When a Property Owner receives a timely and allowed written payment request from a General Contractor, then the Property Owner must pay the amount owed to the General Contractor by the thirty-fifth (35th) day after the Owner receives the request; failure to do so is a violation of the Prompt Payment Act, unless there is a reasonable basis to dispute the amount owed. Even if there is a dispute, the Property Owner cannot withhold more than 100% of the disputed amount on commercial Projects and 110% of the disputed amount on residential Projects. See Section 28 of the Texas Property Code to learn more.
When a General Contractor receives payment from a Property Owner, the General Contractor must pay each of its Subcontractors that portion of the Property Owner’s payment attributable to the Subcontractors’ work performed under its contract with the Contractor within seven (7) days of receiving the payment from the Owner; failure to do so is a violation of the Act, unless there is a reasonable basis to dispute the amount owed. Even if there is a dispute, the General Contractor cannot withhold more than 100% of the disputed amount on commercial Projects and 110% of the disputed amount on residential Projects.
When a Subcontractor receives payment from a Contractor, the Subcontractor must pay each of its Subcontractors and Suppliers the portion of the Contractor’s payment attributable to its Subcontractors and Suppliers for work performed under its contract with them within seven (7) days of receiving the payment from the Contractor; failure to do so is a violation of the Act, unless there is a reasonable basis to dispute the amount owed. Even if there is a dispute, the Subcontractor cannot withhold more than 100% of the disputed amount on commercial Projects and 110% of the disputed amount on residential Projects.
Any unpaid amount that is required to be paid pursuant to the Act begins to accrue interest the day after the date that payment becomes due at 1½ percent each month (or 18% a year).
Inside Tip
Claimants should consider including any potential or actual violation of the Prompt Payment Act in the Pre-Lien Notice, Notice of Lien Filing, and/or a Payment Demand Letter. All of The Lien Professor’s Mechanics Lien Kit Notices contain references to the Prompt Payment Act and a demand for accrued interest.
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