California Prompt Payment Act

What is the California Prompt Payment Act?

The California Prompt Payment Act is state law (primarily in the Business and Professions Code and related statutes) that sets when owners and contractors must pay for undisputed work on many private construction projects, and adds penalties when payment is late.

If you wait on retainage or a GC sits on your draw in California, this law is often the backbone of a formal demand letter.

Public works projects follow separate public contracting and payment rules, including prevailing wage requirements.

Who it applies to

The Act generally covers private commercial and residential construction contracts where an owner, direct contractor, or subcontractor owes payment for work performed under contract.

It does not replace your written agreement. It sets minimum payment timing when the contract is silent or when certain billing conditions are met.

Payment timelines (overview)

Exact timing depends on contract terms and whether the owner accepted the work. Common patterns include:

Many contracts specify net 30, net 45, or retainage schedules. Read whether your subcontract language overrides or aligns with statutory floors.

Undisputed vs disputed amounts

The Act protects undisputed portions of a billing. If the owner or GC has a good-faith dispute about defective work, incomplete scope, or missing backup, they may withhold a reasonable amount tied to the dispute.

That is why daily reports, photos, approved submittals, and signed change orders matter when a payment fight starts.

Interest and collection costs

When payment is wrongfully withheld past statutory or contractual deadlines, the Act may provide for:

• Interest on late undisputed amounts (statutory rate applies in many cases)
• Recovery of reasonable attorney's fees and costs when enforcement actions succeed under the statute

Interest adds up quickly on a six-figure commercial draw that is 60 days late.

Relationship to mechanic's liens

The Prompt Payment Act and California mechanic's liens solve different problems:

You may pursue both strategies in the same dispute, but each has separate rules. Talk to counsel before choosing a path.

Retainage and conditional waivers

California progress billing often pairs with retainage and conditional lien waivers. Track which waiver matches which invoice and whether retainage release dates are defined in the subcontract.

Signing an unconditional waiver before payment clears is a common way subs lose leverage.

Practical tips for California contractors

Submit clean pay apps on schedule. Vague billings delay the clock and give the GC an excuse to hold.

Separate disputed and undisputed amounts in writing when a partial fight starts.

Send a formal demand referencing the Act when a draw is late. It gets attention from commercial owners and GC accounting teams.

Keep CSLB licensing active. Payment disputes get harder when your CSLB license or insurance lapses mid-project.

Disclaimer

This glossary entry is general information only, not legal advice. Payment deadlines depend on your contract, billing acceptance, and project type. Consult a California construction attorney before sending legal demands or filing suit.