Podcast Episode 4—Prompt Payment of Contractors in Texas

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Podcast Episode Timestamps

00:00 — Topic
00:35 — The governing statute
01:30 — Exceptions to the deadlines
02:00 — The penalties
02:19 — Government projects are different
02:35 — The takeaway—submit your invoices!
02:54 — Where to find the associated YouTube video, blog post, etc.
04:05 — Outro

The Situation

You performed work on a private construction project in Texas and you’re wondering how long until you receive payment.

Governing Law

In Texas, chapter 28 of the Property Code governs this situation. It’s called Prompt Payment to Contractors and Subcontractors. It regulates the time limits and interest penalties on all private construction projects within the state.

So, when do you get paid?

Within 35 days from invoice receipt—the property owner must make payment to the prime contractor.
Within 7 days from receiving payment from the property owner—the prime contractor must pay their subcontractors and suppliers.
The 7-day turnaround period applies to all payments down the next tier, and every tier below (i.e., second tier subcontractors).

Are there exceptions to the payment deadlines?

Yes. Texas retainage laws require the owner to retain 10% of the contract amount. Additionally, if there is a good faith dispute regarding whether the work was performed properly, payments may be withheld. NOTE: there are different withholding amounts permitted depending on whether the project is on a fourplex or less.

Penalties?

Interest will begin accruing at 1.5% per month (18% per year) if payment of an undisputed amount is late or wrongfully withheld.  Plus, in the event of a lawsuit or arbitration, the court may award interest, reasonable attorney’s fees, and court costs.

What about public projects?

This post focuses on private projects.  For government projects, take a look at chapter 2251 of the Texas Government Code for state projects and 31 USC ch. 39 for federal projects.

Takeaway

Submit your invoices.  If you are a general contractor, subcontractor, or supplier on a construction project in Texas, there are enforceable deadlines for prompt payment.  But the deadlines only begin to accrue after submitting the invoice.  So, don’t neglect to submit your invoices.  

YouTube Video

Here is a YouTube video that goes into more detail (or rambling) about this specific situation.

Disclaimer: This audio, video, and blog post are for informational purposes only and should not be misinterpreted as legal or other professional advice. If you have a legal question, you should consult with an attorney in your jurisdiction. Thank you for tuning in to Keith Law, PLLC.

(Photo by Karolina Grabowska from Pexels)