Augment Subcontractor Protections.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
H 1
HOUSE BILL 383

Short Title: Augment Subcontractor Protections. (Public)
Sponsors: Representative Lowery.
For a complete list of sponsors, refer to the North Carolina General Assembly web site.
Referred to: Housing and Development, if favorable, Commerce and Economic Development,
if favorable, Rules, Calendar, and Operations of the House
March 13, 2025
*H383-v-1*
A BILL TO BE ENTITLED 1
AN ACT TO MODIFY THE CHAPTER REGARDING P AYMENTS TO 2
SUBCONTRACTORS TO AU GMENT THE PROTECTION S AFFORDED BY THAT 3
CHAPTER. 4
The General Assembly of North Carolina enacts: 5
SECTION 1. Chapter 22C of the General Statutes reads as rewritten: 6
"Chapter 22C. 7
"Payments to Subcontractors. 8
"§ 22C-1. Definitions.Purpose; definitions. 9
(a) Purpose. – The purpose of this Chapter is to increase protections appl icable to 10
payments to subcontractors, including declaring clauses of contracts attempting to shift the risk 11
of failure to pay to another by making payment to the other contingent on receipt of payment, 12
such as a pay if paid clause or a pay when paid clause, against the public policy of the State and 13
unenforceable. 14
(b) Definitions. – Unless the context otherwise requires in this Chapter: 15
(1) "Contractor" means a person who contracts with an owner to improve real 16
property. 17
(2) "Improve" means to build, effect, alter, repair, or demolish any improvement 18
upon, connected with, or on or beneath the surface of any real property, or to 19
excavate, clear, grade, fill or landscape any real property, or to construct 20
driveways and private roadways, or to furnish materials, including trees and 21
shrubbery, for any of such purposes, or to perform any labor upon su ch 22
improvements, and shall also mean and include any design or other 23
professional or skilled services furnished by architects, engineers, land 24
surveyors and landscape architects registered under Chapters 83A, 89C or 25
89A of the General Statutes. 26
(3) "Improvement" means all or any part of any building, structure, erection, 27
alteration, demolition, excavation, clearing, grading, filling, or landscaping, 28
including trees and shrubbery, driveways, and private roadways, on real 29
property. 30
(4) An "owner" is a person who has an interest in the real property improved and 31
for whom an improvement is made and who ordered the improvement to be 32
made. "Owner" includes successors in interest of the owner and agents of the 33
owner acting within their authority. 34
General Assembly Of North Carolina Session 2025
Page 2 House Bill 383-First Edition
(5) "Real property " means the real estate that is improved, including lands, 1
leaseholds, tenements and hereditaments, and improvements placed thereon. 2
(6) "Subcontractor" means any person who has contracted to furnish labor or 3
materials to, or has performed labor for, a contractor or another subcontractor 4
in connection with a contract to improve real property. 5
"§ 22C-2. Performance by subcontractor. 6
Performance by a subcontractor in accordance with the provisions of its contract shall entitle 7
it to payment from the party with whom it contracts. Payment by the owner to a contractor is not 8
a condition precedent for payment to a subcontractor and payment by a contractor to a 9
subcontractor is not a condition precedent for payment to any other subcontractor, and an 10
agreement to the contrary is unenforceable. 11
"§ 22C-3. Time of payment to subcontractors after contractor or other subcontractor has 12
been paid.payment. 13
(a) When a subcontractor has performed in accordance with the provisions of his 14
contract, the contractor shall pay to his subcontractor and each subcontractor shall pay to his 15
subcontractor, within seven days of receipt by the contractor or subcontractor of each periodic or 16
final payment, the full amount received for such subcontractor's work and materials based on 17
work completed or service provided under the subcontract. 18
(b) When a subcontractor has performed in accordance with the provisions of his 19
contract, unless earlier required by subsection (a) of this section, the contractor shall pay to his 20
subcontractor and each subcontractor shall pay to his subcontractor, within 30 days of receipt of 21
billing from the payee to the payor, the full amount billed for such subcontractor 's work and 22
materials based on work completed or service provided . A contractual provision postponing 23
payment for more than 30 days after performance in accordance with the provisions of the 24
contract and billing is void. 25
"§ 22C-4. Conditions of payment. 26
Nothing in this Chapter shall prevent the contractor, at the time of application and 27
certification to the owner, from withholding such application and certification to the owner for 28
payment to the subcontractor for: unsatisfactory job progress; defective construction not 29
remedied; disputed work; third party claims filed or reasonable evidence that claim will be filed; 30
failure of subcontractor to make timely payments for labor, equipment, and materials; damage to 31
contractor or another subcontractor; reasonable evidence that subcontract cannot be completed 32
for the unpaid balance of the subcontract sum; or a reasonable amount for retainage not to exceed 33
the initial percentage retained by the owner. 34
"§ 22C-5. Late payments to bear interest. 35
Should any periodic or final payment to a subcontractor required by this Chapter be delayed 36
by more than seven days after receipt of periodic or final payment by the contractor or 37
subcontractor, a maximum time period permitted under this Chapter, the contractor or 38
subcontractor shall pay his subcontractor interest, beginning on the eighth day, first day after the 39
maximum time period, at the rate of one percent (1%) per month or a fraction thereof on such 40
unpaid balance as may be due. 41
"§ 22C-6. Applicability of this Chapter. 42
The provisions of this Chapter shall not be applicable to residential contractors as defined in 43
G.S. 87 10(1a), or to improvements to real property intended for residential purposes which are 44
exempted from the application of Chapter 83A of the General Statutes pursuant to 45
G.S. 83A-13(c)(1), or to improvements to real property intended for residential purposes which 46
consist of 12 or fewer residential units." 47
SECTION 2. This act is effective when it becomes law and applies to contracts 48
entered into on or after that date. 49