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How much interest is "reasonable" under Michigan's prompt payment law?

MichiganConstruction ContractPrompt Payment

I've read through your description of Michigan's prompt payment laws (which are great, by the way). But I'm not sure how much interest we're allowed to charge on a late payment. The law says we can include "reasonable interest" in our next pay app, but I'm not sure what they think that means. To me, 10% sounds pretty reasonable, considering how long it's taken me to chase down these invoices. How much do other people charge for late payments? Are you aware of any court cases where the Michigan courts decided how much interest a GC can charge?

1 reply

Jun 12, 2020
The interest rate charged for late payments should generally be set by the contract. And, the amount allowed under the contract must be a "reasonable" amount of interest. As you mentioned above, though - it's hard to know what's considered reasonable, without more guidance. Regardless - looking to the legal interest rates in Michigan, found at MCL 438.31, it appears that a rate of 5-7% might be appropriate. But, for a more in-depth analysis of what's allowed or what's ordinarily charged, reaching out to a Michigan construction attorney would provide some additional clarity.
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