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The State of Texas Prompt Payment Act

Have you ever not received payment after completing the work? Unfortunately, the answer for many of you is probably yes. The good thing is, in Texas, there are laws that are meant to protect you and allow you to collect payment on jobs you have completed. For a subcontractor to collect and combat not receiving payment after the work has already been completed, the subcontractor needs to follow the steps in the Texas Prompt Payment Act.

The facts: The State of Texas Prompt Payment Act, found in Chapter 28 of the Texas Property Code, calls for prompt payment for work performed on private, residential, and commercial projects. Prompt payment for public works jobs is found in Texas Government Code Section 2251.

But what exactly does prompt payment mean, and how do you go about enforcing the Prompt Payment Act in Texas? We list out the details you need to know about the Prompt Payment Act below and how it differs between private projects and public works projects.

So what do you do if you’re owed payment on a Private Project?

First, you need to establish a timeline. Under the Texas Prompt Payment Act, once an owner receives a request for payment, the contractor has a right to be paid within thirty-five (35) days, if the work conforms to the contract, and the amount requested is allowed under the contract. The subcontractor is entitled to payment within seven (7) days of the contractor’s receipt of payment. The contractor’s/subcontractor’s right to payment cannot be waived.

Next, you need to send a demand letter stating your payment is overdue. In this written letter, a contractor can provide a ten (10) day notice to suspend work for non-payment. After the ten (10) day notice, the contractor does not have to return to work until they are paid for the unpaid balance and the costs for demobilization and remobilization. Additionally, the contractor/subcontractor may be entitled to interest after the thirty-sixth (36) day. Learn how to calculate demobilization, remobilization, and interest on a past-due payment below.

Lastly, if you still have not received payment after the owner or GC has received your demand letter, you will need to file a lien on the property. To learn more about the lien process, read our blog here.

So what do you do if you’re owed payment on a Public Works Project?

The same steps listed above apply for public projects as they do for private, but there are different timelines that need to be followed. Government entities must make prompt payments to contractors as well. Payment must be made by the thirty-first (31st) day after the later of the following: (1) the date goods are received under the contract; (2) the date services called for under the contract are completed; or (3) the date the invoice is presented to the governmental entity. A contractor is required to make payment to its subcontractors no later than the tenth (10th) day after the contractor’s receipt of payment.

How to calculate past-due interest, demobilization, and remobilization?

The Texas Prompt Payment Act allows for you to include interest after the 36th day of past due payment as well as include costs for demobilization and remobilizations. Here are some tips on how to calculate these costs:

  • Interest begins to accrue on any unpaid amounts required to be paid under the Prompt Payment Act Sections 28.001 et seq. of the Texas Property Code, on the day after the date on which the payment becomes due, at the rate of 1.5% each month.[1]
  • Demobilization Costs means all costs and expenses incurred for the suspending or termination of work, including as applicable, travel expenses, penalties, fees and other costs associated with terminating, suspending, or making change orders to contracts.
  • Remobilization occurs when a construction business must undertake additional mobilization activities after initial mobilization has already taken place.

These statutes contain some exceptions that an attorney will need to help you navigate. Our firm has been protecting subcontractors’ right to payment since 2006.

Give us a call to let us help you make sure the entire process is followed correctly, and the proper notices are sent so that you can receive prompt payment you deserve!

[1] Tex. Prop. Code §28.004

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