owners, Prime Contractors, Subcontractors, and subs of subs is a common occurrence in the realm of construction law. CASPA provides a pow- erful weapon for Contractors and Subcontractors whose work is performed but who do not receive payment with- out a bona fide dispute. On the flip side, Owners of real es- tate who hire construction professionals need to be care- ful if there are disputes when it comes time to pay the bill.
Any time one person hires another and doesn’t pay, the unpaid party can bring a lawsuit seeking payment. CASPA has long provided unpaid Contractors with additional rem- edies above and beyond what is available to other claim- ants. It allows the unpaid party to seek not only the unpaid amounts but also a penalty equal to 1% per month of the amount unpaid, 1% interest per month, and attorney's fees.
That is, taken together, CASPA adds a total of 24% per year to the principal amount owed to Contractors and Subcontractors. That is no small thing, and well in excess of the ordinary time value of money. Additionally, the abil- ity of Contractors and Subcontractors to seek their attor- ney's fees is a powerful remedy. Ordinarily, in the Ameri- can legal system, each side pays their own attorney's fees irrespective of who ultimately prevails in the litigation. Ac- counting for these costs usually provides defendants with leverage in negotiating how much they might ultimately pay. By providing this remedy, CASPA puts a thumb on the scales for unpaid Contractors in these negotiations.
That being said, CASPA also provides some protec- tions for Owners to help prevent this leverage from being used unfairly. First, an Owner is permitted to withhold payment for a "deficiency item," defined as
Construction work which has been performed but which the Owner, the Contractor, or the inspector will not
certify as being completed according to the specifica- tions of the construction contract. Where work is not yet completed or performed improperly, the Owner can withhold payment, provided that the Owner notifies the Contractor of the deficiency within fourteen days after receiving the invoice and pays for the completed portion of the work. CASPA also provides Contractors with similar protection as to claims made by their subs.
Although CASPA has been on the books since 1994, in 2018 it was expanded and strengthened. Penn- sylvania Governor Tom Wolf signed a new law that overhauled CASPA and expands the remedies avail- able to unpaid Contractors and Subcontractors. These changes became effective as of October 10, 2018.
One primary update is that CASPA’s protections ex- pressly cannot be waived by contract. That is, even if an Owner has the leverage to insist that a Contrac- tor waive its CASPA rights in a written contract, that provision would not be valid or enforceable. The Contractor could still pursue, for example, the interest, penalty, and attorney’s fees remedies for unpaid work.
An additional caveat in the updated CASPA is that a Con- tractor or Subcontractor is expressly authorized to stop performance until payment is received. An Owner is en- titled to withhold payment if the work is deficient, but now the Owner is required to provide notice regarding the de- ficiency which allegedly justifies nonpayment within four- teen (14) calendar days of receipt of the disputed invoice. Owners will need to ensure that they observe this provi- sion and provide prompt notice of deficient work along with an explanation of why they are withholding payment. An Owner who fails to provide written notice may waive their right to withhold payment for the deficient work.
The updated CASPA also deals with retainage. Retainage, sometimes called retention, is a common concept in the construction industry, where a portion of the contract price
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