Construction Law Update: “Pay When Paid” Clauses Outlawed in Virginia
Effective January 1, 2023, the so called generic “pay when paid” term common in local construction contracts will no longer be legal in Virginia. Under this common contract term, the upstream contractor is not responsible for payment to a down stream subcontractor until such time as the first contractor was paid by the owner or higher tiered contractor. This new Virginia statute makes such clauses unenforceable and applies to private and government funded projects. This law will apply to contracts signed beginning in January of 2023.
Additional requirements include that the higher tiered contractor must pay its subcontractor within 7 days after receiving the amounts paid, or 60 within days of the satisfactory completion of the work, whichever is earlier.
We can help draft contracts and subcontracts that comply with the new Virginia statute and protect your business.
McNamee Hosea has an experienced team of lawyers and paralegals that protect client’s rights in the District, Maryland and Virginia every day. Contact us with any questions.
John P. Lynch