New York Construction Collections: Protect Payment Rights Before a Debt Becomes a Lawsuit

Reviewed September 7, 2026.

Collecting construction receivables starts with the contract and continues throughout the project. A payment demand may help resolve a dispute, but it does not preserve every lien, bond or statutory deadline.

Build a usable payment record

Identify the contracting entities, scope, price, billing requirements, change-order procedure and payment dates. Negotiate clear provisions addressing interest, collection costs and attorney’s fees where appropriate; do not assume those amounts are recoverable without an applicable agreement or statute. Keep signed contracts, delivery tickets, approved changes, daily reports, invoices and proof of submission together. Review aging receivables regularly and document the reason for each withheld payment.

Check prompt-payment protections

New York’s private construction prompt-payment law has a defined scope and exclusions. For covered contracts, General Business Law § 756-a generally requires invoice approval or written disapproval within 12 business days after receipt of the invoice and required documentation. Payment timing, lawful withholding and lower-tier payment rules require separate analysis. Review notice requirements before suspending work.

Preserve parallel remedies

A private mechanic’s lien generally has a four-month filing period for qualifying single-family dwellings and an eight-month period for other private improvements, subject to statutory exceptions and special retainage rules under Lien Law § 10. Public-improvement liens attach to project funds and follow different filing and service rules under § 12. Filing does not finish the process: calendar lien duration, extension and enforcement requirements.

Obtain any payment bond promptly. Eligible claimant tiers, notices and lawsuit deadlines depend on the bond and applicable law. Where project funds may have been diverted, evaluate Article 3-A trust remedies. Under § 77, subcontractors and material suppliers have a limitation rule tied to the later of project completion or final payment becoming due. Nonpayment alone does not establish diversion, personal liability or entitlement to attorney’s fees.

Use negotiations, mediation, arbitration or litigation as appropriate while preserving these separate rights. An early assessment of documentation, defenses, collectability and cost helps select a practical recovery strategy.

Kushnick Pallaci PLLC assists clients throughout New York with construction debt collection. Contact 631-752-7100 or vtp@kushnicklaw.com.

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Drafting Attorney’s Fee Provisions in Construction Contracts

Reviewed September 7, 2026.

If a construction contract is intended to shift legal fees, say so clearly and review the consequences before signing. A general indemnification provision may address third-party claims without providing fees for a dispute between the owner, contractor or subcontractor.

Sage Systems, Inc. v. Liss, 39 NY3d 27 (2022), confirms that courts require clear contractual intent to depart from the usual rule that each party pays its own legal fees.

Terms worth addressing

• Which disputes qualify: unpaid invoices, breach claims, arbitration, appeals and judgment enforcement.
• Whether recovery is mutual and how the agreement defines the party entitled to fees.
• How partial success, settlement and counterclaims affect recovery.
• Whether the clause is consistent with consumer protections and other applicable law.

Statutory fee remedies must be checked individually. A construction dispute or late payment does not itself create an automatic right to attorney's fees under the Prompt Payment Act or the Lien Law. The contract, remedy pursued and supporting facts matter. Avoid treating a fee provision as a promise that litigation will cost nothing.

Kushnick Pallaci PLLC assists clients throughout New York with construction contract drafting and review. Contact 631-752-7100 or vtp@kushnicklaw.com.

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Drafting a Protective New York Construction Contract

Reviewed September 7, 2026.

A useful construction contract makes the parties’ obligations clear and provides workable procedures when scope, schedule or payment changes. Copying an old form without checking the project can leave important gaps.

1. Use the correct parties and required written terms. Identify the legal entities, project and authorized signers. Certain home-improvement agreements must satisfy General Business Law § 771, including detailed written-contract requirements. Confirm local licensing rules as well.
2. Define scope and changes. Specify included work, exclusions, allowances, plans, owner selections and responsibility for permits and design. State who may authorize changes and how price and time adjustments are documented.
3. Make payment procedures practical. Address invoicing, required supporting documents, due dates, retainage and disputed amounts. Review applicable prompt-payment law before relying on a clause that delays payment or allows work suspension. Interest and late charges must be lawful.
4. Address collection costs clearly. If the parties intend fee recovery in a dispute between themselves, use an appropriately drafted provision. A general indemnity clause does not automatically shift attorney’s fees in a direct contract dispute.
5. Choose dispute resolution deliberately. Evaluate negotiation, mediation, arbitration and court proceedings, including forum, consolidation and available relief. Arbitration is not necessarily cheaper or faster. Consumer-contract restrictions and federal arbitration law can affect enforceability.
6. Allocate risk with care. Coordinate indemnity, insurance, warranties, termination rights and any consequential-damage waiver. Review exclusions, mutuality and the particular losses being allocated; a waiver does not necessarily eliminate every category of damages.
7. Check the complete package. Reconcile incorporated documents and inconsistent clauses. Ensure the people administering the job understand notice requirements and can keep the records the contract requires.

Project-specific review before signing is usually more useful than discovering conflicting obligations after a dispute begins. Update forms when the law, insurance program or type of work changes.

Kushnick Pallaci PLLC assists clients throughout New York with construction contract drafting and review. Contact 631-752-7100 or vtp@kushnicklaw.com.

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