Proper Notification Can Preserve Your Rights!
Proper notification is essential to preserving rights to interest payments under South Carolina’s Prompt Payment Act, S.C. Code Ann. §29-6-10 et seq.
The general rule
In South Carolina, contractors and subcontractors are entitled to payment of undisputed amounts promptly after submitting pay requests. What is “prompt” payment under the law? For owners paying subcontractors, payment is required within 21 days of the owner’s receipt of a pay request. For contractors paying subcontractors, “prompt” payment means paying subcontractors within 7 days of the contractor being paid.
Contractor or subcontractor’s right to interest payments
If payment to a contractor by an owner is delayed by more than 21 days, or if payment by a contractor to a subcontractor is delayed by more than 7 days, the party requesting payment is entitled to interest payments at a rate of one percent per each month of delay. Interest begins accruing on the date the balance is due, and interest payments can be recovered pro rata for delays of more than or less than one month.
However, to be entitled to interest, the owner or contractor being charged interest must have been notified of the Prompt Payment Act at the time of the payment request. Therefore, those seeking payment should notify the payer that payment is governed by the South Carolina Prompt Payment Act. Notification might be included in writing on a pay request, for example.
The Prompt Payment Act does not apply to residential homebuilders or to certain improvements on residential property. In addition, the Act does not prevent owners or contractors from retaining funds for reasons such as unsatisfactory job progress, defective construction that has not be corrected, or disputed work.
In addition, many written construction agreements provide for a set interest rate that the parties have previously agreed upon. The Prompt Payment Act does not prohibit parties from designating an interest rate in their contracts. Furthermore, if a written contract does set an interest rate, the interest rate in the contract applies instead of the one percent rate provided for in the Act.
If you would like more information on this topic or have another South Carolina legal question, please contact Caroline Lindsey at (919) 277-2541 or by email, Clindsey@andersonandjones.com!