Pennsylvania’s payment regulation will tighten construction transaction controls nationwide

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On October 10 the state of Pennsylvania enacted significant changes to its Contractor and Subcontractor Payment Act (CASPA). In short, the amendments provide increased protections for payment on private construction projects, while at the same time impose new and additional notice requirements of which owners, lenders, contractors and subcontractors must all be aware.

These changes arrive on the heels of recent payment amendments made in other states, such as California, meaning that Pennsylvania is only the beginning of a larger trend coming soon.

It is important that all parties involved in construction projects not only be aware of these regulation updates and how they will impact their projects, but also what they can do to prepare for when the legislation inevitably reaches them.

For instance, builders continue to pay their sub-contractors via paper checks, after collecting paper invoices and paper lien waivers. The sub-contractor must then drive to pick up the check, deposit it and wait days for funds availability. In addition, builders are completing 1099 tax forms and other reporting material by hand, which can be difficult and time-consuming. This kind of process will not be sustainable under updated regulations.

By implementing innovative new technology that efficiently and effectively automates the entire construction payment process, lenders, builders and general contractors can guarantee compliance with updated regulations and ensure that all parties are paid appropriately.

The right mobile and web-based solution can automate the construction payment stream with electronic submittal of lien waivers and invoices from contractors to the builder, as well as electronic payments to replace checks. No more need for paper.

In addition, borrowers are able to pay their contractors instantly with new payment options including Same Day ACH, allowing them to focus on the project at hand and saving the contractors significant amounts of time and frustration. With a more efficient payment process, everyone can concentrate on what they have been hired to do, and what they do best.

Technology such as this also increases transparency in the payment stream process and reduces unnecessary friction between lenders, borrowers, builders and contractors. With mobile access, it is easy to log into the system on-the-go to check for any errors and assess the status of the project. Contractors have all of their payment questions answered simply by checking their phone.

The changes happening in Pennsylvania are only the tip of the iceberg. And frankly, it is about time that regulations are updated to reflect our modern capabilities. Lenders should take advantage of this time to implement automated payment stream tools in order to speed cycle time and payments, improve communication and focus on their important work at hand.

Matt Johner

Matt Johner

Matt Johner is president and co-founder of BankLabs.

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