Last Updated January 24, 2002

Property Code - CHAPTER 28[Go To Best Hit]

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<sfr>1/2<efr> 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<sfr>1/2<efr> 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.