In the construction industry, delayed payments can threaten the operations of contractors and subcontractors. To combat this problem, Texas enacted the Prompt Payment Act (PPA) to ensure timely payment for work completed on both public and private construction projects.
Disputes over delayed or withheld payments are one of the most common sources of conflict in construction projects. When payment issues escalate, working with a Houston construction disputes attorney can help contractors and property owners enforce their rights under the Prompt Payment Act.
Overview of the Texas Prompt Payment Act
The Texas Prompt Payment Act establishes mandatory deadlines for making payments and outlines penalties for noncompliance.
Private Projects
On private construction projects, Texas law requires property owners to pay contractors within 35 days of receiving a proper invoice.
Contractors must pay subcontractors within 7 days after receiving payment from the owner. Likewise, subcontractors must pay lower-tier subs or suppliers within 7 days of receiving payment. If payment is late, the paying party owes interest on the unpaid balance.
Public Projects
For state or local government contracts, the rules are similar but typically stricter. A government entity must pay a contractor within 30 days of receiving a correct invoice.
Contractors and subcontractors still have 7 days to pay down the chain once funds are received. Late payments accrue interest at the maximum legal rate set by the Texas Comptroller.
The Act allows parties to withhold payments for legitimate reasons, including: certain valid
- Disputes over defective or incomplete work
- Failure to meet contractual obligations
- A properly submitted notice of withholding, explaining the reason and amount being withheld
Disputes frequently arise when payment delays stem from unresolved change orders in Texas, particularly where the owner or upstream contractor disputes whether additional work was authorized or properly documented. In these situations, payment may be withheld temporarily, but only if the withholding complies with the Act’s notice and good-faith requirements.
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Understanding Texas Payment Rights
Remedies for Violations of the Act
When a party fails to comply with the Texas Prompt Payment Act, affected contractors, subcontractors, and suppliers may have several remedies available. A construction claim may offer money for:
1. Interest Penalties
As soon as a payment is late, the payer begins accruing statutory interest on the overdue balance. This interest continues until payment is made.
2. Attorney’s Fees
If the unpaid party must initiate legal action to enforce their rights, courts may award reasonable attorney’s fees and court costs related to the proceeding. This option makes litigation more accessible for those seeking to recover delayed payments.
3. Lien Rights
In private projects, the Prompt Payment Act does not eliminate mechanics’ lien rights. Contractors and subs can still file a lien affidavit to recover unpaid funds.
4. Retainage Protections
If a party withholds a portion of payment until project completion, the Act requires the party to pay this retainage within 35 days after completion, assuming no defects or disputes exist. Delayed retainage payments are also subject to interest penalties.
Contact an Experienced Attorney for Help Understanding Your Rights
If you are experiencing late payments related to a construction project or you are unsure whether a delay is lawful, you should consult an experienced Houston construction attorney for help understanding your legal options.
At Porter Law Firm, an attorney can help you evaluate whether a delay is legitimate or if a party has violated the PPA in withholding payment. Your lawyer can also calculate your damages and gather the evidence needed to prove your claim. Contact us today to schedule a confidential consultation.