New York Prompt Payment Act: Coverage, Deadlines and Retainage

Updated September 7, 2026.

New York's Prompt Payment Act can help construction businesses collect payment, but it does not cover every project or require payment within ten days in every dispute. Start with the project's statutory coverage and the actual contract.

Which projects does the Act cover?

General Business Law § 756 generally requires an aggregate construction project cost of at least $150,000. The statute excludes public works and their subcontracts, individual one-, two- and three-family residential dwellings, and additional specified residential projects. Those additional exclusions include certain tract developments, projects of 4,500 square feet or less, and specified assisted housing projects. Review the full definition before assuming coverage.

Public projects have separate payment rules. A small residential contractor's payment claim may instead depend on the contract, applicable home-improvement requirements and other remedies.

Invoicing and payment deadlines

For covered contracts, § 756-a generally calls for approval or disapproval within 12 business days after delivery of the invoice and all required documentation. A disapproval must identify the disputed items in writing. This is not a universal 12-calendar-day rule.

The statutory framework generally provides for owner payment within 30 days after approval and downstream payment within seven days after receipt of good funds for the relevant work, subject to the statutory conditions. Lender-related provisions, including § 756-d, require separate review. Save proof of submission, approval, disapproval and payment.

Final invoices and retainage: the 2023 changes

For covered contracts entered into on or after November 17, 2023, Chapter 657 of the Laws of 2023 permits a final invoice upon substantial completion, as defined or contemplated by the contract. It also changed the retainage limit.

Under § 756-c, owner retainage cannot exceed 5% of the contract sum. Contractor and subcontractor retainage cannot exceed 5% or the actual percentage retained by the owner. The owner's release deadline remains tied to final approval of the work; it is not automatically the date of substantial completion. The contract date and applicable statutory version matter.

What remedies are available?

§ 756-b provides interest and procedures for suspension and expedited arbitration in qualifying disputes. Suspension requires the statutory notice and opportunity to cure, including at least ten calendar days' advance notice to the required parties. Simply walking off the job can create a separate dispute.

Expedited arbitration also has prerequisites. The parties must attempt to resolve the complaint after verified delivery of written notice; referral to the American Arbitration Association cannot occur sooner than the statutory 15-day period. Preserve proof of delivery and obtain advice about the applicable procedure.

Can the contract override the statute?

Contract terms generally govern except where the Act provides otherwise. § 757 invalidates specified provisions concerning out-of-state law or forums, suspension, expedited arbitration, payment terms and retainage above the statutory cap. The material-supplier exception to the out-of-state provision should be checked separately.

Kushnick Pallaci PLLC assists with construction contract review and construction payment disputes. Review payment and notice terms before signing, and assess lien and other claim deadlines independently of a Prompt Payment Act complaint.

General information only. Application depends on the project, contract and facts.

Contact Kushnick Pallaci PLLC at 631-752-7100 or vtp@kushnicklaw.com. Attorney Advertising.