My very first post for this blog (which is nearly two years old) covered the Arizona Court of Appeals’ decision in RSP Architects, Ltd. v. Five Star Development Resort Communities, LLC, 306 P.3d 93, 232 Ariz. 436 (App. 2013). In RSP Architects, the court held that Arizona’s private sector prompt payment laws (A.R.S. § 32-1129 et seq.) do not apply to architectural service contracts. While this remains the case, Arizona design professionals recently scored a victory on the prompt payment front. The Arizona Design Professional Prompt Pay Act (the “Act”) was created earlier this year when Governor Ducey signed H.B. 2336 into law. The Act, which went into effect on July 3, 2015, establishes requirements for promptly paying “design professionals” performing work on state, county, and municipal construction projects. For purposes of the Act, “design professional services” are defined as “architect services, engineer services, land surveying services, geologist services or landscape architect services or any combination…” thereof.
Scope of the Act.
The Arizona Design Professional Prompt Pay Act is rather limited in scope. First, as stated above, it does not apply to private projects. Second, it does not apply in situations when the design professional has a direct contract with the project owner. Rather, the Act only applies to public projects where the “design professional” is hired by a contractor.
Effect of the Act.
In those situations where the Act does apply, it affords design professionals many of the same protections that subcontractors and material suppliers have enjoyed for years under Arizona’s existing prompt payment laws. Among other things, the Act provides that:
- contractors shall pay their design professionals within 7 days of each progress payment, unless agreed otherwise in writing (A.R.S. §§ 34-221(G) and 41-2577(B));
- interest accrues at the rate of 1% per month on payments not made to design professionals within 7 days (A.R.S. §§ 34-221(K) and 41-2577(F));
- design professionals can request progress payment notifications from the owner (A.R.S. §§ 34-221(H) and 41-2577(C)); and
- provisions in “design professional service contracts” that (a) make the contract subject to the laws of another state or (b) require any litigation, arbitration, or other dispute resolution proceeding arising from the contract to be held outside Arizona are void and unenforceable.
While limited in scope, the Arizona Design Professional Prompt Pay Act is a victory for Arizona design professionals insofar as it provides them with some prompt pay protection. It is also important for contractors to know about the Act as a result of the new payment obligations with which they are charged.