The Prompt Payment Act: Getting Paid on Time in Tennessee

Slow payment is the construction industry's oldest disease, and Tennessee's Prompt Payment Act is the statutory medicine. The Act requires owners to pay prime contractors — and primes to pay subs — within defined periods after proper invoicing, and it backs those deadlines with interest penalties that compound fast.

The leverage is real: wrongful withholding can trigger interest at rates that make late payment genuinely expensive for the paying party. That changes negotiation dynamics. A demand letter that cites the Prompt Payment Act, calculates the accruing interest, and lays out the retainage rules tends to move checks that months of phone calls did not.

But the Act has limits. It doesn't override legitimate disputes over defective work, and 'pay-if-paid' and 'pay-when-paid' clauses still shape when — and whether — downstream payment obligations mature. Knowing the difference between a genuine dispute and a delay tactic is where strategy comes in.

Our advice to contractors: document your applications for payment meticulously, track the statutory clocks from day one, and don't let 'the check is coming' conversations run past your lien deadlines. The Prompt Payment Act, the lien statutes, and your contract terms work together as a system. Use them that way.