Why Every Residential Contractor Needs a Written Contract
The Cromeens Law Firm
June 4, 2026
Last Updated: May 28, 2026
The Texas Prompt Payment Act is the state law that forces owners, contractors, and governmental entities to pay you on time for construction work. When the deadline passes without payment, the law charges them statutory interest, and after 10 days of written notice, it gives you the right to stop work. The Act covers private construction projects under Chapter 28 of the Texas Property Code and public construction projects under Chapter 2251 of the Texas Government Code.
If you are on a private commercial or residential construction project, Chapter 28 of the Texas Property Code governs your job. If you are on a public construction project for any state agency, county, city, school district, or other governmental entity, Chapter 2251 of the Texas Government Code governs your job. If you are on a federal construction project, the federal Prompt Payment Act applies, not the Texas rules below.
Miss the notice and timing rules and you lose your right to stop work. On private projects, you can also lose your attorney’s fees.
If you are on a public project and want to understand the bond-claim side of getting paid, see our post on bond claims explained.
Residential projects, including single-family homes and 2-to 4-family buildings, are covered by Chapter 28, with a few special rules outlined below. The right to stop work does not apply to these residential projects.
This guide reflects the major 2023 amendment (HB 3485) that gave contractors and subcontractors the right to refuse extra work when unsigned change orders exceed 10 percent of the contract value, and the 2025 amendment (HB 3005) that closed a loophole in which governmental entities and owners were using long-running post-completion audits to stall payment.
Texas has two prompt payment statutes for construction, and which one governs your job depends on who owns the project. A third statute, the federal Prompt Payment Act, covers federally owned projects, and certain types of construction are entirely exempt from coverage.
Private Commercial and Residential Projects: Chapter 28 of the Texas Property Code
If you are working on a privately owned construction project, Chapter 28 of the Texas Property Code governs how and when you get paid. This covers both private commercial projects and residential projects of all sizes, from single-family homes to large apartment buildings.
Public Projects: Chapter 2251 of the Texas Government Code
If you are working on a public project for any state agency, county, city, school district, or other governmental entity, Chapter 2251 of the Texas Government Code governs your job. This includes state agency contracts, public school construction, county and city projects, special-purpose district work, and any other construction paid for by a governmental entity.
Federal Projects: A Different Statute Applies
If the project is federally owned or federally contracted, the federal Prompt Payment Act in 31 U.S.C. Chapter 39 applies, along with payment terms in the Federal Acquisition Regulation. The Texas statutes do not apply.
Oil, Gas, and Pipeline Construction Are Often Not Covered
Texas Property Code Section 28.010 carves out most oil and gas construction from Chapter 28 entirely. Agreements to explore, produce, or develop oil, gas, or natural gas liquids are not covered. Contracts to gather, store, or transport natural gas by pipeline or fixed associated facility are also not covered. The Houston First Court of Appeals confirmed this in Arrow Field Services, LLC v. Linde Engineering North America, Inc. (2024), where the court reversed roughly $22 million in prejudgment interest, attorney’s fees, and costs because Chapter 28 did not apply to the construction of a natural gas processing plant. If your project involves oilfield or pipeline work, assume the exemption applies and make sure your contract has its own interest and attorney’s fee provisions to fill the gap.
On private projects, the owner has 35 days to pay the general contractor after receiving a written payment request, and each downstream tier then has 7 days to pay the next tier. On public projects, the governmental entity has 31 days to pay the prime contractor after receiving a proper invoice, and each downstream tier has 10 days to pay the next tier.
Payment Deadlines on Private Commercial and Residential Construction Projects (Chapter 28)
| Who Owes Payment | Who Receives It | Deadline | Source |
| Owner | General contractor | 35 days after owner receives written payment request | § 28.002(a) |
| General contractor | Subcontractor | 7 days after GC receives owner’s payment | § 28.002(b) |
| Subcontractor | Lower-tier sub or supplier | 7 days after subcontractor receives upstream payment | § 28.002(c) |
If you are a subcontractor and the GC receives payment from the owner on Monday the 1st, the GC owes you by the 8th. Payment is overdue starting on the 9th.
For single-family residence projects, a written contract may extend the owner’s 35-day deadline but cannot extend it beyond 60 days under Texas Property Code Section 28.006(b). No other extension by contract is allowed.
Payment Deadlines on Public Construction Projects (Chapter 2251)
| Who Owes Payment | Who Receives It | Deadline | Source |
| Governmental entity | Vendor (prime contractor) | 31 days after the later of receipt of goods, completion of services, or invoice receipt | § 2251.021(a) |
| Vendor (prime) | Subcontractor | 10 days after vendor receives payment from the governmental entity | § 2251.022 |
| Subcontractor | Lower-tier sub or supplier | 10 days after subcontractor receives upstream payment | § 2251.023 |
If the governmental entity pays the prime contractor on the 1st of the month, the prime contractor owes the subcontractor by the 11th. Payment is overdue starting on the 12th.
Some political subdivisions whose governing body meets only once a month or less frequently get 46 days instead of 31 to pay the prime contractor, under Texas Government Code Section 2251.021(b).
When the Clock Starts
On private projects, the 35-day owner clock starts the day the owner receives your written payment request.
On public projects, the 31-day governmental entity clock starts on the latest of three events: when the entity receives the goods, when the service is completed, or when the entity receives a proper invoice.
The downstream clocks at every tier start when that tier receives payment from the upstream, not when the payment is sent or mailed. The document you send must be a clear written request for payment. An informal status update or progress report is generally not enough.
What Happens When a Deadline Falls on a Weekend or Holiday
Neither Chapter 28 nor Chapter 2251 has an express weekend or holiday extension. The general rule in Texas Government Code Section 311.014 extends a deadline that falls on a Saturday, Sunday, or legal holiday to the next business day. If you are close to a deadline that lands on a weekend, send your notice or invoice early to be safe.
Both statutes begin accruing statutory interest on the late party the day after the payment deadline passes. On public projects, the loser pays the winner’s reasonable attorney’s fees by statute. On private projects, attorney’s fees are at the court’s discretion.
Interest on Late Payments
Interest under Chapter 28 (private projects) is fixed at 1.5 percent per month under Texas Property Code Section 28.004, which works out to 18 percent per year.
Interest under Chapter 2251 (public projects) is set each fiscal year under Texas Government Code Section 2251.025, calculated as the Wall Street Journal prime rate on the first business day of July plus 1 percentage point.
The Texas Comptroller publishes the rate annually. For fiscal year 2026 (September 1, 2025 through August 31, 2026), the public project interest rate is 8.50 percent per year. Interest under both statutes is simple, not compounded, and begins accruing the day after the deadline passes.
Attorney’s Fees Are Mandatory on Public Construction Projects, Discretionary on Private
Texas Government Code Section 2251.043 requires that the prevailing party in a public construction project prompt payment dispute be awarded reasonable attorney’s fees. The court has no discretion on this point. The losing side, whether vendor or governmental entity, pays. For private construction projects, Texas Property Code Section 28.005(b) gives the court discretion to award costs and attorneys’ fees as the court deems equitable and just.
The practical effect is that the strength of your attorney’s fees claim on a private construction project depends on how cleanly you followed the statutory notice and timing rules.
If payment has stopped and you are not getting answers, both statutes give you the right to stop work after 10 days of written notice. Send the notice correctly, and the statute also protects you from being sued for damages caused by the suspension.
How to Send a Proper Notice of Intent to Stop Work
The notice must be in writing and must state two things: that you have not received payment, and that you intend to suspend work for non-payment.
On private construction projects, send the notice to the owner. If the owner has a construction loan and the lender’s contact information was posted at the project site within 10 days of the start of construction, you must also send the notice to the lender under Texas Property Code Section 28.009(b).
On public construction projects, send the notice to the prime contractor under Texas Government Code Section 2251.052, with an optional copy to the governmental entity. Either way, you cannot stop work before the 10th day after you deliver the notice.
The Safe Harbor: When Stopping Work Doesn’t Expose You to Damages
If you send the notice correctly and wait 10 days, the statute provides you with two protections. First, you are not required to do any further work until you are paid the contract amount plus your reasonable costs of demobilizing and remobilizing. Second, you are not liable for damages caused by your suspension.
These protections are set forth in Texas Property Code Section 28.009(c) for private projects and inTexas Government Code Sections 2251.051(c) and 2251.052(d) for public projects.
The exception: if before you suspend, the party who hired you sends you written notice claiming they have already paid or that they have a good-faith dispute about your work, your damages protection may not hold up, and the statute requires you to give them a reasonable chance to address the issue before you stop. If you are in that situation, talk to an attorney before walking off the job.
When the Right to Stop Work Does Not Apply
The Chapter 28 right to stop work does not apply to contracts for the design, construction, remodeling, or repair of a detached single-family home, duplex, triplex, or quadruplex. If you are working on one of those construction projects, you can still recover statutory interest for late payment, but you cannot legally suspend performance under the prompt payment statute. The exclusion is in Texas Property Code Section 28.009(e)(1).
Both statutes allow an owner, general contractor, or governmental entity to withhold payment when they have a real, good-faith dispute about your work or invoice. What they cannot do is hold back more than the law allows or use an open-ended audit as their reason after the job is finished.
What Counts as a Good Faith Dispute
A good-faith dispute is a real disagreement about whether you performed the work properly or about the amount you claim is owed. The standard is in Texas Property Code Section 28.003 for private projects and Texas Government Code Section 2251.002 for public projects.
On public construction projects, the governmental entity must notify you of any dispute within 21 days of receiving your invoice and must include details about the disputed amount under Texas Government Code Section 2251.042(a).
If the party who hired you uses a dispute to defeat your right to suspend or your damages protection when you stop work, they have to give you a written list of specific reasons under Texas Government Code Section 2251.051(d) or Texas Property Code Section 28.009(d).
How Much They Can Withhold
The statutes set three different withholding caps depending on project type:
| Project Type | Withholding Cap | Source |
| Private commercial (non-residential) | 100 percent of the disputed amount | Tex. Prop. Code § 28.003(b) |
| Private residential (single-family, duplex, triplex, quadruplex) | 110 percent of the disputed amount | Tex. Prop. Code § 28.003(a) |
| Public projects | 110 percent of the disputed amount | Tex. Gov’t Code § 2251.042(d) |
If they hold back more than the cap, the excess is owed to you the same way any unpaid invoice would be. Statutory interest still runs on the excess from the day after the payment was originally due.
The 2025 Audit-Exclusion Rule (HB 3005)
Effective September 1, 2025, Texas closed a loophole that owners and governmental entities had been using to stall payment after the job was finished.
Under Texas Property Code Section 28.003(c) and Texas Government Code Section 2251.002(c), an audit of the construction project that continues for more than 60 days after substantial completion is no longer a good-faith or bona fide dispute. The rule applies to contracts entered into on or after September 1, 2025.
The same 2023 legislation that updated the Texas Prompt Payment Act gave contractors and subcontractors a related power for the change-order problem.
Under Texas Property Code Section 28.0091 (private projects) and Texas Government Code Section 2251.0521 (public projects), you can refuse to perform additional directed work when the value of all unsigned change orders for that directed work exceeds 10 percent of your original contract. If you refuse, you are not liable for damages for failing to do the work.
How the 10% Rule Works
The math is straightforward. Add up the value of all the additional work that has been directed but not yet signed off on a change order. Include both work you have already performed and work you have been told to perform. If the total exceeds 10 percent of your original contract amount, you can decline to do any more of that unsigned work. For example, if your original contract is $200,000 and the owner has directed $25,000 in additional work without a signed change order, you have crossed the 10 percent threshold and can refuse further directed work without a signed change order.
The statute does not require any formal notice to invoke this right. You stop performing the unsigned additional work, and the statute protects you from damages for that decision. The liability shield lives in Texas Property Code Section 28.0091(b) for private projects and Texas Government Code Section 2251.0521(d) for public projects.
On private construction projects, the additional work must be directed by the owner. On public construction projects, the additional work must trace back to a directive from the governmental entity, even if it reaches you through the prime contractor.
When the Rule Applies to You
The 10 percent rule applies only to contracts entered into on or after September 1, 2023. If your contract was signed before that date, this statute does not protect you.
The Texas Prompt Payment Act gives you real leverage. It also has small windows and exact content requirements at every step. A missed notice deadline, a vague dispute response, or a wrongly counted day can cost you your statutory interest, your attorney’s fees, and your right to stop work. For many contractors and subcontractors, that is the difference between getting paid and writing off the receivable. We built our practice around the construction businesses that get stiffed. Whatever stage you are at, we can help in one of two ways.
Ongoing collections and lien protection. If late payment is a recurring problem in your business, the Cromeens Lien & Collection Subscription Plan handles your monthly invoicing follow-up, hits every Texas lien deadline, sends prompt-pay notices when timelines slip, and pursues collections for a flat monthly fee. You stay focused on the work, and we make sure you get paid for it.
A specific payment dispute. If you have a job where payment has stopped, and you need to move fast on a stop-work notice, a withholding fight, or the 10 percent change order rule, book a free consultation with one of our construction attorneys. We will review your contract, notices, and timeline and explain your options.
Call us at 713-715-7334.
No. The Texas Prompt Payment Act for construction is found in Chapter 28 of the Texas Property Code (for private projects) and Chapter 2251 of the Texas Government Code (for public projects). The Texas Prompt Payment of Claims Act is Chapter 542 of the Texas Insurance Code and governs how insurance companies handle and pay claims. The names are similar, but the two statutes cover entirely different industries. If you are a contractor or subcontractor trying to get paid for construction work, the Construction Prompt Payment Act is what applies to your situation.
The Prompt Payment Act does not protect owners in this situation. It protects subcontractors against general contractors and general contractors against owners, but it does not run the other direction. An owner facing lien claims from unpaid subs has several statutory tools available.
Those owner-side protections live in Chapter 53 of the Texas Property Code. The main ones are fund-trapping under Section 53.081 (which lets the owner hold back money from the GC after receiving pre-lien notice from a sub), the 10 percent statutory retainage in Section 53.101, the Construction Trust Fund Act in Chapter 162 (which imposes civil and criminal liability on contractors who divert project funds), and the routine practice of demanding conditional lien waivers from every sub and supplier with each progress payment. Our post on how to file a contractor lien in Texas walks through the lien side in more detail.
The most common mistakes that invalidate a prompt payment claim are procedural. The biggest one is sending a payment statement or progress report rather than a true written demand for payment, which never starts the statutory clock running. Second is suspending work before the full 10 days have run after the notice is delivered, which forfeits the damages safe harbor. Third is miscounting the start of the clock by using the invoice date instead of the date the recipient received the invoice or the date the goods were completed. Fourth, and very common in practice, is walking off the job in frustration without sending any written intent-to-suspend notice. The damaged safe harbor only protects you if you follow the notice process first.
The Texas Prompt Payment Act mostly puts the deadlines on the party who owes you payment, not on you. The one you have to count carefully is the 10-day waiting period after you send a stop-work notice. If you suspend work before the 10th day, you lose the damages safe harbor.
Aside from the Prompt Payment Act itself, the deadlines that more often catch contractors and subcontractors are the lien-filing deadlines in Chapter 53 of the Texas Property Code. If you missed a Texas lien deadline, our post on what to do if you missed a Texas lien deadline walks through the alternatives that may still be open to you.
Not entirely. Pay-if-paid clauses are enforceable in Texas commercial construction, but Texas Business and Commerce Code Section 56.052 gives a subcontractor a path to make the clause unenforceable on a specific unpaid invoice. After 45 days have passed from the date you submitted a proper written payment request and the contractor has not paid, you can send a written objection to further enforcement of the pay-if-paid clause. The objection takes effect on the later of the 10th day after the contractor receives it or the 8th day after Prompt Payment Act interest begins accruing on the unpaid amount. From that point on, the clause cannot block payment for work performed or materials delivered after the notice took effect.
Texas Business and Commerce Code Section 56.055 separately bars a pay-if-paid clause from defeating your mechanic’s lien rights under Chapter 53 of the Texas Property Code. And Chapter 56 does not apply to single-family through 4-family residential contracts, certain civil-engineering public infrastructure (roads, utilities, water and wastewater, airports), or contracts that are purely for the sale of goods or demolition.
Karalynn Cromeens is the Owner and Managing Partner of The Cromeens Law Firm, PLLC, with over 17 years of experience in construction, real estate, and business law. A published author and passionate advocate for contractors, she has dedicated her career to protecting the businesses her clients have built. Karalynn is on a mission to educate subcontractors on their legal rights, which inspired her books Quit Getting Screwed and Quit Getting Stiffed, as well as her podcast and The Subcontractor Institute.
