Texas Prompt Pay Act: When Contractors Must Be Paid
Last updated: July 2025
Under the Texas Prompt Payment Act (Tex. Prop. Code §§ 28.001–28.010), property owners must pay general contractors within 35 days of receiving a payment request, general contractors must pay subcontractors within 7 days of receiving owner payment, and subcontractors must pay their lower-tier subs within 7 days of receiving payment from above. These deadlines apply to private construction contracts in Texas. Late payments accrue interest at 1.5% per month (18% annually) automatically — no lawsuit required to trigger it. A contractor who wrongfully withholds payment can also be liable for attorney's fees. The Act does not replace mechanics lien rights; it runs parallel to them. Missing a preliminary lien notice deadline on top of a slow-pay dispute leaves a subcontractor with no legal leverage at all.
What Is the Texas Prompt Payment Act and Who Does It Cover?
The Texas Prompt Payment Act is codified at Tex. Prop. Code Chapter 28 and applies to all private construction contracts in Texas. It covers the full payment chain: property owners paying general contractors, general contractors paying first-tier subcontractors and suppliers, and first-tier subcontractors paying lower-tier subcontractors and suppliers. Public works contracts are governed separately under Tex. Gov't Code Chapter 2251, which sets different timelines. The Act applies regardless of contract size — a $5,000 roofing subcontract and a $5 million mechanical contract both fall under the same statutory deadlines.
What the Act does not cover: residential homestead contracts where the owner occupies the property and has no more than four units are sometimes treated differently depending on the contract structure, so review your specific agreement if you're working on a single-family residence.
What Are the Exact Payment Deadlines Under Chapter 28?
The deadlines under Tex. Prop. Code § 28.002 are specific and non-negotiable:
- Owner to General Contractor: Payment is due within 35 days after the owner receives a written payment request, provided the request conforms to the contract.
- General Contractor to Subcontractor: Payment is due within 7 days after the GC receives payment from the owner.
- Subcontractor to Lower-Tier Subcontractor: Payment is due within 7 days after the first-tier subcontractor receives payment from above.
That 7-day pass-through rule is the most important number for subcontractors. Once the GC gets paid, the clock starts. Seven days. Not 30, not 60 — seven. The same 7-day rule applies down every level of the subcontract chain.
For pay-when-paid clauses: Texas courts have enforced pay-when-paid language as a timing mechanism, not as a condition precedent to payment. That means if the owner never pays the GC, the GC cannot use that clause to permanently avoid paying you — the obligation to pay survives, just delayed to a reasonable time.
What Interest Rate Applies to Late Payments in Texas?
Late payments under Tex. Prop. Code § 28.004 accrue interest at 1.5% per month, which equals 18% per year. This interest accrues automatically from the date payment was due — you do not need a court order or a demand letter to start the clock. You are owed it by operation of law.
To calculate your penalty: take the unpaid amount, multiply by 0.015, and multiply by the number of months overdue. A $50,000 unpaid invoice sitting 90 days past due has accrued $2,250 in statutory interest before you've filed a single document. At six months, that's $4,500. The penalty compounds month over month, which makes delay increasingly expensive for whoever is sitting on the money.
Attorney's fees are also available under § 28.005 if you prevail in a suit to collect. The court has discretion to award reasonable fees to the prevailing party, which gives subcontractors meaningful leverage in demand letters and negotiations.
How Does Texas Prompt Pay Interact With Mechanics Lien Rights?
The Prompt Payment Act and Texas mechanics lien law operate on separate tracks — satisfying one does not satisfy the other. Your lien rights exist under Tex. Prop. Code Chapter 53, and they require completely different notices and deadlines than a Prompt Pay demand.
To preserve mechanics lien rights on commercial projects in Texas, second-tier subcontractors (subs working under a GC's sub) must send a notice by the 15th day of the second and third months following each month in which labor or materials were furnished. This is the "Section 53.056 notice" requirement, commonly called the Texas Monthly Notice or 2nd-3rd Month Notice. Missing it kills your ability to lien for work performed in those months — the Prompt Payment Act does not save you.
Here's the practical risk: a GC can acknowledge a Prompt Pay violation, owe you statutory interest, and still leave you with no lien rights if you failed to send the required monthly notices. You want both protections running simultaneously.
According to Rabbet's 2024 Construction Payments Report, 82% of contractors face payment waits of over 30 days — up from 49% just two years earlier. That statistic reflects why legal protections matter: slow pay is the norm in construction, not the exception.
What Counts as a Valid Payment Request Under the Texas Prompt Pay Act?
The 35-day owner deadline does not start until the owner receives a "written payment request" that conforms to the contract. Under § 28.002, if the payment request does not comply with the contractual requirements, the owner can reject it — and the clock does not restart until a conforming request is submitted.
Practical steps to make your payment request bulletproof:
- Put it in writing. Verbal requests do not trigger the statute.
- Follow your contract's invoice format exactly. If the contract requires a Schedule of Values breakdown, include it. If it requires a notarized statement, get it notarized.
- Reference the contract number and project name on every invoice.
- Keep proof of delivery. Send invoices via certified mail or email with delivery confirmation. You need to be able to prove the date the owner or GC received the request, because that's day zero of the 35-day countdown.
If the owner or GC rejects a payment request as non-conforming, they are required under § 28.003 to provide written notice of the rejection and the reasons for it within 14 days of receipt. If they fail to send that rejection notice within 14 days, they forfeit their ability to claim the request was non-conforming.
Does Texas Prompt Pay Cover Retainage?
Retainage is governed partly under the Prompt Pay Act and partly under Tex. Prop. Code Chapter 53's retainage provisions. Here is what Chapter 28 says about retainage timing:
Under § 28.002(c), retainage withheld from a subcontractor must be paid within 7 days after the GC receives retainage from the owner. The same 7-day pass-through rule that applies to progress payments applies to retainage release.
Chapter 53 separately requires that owners set aside retainage in a dedicated fund (or provide a bond) on projects over $5 million. For projects under that threshold, there is no statutory escrow requirement — but the pass-through timing obligations still apply.
Retainage disputes are common, and slow retainage release is one of the top reasons subcontractors end up filing liens in Texas. If your retainage has been sitting after the GC received their retainage from the owner, you are already accruing 1.5% per month in statutory interest under Chapter 28.
What Should You Do If a Payment Is Late in Texas?
When a payment crosses the deadline, take these steps in order:
Step 1 — Calculate the violation. Determine the exact date payment was due (7 days from GC receipt, or 35 days from owner receipt of invoice). Confirm you have proof of when the payment request was received upstream.
Step 2 — Send a written demand letter. Reference Tex. Prop. Code Chapter 28 explicitly. State the amount owed, the due date, the current interest accrued at 1.5% per month, and your intent to pursue attorney's fees under § 28.005 if not paid within a stated deadline (7–14 days is typical). Many late payments resolve at this stage because the GC now knows you understand the statute.
Step 3 — Verify your lien notice status. While you're chasing payment, confirm you have sent all required monthly notices under Chapter 53 to preserve your lien rights. A Prompt Pay demand letter is a faster tool, but a mechanics lien is the bigger hammer. You want both options available.
Step 4 — File a mechanics lien if payment remains outstanding. A Texas lien claim on a commercial project must be filed by the 15th day of the fourth month after the month in which the work was performed (for original contractors) or after the last month in which labor or materials were furnished (for subcontractors).
According to Rabbet's 2024 Construction Payments Report, slow payments cost the U.S. construction industry an estimated $280 billion in 2024, adding roughly 14% to total construction spending. That cost lands hardest on subcontractors who lack the cash reserves to float unpaid invoices for months.
How Does the Texas Prompt Pay Act Apply to Public Projects?
Public works in Texas fall under Tex. Gov't Code Chapter 2251, not Chapter 28. The timelines differ:
- A governmental entity must pay a contractor within 30 days of receiving a payment request.
- Prime contractors must pay subs within 10 days of receiving payment from the government.
- Interest on late public payments accrues at the rate published by the Texas Comptroller (currently 18% per annum, but confirm current rate at comptroller.texas.gov).
Mechanics lien rights do not attach to public property in Texas. Instead, the protection for subcontractors on public projects is a payment bond claim under Tex. Gov't Code § 2253.021. Subcontractors on public jobs must send written notice of their claim to the prime contractor no later than 90 days after the date the claimant last provided labor or materials.
The notice and deadline structure is completely different from private work. If you work across both public and private jobs, treat them as two separate compliance tracks.
Frequently Asked Questions
Does the Texas Prompt Payment Act require a written contract to apply?
No. Chapter 28 applies to both written and oral construction contracts on private projects in Texas. However, proving the terms of a payment request, the agreed contract price, and the date payment was received is significantly harder without a written contract. Always get your agreements in writing.
Can a contract waive the Texas Prompt Payment Act's interest penalties?
No. Tex. Prop. Code § 28.007 prohibits contractual waivers of the Act's interest and attorney's fee provisions. Any contract clause that attempts to eliminate or reduce these statutory rights is void. A GC cannot draft away your right to 1.5% monthly interest through contract language.
What is the difference between the Texas Prompt Payment Act and a mechanics lien?
The Prompt Payment Act creates a right to statutory interest and attorney's fees when payment is late — it is a claim against the party who owes you money. A mechanics lien is a claim against the property itself and runs with the title. They are separate remedies and you can pursue both simultaneously. Losing one does not affect the other.
How do I prove when the GC received payment from the owner to start the 7-day clock?
Request a copy of the owner's payment records or the GC's draw schedule. Some subcontract agreements require the GC to notify subs when owner payments are received — if yours does, get that notice in writing. If the GC won't disclose receipt dates, that information can be obtained through discovery if the dispute reaches litigation.
Does the 7-day rule apply to suppliers as well as subcontractors?
Yes. Tex. Prop. Code Chapter 28 applies to material suppliers at every tier of the payment chain. A supplier who delivers materials to a subcontractor is entitled to payment within 7 days of the subcontractor receiving payment from the GC, under the same pass-through structure.
What happens if a GC disputes part of an invoice — does the full 7-day clock pause?
No. Under § 28.003, if a portion of a payment is disputed, the undisputed portion must still be paid on time. Withholding the entire payment because of a partial dispute is a violation of the Act. The disputed amount may be withheld, but the undisputed balance must flow through on the statutory schedule.
Is there a minimum dollar threshold for the Texas Prompt Payment Act to apply?
No minimum dollar amount is specified in Chapter 28. The statute covers any private construction contract, regardless of value. A $3,000 painting subcontract and a $3 million structural steel contract both carry the same payment timing obligations.
How does Texas Prompt Pay interact with lien waivers?
Signing a conditional lien waiver upon payment is standard and does not conflict with the Act. However, signing an unconditional lien waiver before receiving payment waives your lien rights regardless of whether Chapter 28 was violated. Never sign an unconditional waiver until the check has cleared your bank account.
Protect Your Lien Rights Today
The Prompt Payment Act gives you statutory interest and a path to attorney's fees — but it only works if you also have your lien rights intact. A demand letter citing Chapter 28 carries real weight when a GC knows you can back it up with a filed lien claim. If you are not tracking your monthly notice deadlines on every Texas job, you are leaving that leverage on the table.
LienFlash files your Texas preliminary notices in under 2 minutes via USPS Certified Mail, with attorney-reviewed templates and a Certificate of Mailing PDF for every filing. A single notice is $24.99. If it preserves lien rights on a $30,000 subcontract that would otherwise go unpaid, the math is not complicated.