The following is an opinion piece written by Jason Kosek, a shareholder in the New York headquarters of Anderson Kill PC, and Keith A. Lazere, a shareholder in Anderson Kill’s New York office and the company’s deputy general counsel
It’s 2026. You’ve spent all of 2025 bidding on a project, drawing up schedules, reviewing specifications and drawing changes, and now you’re ready to write, negotiate, and execute your contract. But contracts are not static documents, they are living instruments that require routine amendments and updates to reflect industry changes, new legislation and amendments to existing laws.
Below we discuss the three main laws and issues you need to consider when drafting construction contracts in 2026 (two of them new, the third little-known).
1. The AVOID Law
The AVOID Act fundamentally restructures the defense strategy by forcing the immediate identification of third party defendants. Effective April 18, 2026 (120 days from the signing of the AVOID Act), newly amended CPLR Section 1007 establishes rigid deadlines for filing third-party actions, altering procedural practice in New York civil litigation. This means that lawyers can no longer take a wait-and-see approach to the implementer. Instead, they must conduct a comprehensive compensation analysis, insurance investigation and liability assessment within days of filing the response. The safest course may be the general implementer of all potentially liable parties. In employment law litigation, this could mean naming all subcontractors who set foot on the project site, regardless of their apparent relationship to the alleged injury. (See also Jason Kosek’s analysis in the New York Law Journal.)
When drafting contracts to account for the AVOID Act changes, owners should ensure that the contract requires the general contractor to maintain and periodically update a comprehensive project schedule that identifies all entities and vendors performing work on the project. This visibility is critical to compliance and risk management under the AVOID Act.
Each subcontract issued on the project must include provisions that include the following.
Mandatory compensation of the owner: Each contract must designate the Owner as Indemnified with clear and enforceable indemnification language.
Immediate delivery contract: Require all subcontracts and lower-level agreements to be provided to the owner immediately upon execution.
Centralized database: Maintain a comprehensive database tracking all contracting parties and their specific indemnification obligations.
This proactive approach dramatically reduces investigative time given the AVOID Act’s tight deadlines for third-party practice. With easily accessible indemnification agreements, you can quickly draft third-party complaints incorporating relevant contract language, producing stronger allegations that withstand dismissal motions and preserve your recovery rights.
2. Modification of article 757 of the General Business Law (Fast Payment Law.)
On December 19, 2025, New York eliminated any remaining leeway in its withholding laws. The Legislature amended Section 757 of the General Business Law, the Prompt Payment Act, and the message is very clear: any contract provision that requires retention of more than 5% of the total contract amount is void. period
This means that owners cannot retain more than 5% of prime contractors, and prime contractors cannot retain more than 5% of subcontractors. No exceptions. No creative drawings. There is no negotiation around it. Any retention provisions in excess of 5% in your private construction contracts executed after December 19, 2025 are inapplicable. The courts won’t reduce it to 5%, they’ll strike it down entirely, potentially leaving you without any lien protection if the provision isn’t severable from the rest of your payment terms.
To comply with the Prompt Payment Act, landlords should ensure that their own contracts and those of all subcontractors include a 5% retention limit. It is also important to strategically structure retention schedules. Keep more funds early when the risk is higher, release faster as the project progresses, but always keep an eye on the total contract sum calculation. Any provision that allows aggregate withholding of more than 5% is unenforceable and the courts will not rewrite your agreement to save it. Get your retention language in place before you sign your next contract. Relatedly, delete billing provisions in contracts to help prevent account claims (ie, if you don’t object to billing within 90 days, no account is created).
3. Indemnification Language Under New York Law
New York public policy prohibits contractual indemnification for own negligence. Section 5-322.1 of the General Obligations Act overrides any provision in the construction contract that purports to indemnify a part of the liability arising from its own negligence. Courts will not enforce these provisions. They are dead on arrival.
If you’re a landlord, ask for indemnity language in your contracts. In the event of shared negligence, this language requires the contractor to cover your share. Use an activation language like:
· “even if it is partly caused by” the negligence of the indemnified party
· “regardless of” the fault of the indemnified party
· “yes or no” the indemnified party was negligent
This language survives § 5-322.1 because the indemnifier still has some fault. You are not being compensated for your sole negligence. The contractor pays for your partial negligence as long as he shares responsibility for the loss.
Practice notes for contractors: Insist on limited indemnity
If you are a contractor, you limit your indemnification obligation to losses caused solely by your own negligence. This prevents you from funding someone else’s mistakes. Use restrictive language such as:
· “only to the extent caused by the negligence of the contractor”
· “limited to losses arising from negligent acts or omissions of the Contractor”
· “to the extent of the contractor’s proportional fault”
Cut out any language that requires you to indemnify “even if caused in part by” the landlord’s negligence. This is an intermediate form of compensation and puts you on the hook for 100% of the loss, even when the owner is primarily responsible.
To summarize these challenges: prepare ahead of time to avoid delays under the AVOID Act; prepare to live with limited withholding; and protect themselves in cases of shared negligence to the extent possible. Build your contracts before you start building and keep your projects moving forward on schedule.
It cost Jason is a shareholder in the New York headquarters of Anderson Kill PC. Jason focuses his practice on the construction industry and assists clients on a wide range of issues including insurance coverage, regulatory, FCPA, employment law, negligence, nuisance, trespass, products liability and breach of contract, with a focus on construction and regulatory matters. https://www.linkedin.com/in/jason-kosek-4a321737/
Keith A. Lazere is a shareholder in Anderson Kill’s New York office and the firm’s deputy general counsel. Keith focuses his practice on corporate and commercial litigation at the trial and appellate levels in state and federal courts. He represents clients in sophisticated commercial and business litigation involving commercial torts, fraud, breach of contract, corporate and partnership disputes, labor disputes, and debtors’ and creditors’ rights. https://www.linkedin.com/in/keith-a-lazere-71550642
