California prompt payment penalties

California doesn’t just let general contractors and owners sit on your money. A web of “prompt payment” statutes sets payment deadlines and adds real penalties — 2% per month plus attorney’s fees — when payment is wrongfully withheld. Here’s what subs should know.

How fast must you be paid?

On private works, the prime contractor generally must pay a subcontractor within 7 daysof receiving the corresponding payment from the owner (Bus. & Prof. Code § 7108.5). Owners, in turn, must make progress payments to the direct contractor on the contract’s schedule (Cal. Civ. Code §§ 8800, 8802).

The penalty: 2% per month plus attorney’s fees

When a payment is withheld without a good-faith dispute, the law imposes a penalty of 2% per monthof the wrongfully withheld amount — far more than ordinary interest — and the prevailing party in a dispute is entitled to its attorney’s fees and costs. That fee-shifting is what makes these claims worth pursuing.

The good-faith dispute exception

A contractor or owner can withhold payment in good faith, but only the amount actually in dispute — up to 150% of that disputed amount. Withholding money that isn’t genuinely disputed, just to apply pressure, is exactly what triggers the penalty.

How prompt-payment penalties fit your collection strategy

Prompt-payment penalties stack on top of your lien and notice remedies. Raising them in a notice of intent to lien or demand letter increases the pressure, because the GC now risks paying the debt plus a penalty plusyour attorney’s fees.

This page is general information, not legal advice, and does not create an attorney–client relationship. California lien and notice deadlines are strict and fact-specific — “completion” alone can be triggered by actual completion, the owner’s occupancy or use, or a 60-day cessation of labor. Notice Harbor is not a law firm. Confirm any deadline that matters to your claim with a licensed California construction attorney. Prompt-payment deadlines and penalty calculations depend on the contract and the specific facts; confirm the figures for your situation with a California construction attorney.