Texas Construction Prompt Payment Deadlines and Remedies

By Hank FasthoffJuly 5, 2026

Texas uses different prompt payment statutes for private and public construction. Texas Property Code Chapter 28 governs payment for improvements to privately owned real property. Texas Government Code Chapter 2251 governs qualifying payments by state agencies, local governments, and other governmental entities.

The project owner determines which statute applies, while the contract tier determines the deadline. Your records should establish when the payment request was received, when upstream funds were received, what amount was disputed, and when each written notice was delivered.

Private Project Payments Follow a 35 Day and Seven Day Sequence

Under Texas Property Code § 28.002, an owner generally must pay an allowed written request for properly performed work or qualifying stored or fabricated materials by the 35th day after receiving it. The owner may subtract an amount that another statute authorizes the owner to withhold.

After an owner pays, the downstream deadlines apply. A contractor generally must pay each subcontractor its proper share, including attributable interest, by the seventh day after receiving owner funds. A subcontractor that receives payment generally has the same seven day deadline for the next tier.

Those deadlines depend on receipt. A payment file should preserve the written request, required attachments, delivery record, approval history, upstream payment record, and remittance details. A contract can define the documents needed for a proper application, but Texas Property Code § 28.006 generally makes an attempted waiver of Chapter 28 void.

The nonwaiver rule contains an important residential exception. A written contract between an owner and contractor for a single family residence may set the owner's deadline as a date before the 61st day after receipt of the payment request. The statute preserves the 1.5% monthly interest rate when that contract permits payment later than the ordinary Chapter 28 deadline.

Good Faith Disputes Limit the Amount Withheld

Texas Property Code § 28.003 permits withholding when a good faith dispute concerns the obligation to pay or the amount owed. On a detached single family residence, duplex, triplex, or quadruplex, the paying party may withhold no more than 110% of the difference between the amount claimed and the amount the paying party says is due. The cap is 100% for other private real property projects.

A dispute over whether work was properly performed can qualify. The statute limits the withholding to the disputed difference rather than every amount in the application. A payment record is more useful when written notice identifies the disputed work, contract requirement, calculation, and proposed cure.

Section 28.008 provides a separate lender disbursement exception. The exception applies when the owner obtained a loan intended to fund the project, timely and properly requested the proceeds, and the lender failed to disburse funds it was legally obligated to provide. The owner's deadline can then become the fifth day after the owner receives the loan proceeds. That exception depends on all three statutory conditions.

Private Project Interest Accrues Monthly

Texas Property Code § 28.004 provides that an unpaid amount required by Chapter 28 bears interest at 1.5% each month. Interest begins on the day after payment becomes due. At a constant principal, 1.5% each month equals 18% over 12 months, although the calculation should follow the actual statutory accrual period and unpaid principal.

Interest accrues on the amount that should have been paid. When a valid good faith dispute supports withholding within § 28.003, the undisputed balance remains subject to the ordinary deadline. A payment history should therefore separate approved, disputed, withheld, and paid amounts rather than treat the application as one undivided number.

Private Project Suspension Requires Written Notice

Texas Property Code § 28.009 permits a contractor or subcontractor to suspend contract performance when the owner fails to pay an undisputed amount within Chapter 28's time limits. Suspension may begin on the 10th day after written notice to the owner and, when the statute requires it, the owner's lender. The notice must state that payment has not been received and that the sender intends to suspend performance for nonpayment.

Section 28.009 contains separate exclusions. Its suspension remedy doesn't apply to contracts for construction of or improvements to a detached single family residence, duplex, triplex, or quadruplex, or to contracts improving real property for a governmental entity. Contractors on the listed residential projects therefore can't use this statutory suspension remedy, although Chapter 28's payment deadlines and interest provisions continue to apply.

Lender notice depends on the detailed conditions in § 28.009(b), including the project loan, recorded deed of trust, and prescribed lender information. The statute protects a compliant suspension by relieving the sender from further performance until payment of the statutory amount plus demobilization and remobilization costs. Its damages protection also depends on whether the sender received timely written notice that payment was made or that a good faith dispute exists.

A dispute notice intended to defeat that protection must list the specific reasons for nonpayment. When the stated reason concerns noncompliant work, the unpaid party receives a reasonable opportunity to cure or offer a reasonable deduction for an item that can't be promptly cured. Contract notice provisions and § 28.009 should be read together before labor or materials leave the project.

Unsigned Changes Have a Separate 10% Rule

Texas Property Code § 28.0091 addresses additional owner directed work without a written, fully executed change order. A contractor or subcontractor may elect not to proceed when the aggregate actual or anticipated value of that unsigned additional work exceeds 10% of the original contract or subcontract amount. The statute protects the election from associated damages.

House Bill 3485 added that private project rule and a parallel provision for covered public projects. Both apply to contracts entered on or after September 1, 2023. The protection concerns the additional directed work and requires every statutory condition, so it differs from the broader suspension remedy for overdue undisputed payment.

Public Projects Use Chapter 2251

Texas Government Code § 2251.021 generally makes a governmental entity's payment overdue on the 31st day after the latest applicable event. Those events are receipt of the goods, completion of the service, and receipt of a correct invoice. The statute contains specialized rules for certain payments, including outside legal services.

Once the governmental entity pays, Texas Government Code § 2251.022 generally requires the vendor to pay each subcontractor its proper share by the 10th day after receipt. A subcontractor has the same 10 day deadline for the next tier. The downstream periods therefore differ between public and private projects.

Chapter 2251 also permits a governmental entity to withhold for a bona fide dispute. Under § 2251.042, the entity generally must notify the vendor of an invoice error or disputed amount by the 21st day after receiving the invoice and include enough detail to identify the dispute. The statutory withholding cap is 110% of the disputed amount.

The 2025 Audit Amendment Applies Only to Public Work

House Bill 3005 added Texas Government Code § 2251.002(c). For a public work construction contract, a project audit continuing more than 60 days after substantial completion doesn't qualify as a bona fide dispute under Chapter 2251.

The amendment applies to contracts entered on or after September 1, 2025. The enrolled bill amended only Government Code Chapter 2251. It didn't add a matching audit provision to Property Code Chapter 28 for private projects.

Public Project Interest Uses an Annual Rate

Texas Government Code § 2251.025 sets the annual late payment rate at one percentage point above the prime rate published in The Wall Street Journal on the first business day of July. The new rate applies for the fiscal year beginning September 1. The Texas Comptroller's current table states the applicable rate and explains how a payment crossing fiscal years is treated.

A governmental entity is liable for interest accruing on an overdue payment, and the interest is due with the principal. The rate should be checked for the fiscal year in which the payment became late rather than copied from an older demand or contract form.

Public Project Suspension Separates Vendor and Subcontractor Rights

Texas Government Code § 2251.051 permits a vendor to suspend performance when a governmental entity fails to pay an undisputed amount within the statutory period and receives the required written notice. Suspension generally may begin on the 10th day after notice. Section 2251.052 supplies a related remedy for an unpaid subcontractor and requires notice to the vendor, with an optional copy to the governmental entity.

Both sections protect a compliant suspension and address payment of demobilization and remobilization costs. Texas Department of Transportation highway contracts use a longer 20 day period under § 2251.053 and require certified mail to the listed recipients. The contract, project type, recipient, delivery method, and statutory waiting period should be confirmed before performance stops.

Fee Rules Differ Between the Statutes

Texas Property Code § 28.005 permits a person to bring an action to enforce Chapter 28. A court may award costs and reasonable attorney fees as it determines equitable and just. The text doesn't restrict that discretion to a prevailing party.

Texas Government Code § 2251.043 uses different language. In an administrative or judicial action to collect a payment or interest due under Chapter 2251, the opposing party must pay the reasonable attorney fees of the prevailing party. A claim against a governmental entity also requires a valid basis for jurisdiction and any applicable waiver of governmental immunity, so the fee provision alone doesn't settle whether a court may hear the suit.

Chapter 28 Contains a Mineral and Oilfield Exemption

Texas Property Code § 28.010 exempts agreements involving specified mineral development, well or mine services, and pipeline or related hydrocarbon transactions. Its definition of agreement can include construction, repair, maintenance, equipment, transportation, and related services connected with those activities.

That exemption can control even when a contract looks like an ordinary construction agreement. The project purpose and statutory definitions should be checked before relying on Chapter 28's deadlines, interest, or suspension remedy.

A Prompt Payment File Begins With Receipt Evidence

Your file should show the governing contract, project ownership, payment tier, qualifying payment request, receipt date, disputed amount, upstream payment date, accrued interest, and every statutory notice. Those records establish the deadline and identify which party held the funds when payment became overdue.

Prompt payment rights operate beside lien, bond, trust fund, retainage, and contract claims. Each uses different triggers and deadlines. Preserving one remedy doesn't automatically preserve the others, so the payment calendar should state each system's deadlines separately.