North Carolina Prompt Payment Guide and FAQs

Ready? Build Your Free North Carolina
Prompt Payment Now

Make Your Prompt Payment Demand Now
North-Carolina-Prompt-Payment-FAQ

North Carolina Prompt Payment Overview

North Carolina Prompt Payment Requirements


NO
DAYS
Prime Contractors

Not specified in state statutes


7
DAYS
Subcontractors

For Subcontractors, payment due within 7 days after payment received from above.


7
DAYS
Suppliers

For Suppliers, payment due within 7 days after payment received from above.


1%
/ MONTH
Interest & Fees

Interest at 1% month

45
DAYS
Prime Contractors

For Prime (General) Contractors, progress payments are due pursuant ot the contract. Final/Retainage payment due within 45 days after the earlier of acceptance or occupancy.


7
DAYS
Subcontractors

For Subcontractors, payment due within 7 days after receipt of payment from above.


7
DAYS
Suppliers

For Suppliers, payment due within 7 days after receipt of payment from above.


1%
/ MONTH
Interest & Fees

Interest at 1% month, unless a lower rate is agreed to in the contract.

Prompt payment laws are a set of rules that regulate the acceptable amount of time in which payments must be made to contractors and subs. This is to ensure that everyone on a construction project is paid in a timely fashion. These statutes provide a framework for the timing of payments to ensure cash flow and working capital.

Projects Covered by Prompt Payment in North Carolina

The state of North Carolina’s prompt payment provisions are split into two sections, covering both private and public projects. These statutes govern the timing of all payments on construction projects, and impose penalties for late payment in the form of interest.

Private Projects

Private construction projects within the state of North Carolina are governed by N.C. Gen. Stat. §§22C-1 et seq. These rules cover all private projects except residential projects of 12 or fewer units.

Payment Deadlines for Private Projects

Payments from the property owner to the prime contractor are not covered by the prompt payment provisions. Therefore, they will be governed by the terms of the contract between the parties. As for all other payments to subcontractors and suppliers, these must be made within 7 days of the higher-tiered party’s receipt of payment.

Penalties for Late Payment on Private Projects

The prompt payment provisions offer some circumstances where payment can be properly withheld. However, barring any of those reasons, if payment is late or otherwise wrongfully withheld, the unpaid balance will be subject to interest penalties at a rate of 1% per month, until the party is paid.

Public Projects

Payments on public works projects in North Carolina are regulated by N.C. Gen. Stat. §§143-134, 143-134.1, and 143-135. All public construction projects are subject to these rules, with the exception of those involving roads, bridges, and their approaches.

Payment Deadlines for Public Projects

Progress payments from the public entity to the prime contractor must be made according to the terms of the contract. As for final payments from the entity, these must be made within 45 days of either the acceptance of the project, or occupancy of the improvement; whichever is earlier. All other payments to subcontractors and suppliers must be made within 7 days of the higher-tiered party’s receipt of payment.

Penalties for Late Payment on Public Projects

Like private projects, there is a similar list of reasons when payments can be properly withheld. If none of these exist and payment is either late or wrongfully withheld, the unpaid balance will be subject to interest penalties accruing at a rate of 1% per month, unless a lower rate is agreed upon in the contract.

North Carolina Quick Guide to Prompt Payment

North Carolina Prompt Payment Frequently Asked Questions

North Carolina Prompt Payment Private Projects FAQs

What types of private projects are subject to North Carolina’s Prompt Payment laws?

North Carolina’s prompt payment laws apply to all private construction projects except residential projects of 12 units or fewer.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

When do payments become due under North Carolina’s Prompt Payment laws?

Performance in accordance with the contract provisions entitles the subcontractor to payment from the contracting party.

There are no provisions covering payments to general (direct) contractors, only subcontractors are specifically protected.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

When is the deadline for payments under North Carolina’s Prompt Payment laws?

Payment to subcontractors must be made within 7 days of receipt of each progress or final payment from the owner or other higher-tiered contractor (where applicable).

There are no provisions covering payments to general (direct) contractors, only subcontractors are specifically protected.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

Are there reasons for which payment may be withheld past the general deadline?

Yes. North Carolina allows a contractor to withhold payment for the following reasons:

• Unsatisfactory job progress

• Defective work not remedied

• Disputed work

• Third-party claims filed or reasonable evidence that claim will be filed

• Failure of a subcontractor to make timely payments

• Damage to the contractor or subcontractor

• Reasonable evidence that subcontract can’t be completed for the unpaid balance of the subcontract sum

• Reasonable amount of retainage, not to exceed the initial percentage retained.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

If I am paid late according to the Prompt Payment laws, can I obtain interest or other penalties?

If payment isn’t made pursuant to the North Carolina prompt payment provisions, interest penalties will begin to accrue at a rate of 1% per month until payment is made.

• See the answer to this NC contractor’s question: When can I charge interest?

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

Can I include Prompt Payment fees in my North Carolina mechanics lien claim?

No, North Carolina does not allow any miscellaneous amounts to be included on the face of an NC mechanics lien.

• For more on this see: Lien Amounts: What can be included?

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

What is the best practice for making a demand to a non-paying party to get Prompt Payment fees?

Sending a Notice of Intent to Lien and a Prompt Payment Demand letter is generally the best method for encouraging parties to make payment. If payment still isn’t forthcoming, a lawsuit may be necessary.

• For more on this, see: How to Make a Claim Under Prompt Payment Laws

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

North Carolina Prompt Payment Public Projects FAQs

What types of public projects are subject to North Carolina’s Prompt Payment laws?

The North Carolina prompt payment laws apply to the following projects:

• State projects values at $125,000 or more, or when the total cost of labor is $50,000 or more

• Political subdivision projects valued at $500,000 or more, or when the total cost of labor is $200,000 or more

• University of North Carolina projects valued at $200,000 or more, or when the total cost of labor is $100,000 or more.

The prompt payment provisions do not apply to the construction of roads, bridges, or their approaches.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

When do payments become due under North Carolina’s Prompt Payment laws?

Progress payments become “due” according to the terms of the prime contract. Final payments will become due when one of the following events occurs:

• Acceptance by the public entity/owner;

• Certification of completion according to the plans and specifications by the architect, engineer, or designer; or

• Occupied by the public entity/owner for the purpose for which the project was constructed.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

When is the deadline for payments under North Carolina’s Prompt Payment laws?

Public entity to contractor

Progress payments must be made according to the provisions of the contract. Final payments from the public entity to the prime contractor must be made within 45 days of becoming due (see above).

Contractor to subs/suppliers

Upon receipt of payment from the higher-tiered party, payments must be made to that party’s subcontractors and/or suppliers within 7 days.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

Are there reasons for which payment may be withheld past the general deadline?

The public entity may withhold payment for the following reasons:

• Unsatisfactory job progress;

• Defective work not remedied;

• Disputed work; or

• Third party claims filed against the entity or reasonable evidence that one will be filed.

Contractors are allowed to withhold payment for the following reasons:

• Unsatisfactory job progress;

• Defective work not remedied;

• Disputed work;

• Third party claims filed against the entity or reasonable evidence that one will be filed;

• Failure to make timely payments;

• Damage to the contractor or other subcontractors;

• Reasonable evidence that the subcontractor can’t be completed for the unpaid balance of the contract sum; or

• Reasonable amount of retainage not to exceed the initial percentage retained by the public entity.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

If I am paid late according to the Prompt Payment laws, can I obtain interest or other penalties?

If payment isn’t made to the prime contractor pursuant to the NC prompt payment provisions, interest penalties will begin to accrue at a rate of 1% per month until payment is made, unless a lower rate is provided by the prime contract.

Late payments to subcontractors will begin to accrue interest at a rate of 1% per month until payment is made.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

Can I include Prompt Payment fees in my North Carolina bond claim?

No, North Carolina does not allow any miscellaneous amounts to be included on the face of an NC bond claim.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

What is the best practice for making a demand to a non-paying party to get Prompt Payment fees?

Sending a Notice of Intent to Make a Bond Claim and a Prompt Payment Demand letter is generally the best method for encouraging parties to make payment. If payment still isn’t forthcoming, a lawsuit may be necessary.

• For more on this, see: How to Make a Claim Under Prompt Payment Laws

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

Need More Help with North Carolina Prompt Payment? We're Here.

Ask an expert for free

Check out our payment experts
Construction attorneys: Courtney Stricklen, Christopher Ng, Andrea Goldman, and Peter Ryan

North Carolina Prompt Payment
Recent Questions & Answers

technology sub-contractor, non payment by prime, north carolina

Does the North Carolina prompt payment act only apply to construction contracts. I am a sub-contractor in information technology and having an issue where prime contractor is not paying timely even after receiving payment from the client

When can I charge interest?

Late/slow paying companies

Customer is asking to sign a subcontractor's/supplier's affidavit of interim payment and release of lien form. What are the implications of signing it or not signing it?

Hello, Customer is asking to sign a lien waiver with language that states: In consideration of the progress payment of $x the receipt and sufficiency of which are hereby acknowledged, the undersigned and subcontractor or supplier for the above project warrants and represents to Contractor and to...

How to file a lien in North Carolina

Need to file a North Carolina mechanics lien? File your mechanics lien with Levelset, the lien experts quickly and easily. Or you can follow the 3 steps below to file a lien yourself with Levelset’s free information.
Step 2
Download your North Carolina Mechanics Lien Form
Step 3 Find your North Carolina County Recorder
See all North Carolina Counties
File with the Mechanics Lien Experts
Product screenshot suggesting a found material supplier on a project details screen.
We’re the Mechanics Lien experts. With us it’s fast, easy, affordable, and done right!
File Now

Want to Learn More about How North Carolina Contractors Pay?
Progress Residential
Rating 5.0
D.R. Horton
Rating 5.0
SteelFab Inc
Rating 5.0
Core & Main
Rating 5.0
See other Lists of Contractors and How to Best Work With Them

North Carolina Prompt Payment Statutes

Getting informed about prompt payment laws is important. An examination of North Carolina’s prompt payment laws, the rules and regulations related to payment timing, is important to know your rights and responsibilities as a party on a construction project. North Carolina’s specific laws can be found in: N.C. Gen. Stat. §§ 22C-1 to 22C-6 for private projects and N.C. Gen. Stat. §§143-134 to 143-135 for public projects, and are reproduced below. Updated as of 2020.

Prompt Payment Statute on Private Projects

§ 22C-1. Definitions

Unless the context otherwise requires in this Chapter:

(1) “Contractor” means a person who contracts with an owner to improve real property.

(2) “Improve” means to build, effect, alter, repair, or demolish any improvement upon, connected with, or on or beneath the surface of any real property, or to excavate, clear, grade, fill or landscape any real property, or to construct driveways and private roadways, or to furnish materials, including trees and shrubbery, for any of such purposes, or to perform any labor upon such improvements, and shall also mean and include any design or other professional or skilled services furnished by architects, engineers, land surveyors and landscape architects registered under Chapters 83A, 89C or 89A of the General Statutes.

(3) “Improvement” means all or any part of any building, structure, erection, alteration, demolition, excavation, clearing, grading, filling, or landscaping, including trees and shrubbery, driveways, and private roadways, on real property.

(4) An “owner” is a person who has an interest in the real property improved and for whom an improvement is made and who ordered the improvement to be made. “Owner” includes successors in interest of the owner and agents of the owner acting within their authority.

(5) “Real property” means the real estate that is improved, including lands, leaseholds, tenements and hereditaments, and improvements placed thereon.

(6) “Subcontractor” means any person who has contracted to furnish labor or materials to, or has performed labor for, a contractor or another subcontractor in connection with a contract to improve real property.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

§ 22C-2. Performance by subcontractor

Performance by a subcontractor in accordance with the provisions of its contract shall entitle it to payment from the party with whom it contracts.  Payment by the owner to a contractor is not a condition precedent for payment to a subcontractor and payment by a contractor to a subcontractor is not a condition precedent for payment to any other subcontractor, and an agreement to the contrary is unenforceable.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

§ 22C-3. Time of payment to subcontractors after contractor or other subcontractor has been paid.

When a subcontractor has performed in accordance with the provisions of his contract, the contractor shall pay to his subcontractor and each subcontractor shall pay to his subcontractor, within seven days of receipt by the contractor or subcontractor of each periodic or final payment, the full amount received for such subcontractor’s work and materials based on work completed or service provided under the subcontract.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

§ 22C-4. Conditions of payment.

Nothing in this Chapter shall prevent the contractor, at the time of application and certification to the owner, from withholding such application and certification to the owner for payment to the subcontractor for:  unsatisfactory job progress; defective construction not remedied; disputed work; third party claims filed or reasonable evidence that claim will be filed; failure of subcontractor to make timely payments for labor, equipment, and materials; damage to contractor or another subcontractor; reasonable evidence that subcontract cannot be completed for the unpaid balance of the subcontract sum; or a reasonable amount for retainage not to exceed the initial percentage retained by the owner.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

§ 22C-5. Late payments to bear interest

Should any periodic or final payment to a subcontractor be delayed by more than seven days after receipt of periodic or final payment by the contractor or subcontractor, the contractor or subcontractor shall pay his subcontractor interest, beginning on the eighth day, at the rate of one percent (1%) per month or a fraction thereof on such unpaid balance as may be due.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

§ 22C-6. Applicability of this Chapter

The provisions of this Chapter shall not be applicable to residential contractors as defined in G.S. 87 10(1a), or to improvements to real property intended for residential purposes which are exempted from the application of Chapter 83A of the General Statutes pursuant to G.S. 83A-13(c)(1), or to improvements to real property intended for residential purposes which consist of 12 or fewer residential units.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

Prompt Payment Statute on Public Projects

§ 143-134. Applicable to Department of Transportation and Department of Public Safety; exceptions; all contracts subject to review by Attorney General and State Auditor

(a) This Article applies to the Department of Transportation and the Department of Public Safety except in the construction of roads, bridges and their approaches; provided however, that whenever the Director of the Budget determines that the repair or construction of a building by the Department of Transportation or by the Department of Public Safety can be done more economically through use of employees of the Department of Transportation and/or prison inmates than by letting the repair or building construction to contract, the provisions of this Article shall not apply to the repair or construction.

(b) Notwithstanding subsection (a) of this section, the Department of Transportation and the Department of Public Safety shall:

(i) submit all proposed contracts for supplies, materials, printing, equipment, and contractual services that exceed one million dollars ($1,000,000) to the Attorney General or the Attorney General’s designee for review as provided in G.S. 114-8.3; and

(ii) include in all contracts to be awarded by the Department of Transportation or the Department of Public Safety a standard clause providing that the State Auditor and internal auditors of the Department of Transportation or the Department of Public Safety may audit the records of the contractor during and after the term of the contract to verify accounts and data affecting fees and performance. Neither the Department of Transportation nor the Department of Public Safety shall award a cost plus percentage of cost agreement or contract for any purpose.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

§ 143-134.1. Interest on final payments due to prime contractors; payments to subcontractors

(a) On all public construction contracts which are let by a board or governing body of the State government or any political subdivision thereof, except contracts let by the Department of Transportation pursuant to G.S. 136-28.1, the balance due prime contractors shall be paid in full within 45 days after respective prime contracts of the project have been accepted by the owner, certified by the architect, engineer or designer to be completed in accordance with terms of the plans and specifications, or occupied by the owner and used for the purpose for which the project was constructed, whichever occurs first. However, when the architect or consulting engineer in charge of the project determines that delay in completion of the project in accordance with terms of the plans and specifications is the fault of the contractor, the project may be occupied and used for the purposes for which it was constructed without payment of any interest on amounts withheld past the 45 day limit.

No payment shall be delayed because of the failure of another prime contractor on the project to complete his contract. Should final payment to any prime contractor beyond the date the contracts have been certified to be completed by the designer or architect, accepted by the owner, or occupied by the owner and used for the purposes for which the project was constructed, be delayed by more than 45 days, the prime contractor shall be paid interest, beginning on the 46th day, at the rate of one percent (1%) per month or fraction thereof unless a lower rate is agreed upon on the unpaid balance as may be due. In addition to the above final payment provisions, periodic payments due a prime contractor during construction shall be paid in accordance with the provisions of this section and the payment provisions of the contract documents that do not conflict with this section, or the prime contractor shall be paid interest on any unpaid amount at the rate stipulated above for delayed final payments. The interest shall begin on the date the payment is due and continue until the date on which payment is made. The due date may be established by the terms of the contract. Funds for payment of the interest on state-owned projects shall be obtained from the current budget of the owning department, institution, or agency. Where a conditional acceptance of a contract exists, and where the owner is retaining a reasonable sum pending correction of the conditions, interest on the reasonable sum shall not apply.

(b) Within seven days of receipt by the prime contractor of each periodic or final payment, the prime contractor shall pay the subcontractor based on work completed or service provided under the subcontract. If any periodic or final payment to the subcontractor is delayed by more than seven days after receipt of periodic or final payment by the prime contractor, the prime contractor shall pay the subcontractor interest, beginning on the eighth day, at the rate of one percent (1%) per month or fraction thereof on the unpaid balance as may be due.

(b1) No retainage on periodic or final payments made by the owner or prime contractor shall be allowed on public construction contracts in which the total project costs are less than one hundred thousand dollars ($100,000). Retainage on periodic or final payments on public construction contracts in which the total project costs are equal to or greater than one hundred thousand dollars ($100,000) is allowed as follows:

(1) The owner shall not retain more than five percent (5%) of any periodic payment due a prime contractor.

(2) When the project is fifty percent (50%) complete, the owner, with written consent of the surety, shall not retain any further retainage from periodic payments due the contractor if the contractor continues to perform satisfactorily and any nonconforming work identified in writing prior to that time by the architect, engineer, or owner has been corrected by the contractor and accepted by the architect, engineer, or owner. If the owner determines the contractor’s performance is unsatisfactory, the owner may reinstate retainage for each subsequent periodic payment application as authorized in this subsection up to the maximum amount of five percent (5%). The project shall be deemed fifty percent (50%) complete when the contractor’s gross project invoices, excluding the value of materials stored off-site, equal or exceed fifty percent (50%) of the value of the contract, except the value of materials stored on-site shall not exceed twenty percent (20%) of the contractor’s gross project invoices for the purpose of determining whether the project is fifty percent (50%) complete.

(3) A subcontract on a contract governed by this section may include a provision for the retainage on periodic payments made by the prime contractor to the subcontractor. However, the percentage of the payment retained:

(i) shall be paid to the subcontractor under the same terms and conditions as provided in subdivision (2) of this subsection and

(ii) subject to subsection (b3) of this section, shall not exceed the percentage of retainage on payments made by the owner to the prime contractor. Subject to subsection (b3) of this section, any percentage of retainage on payments made by the prime contractor to the subcontractor that exceeds the percentage of retainage on payments made by the owner to the prime contractor shall be subject to interest to be paid by the prime contractor to the subcontractor at the rate of one percent (1%) per month or fraction thereof.

(4) Within 60 days after the submission of a pay request and one of the following occurs, as specified in the contract documents, the owner with written consent of the surety shall release to the contractor all retainage on payments held by the owner:

(i) the owner receives a certificate of substantial completion from the architect, engineer, or designer in charge of the project; or

(ii) the owner receives beneficial occupancy or use of the project. However, the owner may retain sufficient funds to secure completion of the project or corrections on any work. If the owner retains funds, the amount retained shall not exceed two and one-half times the estimated value of the work to be completed or corrected. Any reduction in the amount of the retainage on payments shall be with the consent of the contractor’s surety.

(5) The existence of any third-party claims against the contractor or any additive change orders to the construction contract shall not be a basis for delaying the release of any retainage on payments.

(b2) Full payment, less authorized deductions, shall also be made for those trades that have reached one hundred percent (100%) completion of their contract by or before the project is fifty percent (50%) complete if the contractor has performed satisfactorily. However, payment to the early finishing trades is contingent upon the owner’s receipt of an approval or certification from the architect of record or applicable engineer that the work performed by the subcontractor is acceptable and in accordance with the contract documents. At that time, the owner shall reduce the retainage for such trades to five-tenths percent (0.5%) of the contract. Payments under this subsection shall be made no later than 60 days following receipt of the subcontractor’s request or immediately upon receipt of the surety’s consent, whichever occurs later. Early finishing trades under this subsection shall include structural steel, piling, caisson, and demolition. The early finishing trades for which line-item release of retained funds is required shall not be construed to prevent an owner or an owner’s representative from identifying any other trades not listed in this subsection that are also allowed line-item release of retained funds. Should the owner or owner’s representative identify any other trades to be afforded line-item release of retainage, the trade shall be listed in the original bid documents. Each bid document shall list the inspections required by the owner before accepting the work, and any financial information required by the owner to release payment to the trades, except the failure of the bid documents to contain this information shall not obligate the owner to release the retainage if it has not received the required certification from the architect of record or applicable engineer.

(b3) Notwithstanding subdivisions (2) and (3) of subsection (b1) of this section, and subsection (b2) of this section, following fifty percent (50%) completion of the project, the owner shall be authorized to withhold additional retainage from a subsequent periodic payment, not to exceed five percent (5%) as set forth in subdivision (1) of subsection (b1) of this section, in order to allow the owner to retain two and one-half percent (2.5%) total retainage through the completion of the project. In the event that the owner elects to withhold additional retainage on any periodic payment subsequent to release of retainage pursuant to subsection (b2) of this section, the general contractor may also withhold from the subcontractors remaining on the project sufficient retainage to offset the additional retainage held by the owner, notwithstanding the actual percentage of retainage withheld by the owner of the project as a whole.

(b4) Neither the owner’s nor contractor’s release of retainage on payments as part of a payment in full on a line-item of work under subsection (b2) of this section shall affect any applicable warranties on work done by the contractor or subcontractor, and the warranties shall not begin to run any earlier than either the owner’s receipt of a certificate of substantial completion from the architect, engineer, or designer in charge of the project or the owner receives beneficial occupancy.

(b5) The State or any political subdivision of the State may allow contractors to bid on bonded projects with and without retainage on payments.

(b6) Nothing in subsections (b1), (b2), (b3), and (b4) of this section shall operate to prevent any agency or any political subdivision of the State from complying with the requirements of a federal contract or grant when the requirements of the federal contract or grant conflict with subsections (b1), (b2), (b3), or (b4) of this section. Each bid document must specify when federal preemption of this section shall apply.

(c) Repealed by Session Laws 2007-365, s. 1, effective January 1, 2008.

(d) Nothing in this section shall prevent the prime contractor at the time of application and certification to the owner from withholding application and certification to the owner for payment to the subcontractor for unsatisfactory job progress; defective construction not remedied; disputed work; third party claims filed or reasonable evidence that claim will be filed; failure of subcontractor to make timely payments for labor, equipment, and materials; damage to prime contractor or another subcontractor; reasonable evidence that subcontract cannot be completed for the unpaid balance of the subcontract sum; or a reasonable amount for retainage not to exceed the initial percentage retained by the owner.

(e) Nothing in this section shall prevent the owner from withholding payment to the contractor in addition to the amounts authorized by this section for unsatisfactory job progress, defective construction not remedied, disputed work, or third-party claims filed against the owner or reasonable evidence that a third-party claim will be filed.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

§ 143-134.2. Actions by contractor on behalf of subcontractor

(a) A contractor may, on behalf of a subcontractor of any tier under the contractor, file an action against an owner regarding a claim arising out of or relating to labor, materials, or services furnished by the subcontractor to the contractor pursuant to a contract between the subcontractor and the contractor for the same project that is the subject of the contract between the contractor and the owner.

(b) In any action filed by a contractor against an owner under subsection (a) of this section, it shall not be a defense that the costs and damages at issue were incurred by a subcontractor and that subcontractor has not been paid for these costs and damages. The owner shall not be required to pay the contractor for the costs and damages incurred by a subcontractor, unless the subcontractor submits proof to the court that the contractor has paid these costs and damages to the subcontractor.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

§ 143-134.3. No damage for delay clause

No contractual language forbidding or limiting compensable damages for delays caused solely by the owner or its agent may be enforced in any construction contract let by any board or governing body of the State, or of any institution of State government, or of any county, city, town, or other political subdivision thereof. For purposes of this section, the phrase “owner or its agent” does not include prime contractors or their subcontractors.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

§ 143-135. Limitation of application of Article

(a) Except for the provisions of G.S. 143-129 requiring bids for the purchase of apparatus, supplies, materials or equipment, this Article shall not apply to any of the following:

(1) Construction or repair work undertaken by the State (i) when the work is performed by duly elected officers or agents using force account qualified labor on the permanent payroll of the agency concerned and (ii) when either the total cost of the project, including without limitation all direct and indirect costs of labor, services, materials, supplies and equipment, does not exceed one hundred twenty-five thousand dollars ($125,000) or the total cost of labor on the project does not exceed fifty thousand dollars ($50,000).

(2) Construction or repair work undertaken by a subdivision of the State (i) when the work is performed by duly elected officers or agents using force account qualified labor on the permanent payroll of the agency concerned and (ii) when either the total cost of the project, including without limitation all direct and indirect costs of labor, services, materials, supplies and equipment, does not exceed five hundred thousand dollars ($500,000) or the total cost of labor on the project does not exceed two hundred thousand dollars ($200,000).

(3) Construction or repair work undertaken by The University of North Carolina and its constituent institutions (i) when the work is performed by duly elected officers or agents using force account qualified labor on the permanent payroll of the university and (ii) when either the total cost of the project, including, without limitation, all direct and indirect costs of labor, services, materials, supplies, and equipment, does not exceed two hundred thousand dollars ($200,000) or the total cost of labor on the project does not exceed one hundred thousand dollars ($100,000).

(b) The force account work undertaken pursuant to this section shall be subject to the approval of the Director of the Budget in the case of State agencies, of the responsible commission, council, or board in the case of subdivisions of the State. Complete and accurate records of the entire cost of such work, including without limitation, all direct and indirect costs of labor, services, materials, supplies and equipment performed and furnished in the prosecution and completion thereof, shall be maintained by such agency, commission, council or board for the inspection by the general public. Construction or repair work undertaken pursuant to this section shall not be divided for the purposes of evading the provisions of this Article.

Summary
North Carolina Prompt Payment Law
Article Name
North Carolina Prompt Payment Law
Description
Summary of North Carolina Prompt Payment requirements and laws for North Carolina construction projects including free forms, FAQs, resources and more.
Author
Publisher Name
Levelset
Publisher Logo

Trusted by Thousands of North Carolina Contractors Like You
For Help With Prompt Payment