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March 10, 2012 | Law Alert

Civil Code Public Works of Improvement Prompt Payment Statutes For Design Professionals

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Payments Due To The Prime Design Professional

California Civil Code Section 3320, as amended, will become effective July 1, 2012. The amendments do not substantively change the time period for payment or the amount of the penalty for payments wrongfully withheld.  Both the current and amended versions of Section 3320 require public agencies to make payment to its prime design professionals within 30 days after the public agency’s receipt of a demand for payment (in the case of a progress payment) and after 45 days after the public agency’s receipt of a demand for payment (in the case of a final payment).  If the public agency in good faith disputes an invoiced amount, the public agency is entitled to withhold up to 150% of the disputed amounts.

If any amount is wrongfully withheld or is not timely paid in violation of Section 3320, the prime design professional will be entitled to a penalty of 1½% of the improperly withheld amount per month for every month that payment is not made.  This penalty is in lieu of any interest otherwise due. Disputed amounts withheld are not subject to any penalty.

In any action for the collection of amounts withheld in violation of Section 3320, the prevailing party is entitled to recover his or her reasonable attorney’s fees and costs.

Section 3320 defines “public agency” to include the state, any county, any city, any city and county, any district, any public authority, any public agency, any municipal corporation, or other political subdivision or political corporation of the state.  Its provisions do not, however, apply to state agency contracts subject to Section 927.6 of the Government Code (which provides for other late payment penalties).  Moreover, this section is only available to licensed architects, registered engineers and licensed land surveyors who have entered into a written contract directly with the public agency.

Payments Due From The Prime Design Professional To Sub-consultants

Correspondingly, Civil Code Section 3321 imposes similar payment obligations on prime design professionals vis-à-vis their sub-consultants.  An amended Section 3321, also to become effective July 1, 2012, requires that a prime design professional pay to each sub-consultant design professional the amount due him or her from the payment received, not later than 15 days after receipt of each progress payment or final retention payment. If the prime design professional disputes in good faith any portion of the amount due, he or she may withhold from the payment an amount not to exceed 150% of the disputed amount.  Any disputed amount withheld is not subject to the penalty.

If any amount is wrongfully withheld or is not timely paid in violation of Section 3321, the subconsultant design professional is entitled to a penalty of 1½%  of the improperly withheld amount, in lieu of any interest otherwise due, per month, for each month that payment is not made. In any action for the collection of amounts withheld in violation of Section 3321, the prevailing party is entitled to recovery of his or her reasonable attorney’s fees and costs.

As is the case of Section 3320, only licensed architects, registered engineers and licensed land surveyors who have entered into a written contract directly with the prime design professional are entitled to the benefits of these prompt payment statutes.

Practice Area: Design Professionals Defense & Counseling
Attorney: Jennifer W. Suzuki

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