For the purpose of this chapter, the following words have the following meanings:

(1) CONTRACTOR. Any person, individual, firm, corporation, partnership, or other legal entity who contracts with an owner to improve real property or perform construction services for an owner.

(2) IMPROVE. To build, effect, alter, repair, or demolish any improvements upon, connected with, or on, or beneath the surface of any real property; to excavate, clear, grade, fill, landscape any real property; to construct driveways and roadways; to furnish materials, including trees and shrubbery, for any of these purposes; or to perform any labor upon these improvements.

(3) IMPROVEMENT. All or any part of any building, structure, erection, alteration, demolition, excavation, clearing, grading, filling, or landscaping, including trees and shrubbery, driveways, and roadways on real property.

(4) OWNER. Any person, individual, firm, corporation, partnership, or other legal entity who has an interest in the real property improved and for whom an improvement is made, who either directly or by agent ordered the improvement to be made.

(5) REAL PROPERTY. The real estate that is improved, including lands, leaseholds, tenements, and improvements placed on the real property.

(6) SUBCONTRACTOR. Any person, individual, firm, corporation, partnership, or other legal entity who has contracted to furnish labor or materials to, or has performed labor or supplied materials for a contractor in connection with a contract to improve real property.

(7) SUB-SUBCONTRACTOR. Any person, individual, firm, corporation, partnership, or other legal entity who has contracted to furnish labor or materials to, or has performed labor or supplied materials for a subcontractor in connection with a contract to improve real property.

Performance by a contractor, subcontractor, or sub-subcontractor in accordance with the provisions of his or her contract entitles them to payment from the party with whom they contract. All contracts between parties require a date of payment.

(a) When a contractor has performed pursuant to his or her contract and submits an application or pay request for payment or an invoice for materials, to the owner or owner's representative, the owner shall timely pay the contractor by mailing via first class mail or delivering the amount of the pay request or invoice in accordance with the payment terms agreed to by the owner and the contractor, the agreed upon payment terms must be specified in all contract documents, but if payment terms are not agreed to, then within 30 days after receipt of the pay request or invoice.

(b) When a subcontractor has performed pursuant to his or her contract and submits an application or pay request for payment or an invoice for materials to a contractor in sufficient time to allow the contractor to include the application, request, or invoice in his or her own pay request submitted to an owner, the contractor shall timely pay to the subcontractor in accordance with the payment terms agreed to by the contractor and subcontractor, but if payment terms are not agreed to, then within seven days of receipt of payment from owner by mailing via first class mail or delivering the amount received for the subcontractor's work and materials based on work completed or service provided under the contract.

(c) When a sub-subcontractor has performed labor or supplied materials for a subcontractor pursuant to his or her contract and submits an application or pay request for payment or an invoice for materials to a subcontractor in sufficient time to allow the subcontractor to include the application, request, or invoice in his or her own pay request submitted to a contractor, the subcontractor shall timely pay the sub-subcontractor in accordance with the payment terms agreed to by the subcontractor and sub-subcontractor but if payment terms are not agreed to, then within seven days of receipt of payment from contractor by mailing via first class mail or delivering the amount received for the sub-subcontractor's work and materials based on work completed or service provided under the contract.

(d) If the owner, contractor, or subcontractor does not make payment in compliance with this chapter, the owner, contractor, or subcontractor shall be obligated to pay his or her contractor, subcontractor, or sub-subcontractor interest at the rate of one percent per month (12% per annum) on the unpaid balance due.

(e) A contractor who receives a payment under subsection (a) or otherwise, from an owner in connection with a contract shall pay each of its subcontractors the portion of the owner's payment to the extent of that subcontractor's interest in the owner's payment. The payment shall include interest, if any, that is attributable to work performed or materials suitably stored by that subcontractor if payment for stored materials is provided for in the contract. The payment required by this subsection shall be made not later than the seventh day after the date the contractor receives the owner's payment.

(f) The percentage of retainage on payments by the contractor to the subcontractor shall not exceed the percentage of retainage on payments made by the owner to the contractor. Any percentage of retainage on payments made by contractor to the subcontractor that exceeds the percentage of retainage on payments made by the owner to the contractor shall be subject to interest to be paid by the contractor to the subcontractor at the rate of one percent per month (12% per annum).

(g) The percentage of retainage on payments by the subcontractor to the sub-subcontractor shall not exceed the percentage of retainage on payments made by the contractor to the subcontractor. Retainage on payments made by the subcontractor to the sub-subcontractor that exceeds the percentage of retainage on payments made by the contractor to the subcontractor shall be subject to interest paid at the rate of one percent per month (12% per annum).

(a) Nothing in this chapter shall prevent the owner, contractor, or subcontractor from withholding application and certification for payment for any of the following reasons if there is a bona fide dispute over one or more of the following:

(1) Unsatisfactory job progress.

(2) Defective construction not remedied.

(3) Disputed work.

(4) Third party claims filed or reasonable evidence that a claim will be filed.

(5) Failure of the contractor, subcontractor, or sub-subcontractor to make timely payments for labor, equipment, and materials.

(6) Property damage to owner, contractor, or subcontractor.

(7) Reasonable evidence that the contract, subcontract, or sub-subcontract cannot be completed for the unpaid balance of the contract or contract sum.

(b) In the event that there is a bona fide dispute over all or any portion of the amount due on a progress payment from the owner, contractor, or subcontractor then the owner, contractor, or subcontractor may withhold payment in an amount not to exceed 2 times the disputed amount.

(c) An owner is required to notify a contractor in writing within 15 days of receipt of any disputed request for payment. A contractor, subcontractor and sub-subcontractor is required to provide written notification within 5 days of disputed request for payment or notice of disputed request for payment.

A party may not waive the right to receive interest before a payment is due under a contract subject to this section. A party may waive the interest due on any late payment on or after the date the payment is due under Section 8-29-3.

A contractor, subcontractor, or sub-subcontractor may file a civil action solely against the party contractually obligated for the payment of the amount claimed to recover the amount due plus the interest accrued in accordance with this chapter. If the court finds in the civil action that the owner, contractor, or subcontractor has not made payment in compliance with this chapter, the court shall award the interest specified in this chapter in addition to the amount due. In any such civil action, the party in whose favor a judgement is rendered shall be entitled to recover payment of reasonable attorneys' fees, court costs and reasonable expenses from the other party.

This chapter does not apply to the following:

(1) Residential homebuilders.

(2) Improvements to real property intended for residential purposes which consist of 16 or fewer residential units.

(3) Contracts, subcontracts, or sub-subcontracts in the amount of ten thousand dollars ($10,000) or less.

(4) Contracts with the state or local governments of the State of Alabama.

This chapter does not amend or modify existing laws relating to mechanics and materialmen liens and shall not be applicable in civil actions pursuant to Title 35, Chapter 11, Division 8.