Insight

Sharpening the Sword: What You Need to Know About CASPA

How the Contractor and Subcontractor Payment Act (CASPA) can radically change the stakes of how you build. Learn what CASPA means for your construction projects and contract disputes.

How CASPA Impacts Commercial Real Estate
Eric B. Smith

Eric B. Smith

May 30, 2019 03:07 PM

As a contractor, subcontractor or supplier, few things are worse than remaining unpaid on a project. The Contractor and Subcontractor Payment Act (“CASPA”) is a now nearly 25-year old Pennsylvania statute that addresses the crippling issue of non-payment, slow payment, and late payment down the contractual chain on many projects involving improvements to real property. CASPA seeks to level the playing field by providing specific payment deadlines to ensure prompt payment to contractors, subcontractors, sub-subcontractors and suppliers. As discussed below, CASPA has broad applicability, powerful enforcement mechanisms, the recovery of counsel fees, and hefty penalty interest. Further, the Pennsylvania legislature amended CASPA in 2018, effective October 10, 2018, further sharpening the remedies for contractors, sub-contractors and suppliers.

CASPA’s Broad Application

CASPA applies to virtually all projects that involve improvements upon real estate. CASPA covers all commercial construction projects, residential construction projects of 8 units or more, all work, design, planning, supply, for erection, alteration, demolition, excavation, clearing, grading, filling, landscaping, roadway, and driveway construction, and the provision of trees and shrubbery for any of these purposes, or to perform any labor upon improvements to any real property in the Commonwealth of Pennsylvania.

CASPA provides for two significant exceptions. It does not apply to the residential construction of 7 units or less, or where an owner performs work on its own real property. Further, the construction contract may be written or oral.

CASPA’s Payment Obligations

Generally, in contracts with owners, the timing of payment is controlled first by the construction contract; however, absent an agreement, payment is due at the later of 20 days after the end of the billing period, or 20 days after delivery of invoice. As between contractors and subcontractors, contractors must first inform their subcontractors of the due date on which they expect to receive payment from the owner. Thereafter, subcontractors are entitled to be paid within 14 days of payor’s receipt of progress or final payment.

Basis for Non-Payment

A “deficiency item” is work performed which the owner, contractor or inspector will not certify as being completed according to the specifications. CASPA provides a framework protective of contractors, subcontractors, and suppliers to ensure payment on non-deficiency items, and to limit the withholding of payment to reasonable amounts only in connection with deficient work of which the unpaid party has been given timely notice.

CASPA’s Enforcement and Penalties for Non-Payment

  • Interest. Unless the parties’ contract provides for a different interest amount, any progress payment or final payment that is not paid within seven days of the payment dates provided for by CASPA, then the contractor, subcontractor, or supplier shall be paid interest at the rate of 1 percent per month beginning on the eighth day.
  • Penalty Interest. CASPA provides that if arbitration or litigation is commenced to recover payment due and it is determined that an owner, contractor or subcontractor has failed to comply with CAPSA’s payment terms, the arbitrator or court shall award, in addition to all other damages due, a penalty equal to 1 percent per month of the amount that was wrongfully withheld.
  • Attorney Fees and Expenses. The substantially prevailing party in any proceeding to recover any payment under CASPA shall be awarded a reasonable attorney fee in an amount to be determined by the court or arbitrator, together with expenses.

Protective Language of Statute

Making a contract subject to the laws of another state or requiring that any litigation, arbitration, or other dispute resolution process on the contract occur in another state, shall be unenforceable.

CASPA’S 2018 Amendments

  • Right to Suspend Work – Contractor. Under the 2018 amendments to CASPA a contractor or subcontractor now may suspend work for nonpayment under certain conditions and, in some circumstances, after a notice period. This suspension of work, under the amendment, comes “without penalty” for doing so, and, if a construction contract’s provisions exceed the act, those provisions are unenforceable.
  • Right to Suspend Work – Subcontractor. CASPA creates a similar right for a subcontractor to suspend work until it receives payment required under its subcontract if each of the following has occurred: (1) payment has not been made to the subcontractor in accordance with the terms of the contract (or if the contract is silent, within 14 days after the contractor receives payment from the owner or 14 days after receipt of subcontractor’s invoice, whichever is later); (2) 30 days have passed since the end of the applicable billing period, and written notice provided to the contractor of non-payment; and (3) passage of 30 days since the written notice, and subcontractor provides a second written notice to contractor by certified mail notifying contractor of its intent to suspend.
  • Deficiency Items and Waiver. As stated above, CASPA provides an owner, contractor, or subcontractor the right to withhold payment for “deficiency items.” The amendment modifies the procedures relating to the withholding of payment for deficiency items, most notably by allowing payment to be withheld only where: 1) the amount withheld is reasonable, 2) the owner provides a written explanation with a good faith reason for withholding payment, and 3) which written explanation must be made within 14 days of the date of the invoice. As a tremendous benefit to the unpaid contractor, subcontractor, and supplier, the amendment provides that if the owner (or contractor) fails to 1) withhold only a reasonable amount, 2) provide a written explanation in good faith, and 3) within 14 days of the invoice, then the owner (or contractor) waives its right to withhold payment and must pay the invoice in the full amount stated. Where an owner (or contractor) withholds payment for a deficiency item, it must continue to pay the contractor (or subcontractor) for any other item that has been satisfactorily completed under the construction contract. In other words, payments for non-deficient work may not be held hostage due to deficiency items.
  • Retainage Release After Acceptance. After final acceptance of the work, under the CASPA amendments, an owner, contractor, or subcontractor may not withhold retainage for longer than 30 days after final acceptance unless the withholding party complies with the notice procedures governing withholding of payment for deficiency items explained above.
  • Contractual Waivers Void. The CASPA amendments specifically prohibit waiver of the statute’s provisions by any contract or other agreement. A court should not give any effect to a contractual waiver of any CASPA provision.
  • Effective Date. As a general rule, amended statutes are construed to apply prospectively so as not to impair contractual rights. The CASPA amendments do not provide any guidance as to if they are applicable to contracts already existing on the amendments’ effective date. Regardless of the applicability of the amendments, the existing version of CASPA remains a potent tool for contractors and subcontractors (and sub-subcontractors and suppliers).

Should you have a question or claim that you feel arises under the Contractor and Subcontractor Payment Act, please contact Eric B. Smith, Esquire, 215-540-2653 or esmith@timoneyknox.com.

------------

Eric Smith is admitted to practice in Pennsylvania, the U.S. District Court for the Eastern District of Pennsylvania and the U.S. District Court for the Western District of Pennsylvania. Mr. Smith’s practice focuses on commercial and real estate litigation as well as municipal litigation. His commercial litigation practice includes the representation of clients in contract and warranty disputes, disputes under UCC-Sales, construction disputes, mechanics’ liens, Contractor and Subcontractor Payment Act claims and unfair trade practice claims. He served as outside regional counsel for Home Depot U.S.A., Inc., from 2010 until 2018. Mr. Smith’s real estate litigation practice includes the defense and prosecution of title claims, adverse possession, easement, and boundary disputes, quiet title, reformation, partition, zoning, and eminent domain, as well as title agency liability and defense.

Mr. Smith served as the President of the Montgomery Bar Association in 2017, has been selected to Super Lawyers since 2005 and listed in Best Lawyers since 2017.

Related Articles

IN PARTNERSHIP

Heroes Among Men: How Adam Leitman Bailey, P.C. Saved Lives of the Lifesaving


by Rebecca Blackwell

When a 911 Center in New York City was put in danger, Adam Leitman Bailey, P.C. went to work against the unlawful and hazardous actions of a developer whose construction threatened the peace and safety of all who worked for the Fortune 500 company.

Danger construction site no trespassing sign on fence

Under Pressure


by Antonios Roustopoulos and Sara T. Wagner

Capital markets commercial real estate is under pressure, and creativity is needed to make deals in 2023.

Two corporate employees standing near window with cityscape

The Commercial Conundrum


by Brion J. Kirsch

Even prior to 2020, commercial real estate was experiencing setbacks. Coupled with the challenges of new working environments and less need for commercial spaces, landlords are left with increasingly vacant buildings to fill. Below is a primer on how to move forward.

Pile of old chairs and office equipment with blue backdrop

Big Updates in the Big Apple


by Nina M. Roket and Thomas D. Kearns

A Post-COVID-19 update on the commercial market for landlords, building investors and retail developers in New York.

Abstract skyscrapers and buildings in multi-color

A Look Ahead


by Jarred Boyer

The future of U.S. rental markets may seem uncertain as we continue to grapple with the after-effects of COVID-19, but renters and landlords alike can look toward a more hopeful few years as inflation already begins to recede and the promise of stabilization is on the horizon.

Paper houses and crane sitting amongst coins and money

Out of the Sky: What Construction Workers Can Do if Injured on the Job


by Justin Smulison

Construction zones with unsafe working conditions have long been the sites of injuries for workers. The Perecman Firm, P.L.L.C. fights for victims in New York City and Long Island.

Advice for Injured Construction Workers

Property Rights...and Wrongs


by Chad Cooper and Steven S. Kaufman

Winning a legal battle often boils down to finding and targeting the weakest part of an opponent’s case. Four recent real estate disputes in northeast Ohio are good examples.

Strategies for Real Estate Litigation

Wearing a Hard Hat Significantly Reduces Risk of Injury, Death on NYC Construction Sites


by Michele Mirman

Construction Injury Prevention From Hard Hats

Changing for the Better


by Justin Smulison

Joseph Brophy’s Austin-based boutique firm comprises some of the most talented and experienced civil litigators in Texas.

Betting on Finance, Civil Litigation Success

Teamwork and Strategy


by Justin Smulison

In 2018, Block O'Toole & Murphy continued to secure multimillion-dollar results for injured victims and workers.

Block O'Toole & Murphy Gets Results

When the Levy Breaks


by Warren Friedman

Tariffs against China on construction materials are capricious, unpredictable, and often spectacularly ill-timed. How can the industry prepare?

How Tariffs on China Hurt U.S. Construction

In the News: Georgia


by Nicole Ortiz

A summary of newsworthy content from Colorado lawyers and law firms.

In the News Georgia 2018

Trending Articles

The Best Lawyers in New Zealand™ 2024 Awards


by Best Lawyers

The Best Lawyers in New Zealand 2024 awards include an elite field of top lawyers and law firms.

Auckland, New Zealand Skyline at twilight

Best Lawyers: Ones to Watch in America for 2023


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

Announcing the 2023 The Best Lawyers in America Honorees


by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

Presenting The Best Lawyers in Singapore™ 2024


by Best Lawyers

Best Lawyers offers the most prestigious awards for lawyers and law firms in Singapore for 2024.

Singapore skyline at night

The Best Lawyers in Australia™ 2024 Launch


by Best Lawyers

Best Lawyers is excited to announce The Best Lawyers in Australia™ for 2023, including the top lawyers and law firms from Australia.

Australian Parliament beside water at sunset

Announcing The Best Lawyers in Japan™ 2024


by Best Lawyers

We are proud to present the 2024 edition of Best Lawyers awards for Japan which include the top lawyers and law firms in the country.

Mt. Fuji in the background with fall leaves and structure in front

IN PARTNERSHIP

Paulson & Nace, PLLC: A Pioneer in Personal Injury Law


by Best Lawyers

Since its inception more than 40 years ago, Paulson & Nace, PLLC, a Washington D.C., Maryland and West Virginia-based personal injury firm, has always led with compassion first. Here are some key insights from the firm on how to go about filing a personal injury claim.

Group of lawyers meet around a conference table

Could Reign Supreme End with the Queen?


by Sara Collin

Canada is revisiting the notion of abolishing the monarchy after Queen Elizabeth II’s passing, but many Canadians and lawmakers are questioning if Canada could, should and would follow through.

Teacup on saucer over image of Queen's eye

Announcing The Best Lawyers in Australia™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from Australia.

The Best Lawyers in Australia™ 2023

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

The Best Lawyers in South Africa™ 2023


by Best Lawyers

Best Lawyers proudly announces lawyers recognized in South Africa for 2023.

South African flag

Announcing The Best Lawyers in Germany™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from Germany.

Black, red and yellow stripes

Choosing a Title Company: What a Seller Should Expect


by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

Famous Songs Unprotected by Copyright Could Mean Royalties for Some


by Michael B. Fein

A guide to navigating copyright claims on famous songs.

Can I Sing "Happy Birthday" in Public?

Wage and Overtime Laws for Truck Drivers


by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

The Upcycle Conundrum


by Karen Kreider Gaunt

Laudable or litigious? What you need to know about potential copyright and trademark infringement when repurposing products.

Repurposed Products and Copyright Infringemen