Getting paid on time is one of the most persistent challenges in the construction industry. Fortunately, Tennessee’s Prompt Pay Act gives contractors and subcontractors a legal framework to push back when there is a payment delay without justification. Knowing how this law works can make a real difference in your ability to collect.
What Tennessee’s Prompt Pay Act requires
The Prompt Pay Act sets specific deadlines for payment at every level of a construction project. On private projects, a property owner must pay you within 30 days of receiving a proper invoice. Once you receive payment as a general contractor, you must pay subcontractors within 10 days.
These deadlines apply regardless of whether the contract addresses payment timing and cannot simply be contracted away. Retainage is also capped at 5% of the total contract value, and pay-if-paid clauses require explicit and unambiguous language to be enforceable under Tennessee law.
Public projects operate under stricter timelines, with shorter windows for payment at each tier of the contracting chain.
What happens when payment is late
When a party misses the Prompt Pay Act’s deadlines without a valid legal reason, mandatory interest begins to accrue on the unpaid balance. This is not discretionary. The law imposes the interest penalty automatically, giving you a concrete remedy when the other party wrongfully holds back payment.
For larger projects, the stakes are even higher. Parties who wrongfully fail to deposit retained funds into an interest-bearing escrow account face statutory civil damages of $300 per day and potential Class A misdemeanor criminal fines of $3,000 per day.
What to do when payment is wrongfully withheld
If you do not receive the payment on time, documenting your invoices, communications and the timeline of payment requests is an important first step. Prompt action matters because construction payment disputes often intersect with lien rights, which have their own strict deadlines.
A construction attorney in Tennessee can help you evaluate whether the Prompt Pay Act applies to your situation, calculate any interest penalties owed, and determine whether additional remedies such as a mechanic’s lien or bond claim are available to you.
