PROPERTY CODE
CHAPTER 28. PROMPT PAYMENT TO CONTRACTORS AND SUBCONTRACTORS
§ 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, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1993.
Amended by Acts 1999, 76th Leg., ch. 805, § 1, eff. Sept. 1,
1999.
§ 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, § 1, eff. Sept. 1, 1993.
Amended by Acts 1999, 76th Leg., ch. 805, § 2, eff. Sept. 1,
1999.
§ 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, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1993.
Amended by Acts 1999, 76th Leg., ch. 805, § 3, eff. Sept. 1,
1999.
§ 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, § 4, eff. Sept. 1, 1999.
§ 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, § 4, eff. Sept. 1, 1999.
