CHAPTER 28. PROMPT PAYMENT TO CONTRACTORS AND SUBCONTRACTORS
PROPERTY CODE
TITLE 4. ACTIONS AND REMEDIES
CHAPTER 28. PROMPT PAYMENT TO CONTRACTORS AND SUBCONTRACTORS
Sec. 28.001. DEFINITIONS. In this chapter:
(1) "Contractor" means a person who contracts with an owner to
improve real property or perform construction services for an
owner.
(2) "Improve" means to:
(A) build, construct, effect, erect, alter, repair, or demolish
any improvement on, connected with, or beneath the surface of
real property;
(B) excavate, clear, grade, fill, or landscape real property;
(C) construct a driveway or roadway;
(D) furnish any material, including trees or shrubbery, for the
purpose of taking any action described by Paragraphs (A)-(C) of
this subdivision; or
(E) perform any labor on or in connection with an improvement.
(3) "Improvement" includes all or any part of:
(A) a building, structure, erection, alteration, demolition, or
excavation on, connected with, or beneath the surface of real
property; and
(B) the act of clearing, grading, filling, or landscaping real
property, including constructing a driveway or roadway or
furnishing trees or shrubbery.
(4) "Owner" means a person or entity, other than a governmental
entity, with an interest in real property that is improved, for
whom an improvement is made, and who ordered the improvement to
be made.
(5) "Real property" includes lands, leaseholds, tenements,
hereditaments, and improvements placed on the real property.
(6) "Subcontractor" means a person who contracts to furnish
labor or material to, or has performed labor or supplied
materials for, a contractor or another subcontractor in
connection with a contract to improve real property.
Added by Acts 1993, 73rd Leg., ch. 479, Sec. 1, eff. Sept. 1,
1993.
Sec. 28.002. PROMPT PAY REQUIRED. (a) If an owner or a person
authorized to act on behalf of the owner receives a written
payment request from a contractor for an amount that is allowed
to the contractor under the contract for properly performed work
or suitably stored or specially fabricated materials, the owner
shall pay the amount to the contractor, less any amount withheld
as authorized by statute, not later than the 35th day after the
date the owner receives the request.
(b) A contractor who receives a payment under Subsection (a) or
otherwise from an owner in connection with a contract to improve
real property shall pay each of its subcontractors the portion of
the owner's payment, including interest, if any, that is
attributable to work properly performed or materials suitably
stored or specially fabricated as provided under the contract by
that subcontractor, to the extent of that subcontractor's
interest in the owner's payment. The payment required by this
subsection must be made not later than the seventh day after the
date the contractor receives the owner's payment.
(c) A subcontractor who receives a payment under Subsection (b)
or otherwise from a contractor in connection with a contract to
improve real property shall pay each of its subcontractors the
portion of the payment, including interest, if any, that is
attributable to work properly performed or materials suitably
stored or specially fabricated as provided under the contract by
that subcontractor, to the extent of that subcontractor's
interest in the payment. The payment required by this subsection
must be made not later than the seventh day after the date the
subcontractor receives the contractor's payment.
Added by Acts 1993, 73rd Leg., ch. 479, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 1999, 76th Leg., ch. 805, Sec. 1, eff.
Sept. 1, 1999.
Sec. 28.003. EXCEPTION FOR GOOD FAITH DISPUTE; WITHHOLDING. (a)
If a good faith dispute exists concerning the amount owed for a
payment requested or required by this chapter under a contract
for construction of or improvements to a detached single-family
residence, duplex, triplex, or quadruplex, the owner, contractor,
or subcontractor that is disputing its obligation to pay or the
amount of payment may withhold from the payment owed not more
than 110 percent of the difference between the amount the obligee
claims is due and the amount the obligor claims is due. A good
faith dispute includes a dispute regarding whether the work was
performed in a proper manner.
(b) If a good faith dispute exists concerning the amount owed
for a payment requested or required by this chapter under a
contract for construction of or improvements to real property,
excluding a detached single-family residence, duplex, triplex, or
quadruplex, the owner, contractor, or subcontractor that is
disputing its obligation to pay or the amount of payment may
withhold from the payment owed not more than 100 percent of the
difference between the amount the obligee claims is due and the
amount the obligor claims is due. A good faith dispute includes a
dispute regarding whether the work was performed in a proper
manner.
Added by Acts 1993, 73rd Leg., ch. 479, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 1999, 76th Leg., ch. 805, Sec. 2, eff.
Sept. 1, 1999.
Sec. 28.004. INTEREST ON OVERDUE PAYMENT. (a) An unpaid amount
required under this chapter begins to accrue interest on the day
after the date on which the payment becomes due.
(b) An unpaid amount bears interest at the rate of 1-1/2 percent
each month.
(c) Interest on an unpaid amount stops accruing under this
section on the earlier of:
(1) the date of delivery;
(2) the date of mailing, if payment is mailed and delivery
occurs within three days; or
(3) the date a judgment is entered in an action brought under
this chapter.
Added by Acts 1993, 73rd Leg., ch. 479, Sec. 1, eff. Sept. 1,
1993.
Sec. 28.005. ACTION TO ENFORCE PAYMENT. (a) A person may bring
an action to enforce the person's rights under this chapter.
(b) In an action brought under this chapter, the court may award
costs and reasonable attorney's fees as the court determines
equitable and just.
Added by Acts 1993, 73rd Leg., ch. 479, Sec. 1, eff. Sept. 1,
1993.
Sec. 28.006. NO WAIVER. (a) Except as provided by Subsection
(b), an attempted waiver of a provision of this chapter is void.
(b) A written contract between an owner and a contractor for
improvements to or construction of a single-family residence may
provide that the payment required under Section 28.002(a) be made
not later than a date that occurs before the 61st day after the
date the owner receives the payment request. Notwithstanding
Section 28.004(b), an unpaid amount under contract subject to
this subsection that allows payment later than the date otherwise
required under Section 28.002(a) bears interest at the rate of
1-1/2 percent each month.
Added by Acts 1993, 73rd Leg., ch. 479, Sec. 1, eff. Sept. 1,
1993.
Sec. 28.007. LEGAL CONSTRUCTION. (a) This chapter may not be
interpreted to void a contractor's or subcontractor's entitlement
to payment for properly performed work or suitably stored
materials.
(b) Nothing in this statute shall be interpreted to change the
rights and obligations set forth in Chapter 53, Property Code.
Added by Acts 1993, 73rd Leg., ch. 479, Sec. 1, eff. Sept. 1,
1993.
Sec. 28.008. EXCEPTION FOR FAILURE OF LENDER TO DISBURSE FUNDS.
The date of payment required of the owner pursuant to Section
28.002(a) shall change from the 35th day after the date the owner
receives the payment request to the fifth day after the date the
owner receives loan proceeds, in the event that:
(1) the owner has obtained a loan intended to pay for all or
part of a contract to improve real property;
(2) the owner has timely and properly requested disbursement of
proceeds from that loan; and
(3) the lender is legally obligated to disburse such proceeds to
the owner, but has failed to do so within 35 days after the date
the owner received the contractor's payment request.
Added by Acts 1993, 73rd Leg., ch. 479, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 1999, 76th Leg., ch. 805, Sec. 3, eff.
Sept. 1, 1999.
Sec. 28.009. RIGHT TO SUSPEND WORK. (a) If an owner fails to
pay the contractor the undisputed amount within the time limits
provided by this chapter, the contractor or any subcontractor may
suspend contractually required performance the 10th day after the
date the contractor or subcontractor gives the owner and the
owner's lender written notice:
(1) informing the owner and lender that payment has not been
received; and
(2) stating the intent of the contractor or subcontractor to
suspend performance for nonpayment.
(b) For purposes of Subsection (a), the contractor or
subcontractor must give the owner's lender the written notice
only if:
(1) the owner has obtained a loan intended to pay for all or
part of the construction project;
(2) the lender has remitted funds, including acquisition funds,
for construction purposes;
(3) the loan obtained:
(A) is evidenced by a promissory note secured by a deed of trust
recorded in the real property records of the county in which the
real property that is the subject of the contract is located; and
(B) is not only for the acquisition of personal property or
secured only by a security instrument;
(4) the owner or lender, at the lender's option:
(A) securely posts not later than the 10th day after the date
construction commences a sign on the project site in a prominent
place accessible to each contractor, subcontractor, and supplier
that states the lender's name, address, and the person to whom
any notice should be sent; and
(B) maintains the sign during the pendency of the construction
project;
(5) not later than the 10th day after the date construction
commences, the owner or lender, at the lender's option, provides
a written copy of the notice prescribed by Subdivision (4) to the
contractor and any subcontractor or supplier identified by the
contractor by depositing the notice properly addressed in the
United States mail, first class, postage paid; and
(6) not later than the 10th day after the date a subcontractor
or supplier performs labor or furnishes materials or equipment
for the construction project, the owner, contractor, or
subcontractor provides a written copy of the notice prescribed by
Subdivision (4) to the subcontractor or supplier.
(c) A contractor or subcontractor who suspends performance as
provided by this section is not:
(1) required to supply further labor, services, or materials
until the person is paid the amount provided by this chapter,
plus costs for demobilization and remobilization; or
(2) responsible for damages resulting from suspending work if
the contractor or subcontractor has not been notified in writing
before suspending performance that payment has been made or that
a good faith dispute for payment exists.
(d) A notification that a good faith dispute for payment exists
provided under Subsection (c) must include a list of specific
reasons for nonpayment. If a reason specified includes labor,
services, or materials provided by a subcontractor that are not
provided in compliance with the contract, the subcontractor is
entitled to a reasonable opportunity to:
(1) cure the listed items; or
(2) offer a reasonable amount to compensate for listed items
that cannot be promptly cured.
(e) This section does not apply to:
(1) a contract for the construction of or improvements to a
detached single-family residence, duplex, triplex, or quadruplex;
or
(2) a contract to improve real property for a governmental
entity.
(f) The rights and remedies provided by this section are in
addition to rights and remedies provided by this chapter or other
law.
Added by Acts 1999, 76th Leg., ch. 805, Sec. 4, eff. Sept. 1,
1999.
Sec. 28.010. EXEMPTION FOR MINERAL DEVELOPMENT AND OILFIELD
SERVICES. (a) This chapter does not apply to any agreement:
(1) to explore, produce, or develop oil, natural gas, natural
gas liquids, synthetic gas, sulphur, ore, or other mineral
substances, including any lease or royalty agreement, joint
interest agreement, production or production-related agreement,
operating agreement, farmout agreement, area of mutual interest
agreement, or other related agreement;
(2) for any well or mine services; or
(3) to purchase, sell, gather, store, or transport oil, natural
gas, natural gas liquids, synthetic gas, or other hydrocarbon
substances by pipeline or by a fixed, associated facility.
(b) In this section:
(1) "Agreement" includes a written or oral agreement or
understanding:
(A) to provide work or services, including any construction,
operating, repair, or maintenance services; or
(B) to perform a part of the services covered by Paragraph (A)
or an act collateral to those services, including furnishing or
renting equipment, incidental transportation, or other goods and
services furnished in connection with those services.
(2) "Well or mine services" includes:
(A) drilling, deepening, reworking, repairing, improving,
testing, treating, perforating, acidizing, logging, conditioning,
purchasing, gathering, storing, or transporting oil or natural
gas, brine water, fresh water, produced water, condensate,
petroleum products, or other liquid commodities, or otherwise
rendering services in connection with a well drilled to produce
or dispose of oil, gas, or other minerals or water; and
(B) designing, excavating, constructing, improving, or otherwise
rendering services in connection with an oil, gas, or other
mineral production platform or facility, mine shaft, drift, or
other structure intended directly for use in exploring for or
producing a mineral.
Added by Acts 1999, 76th Leg., ch. 805, Sec. 4, eff. Sept. 1,
1999.