Houston
The Woodlands

How Long Do Texas Contractors Have to Pay Subcontractors?

July 25, 2024

The juggling act of managing schedules, coordinating teams, and ensuring everything aligns perfectly to deliver quality work is familiar territory for any contractor. However, one critical aspect that can sometimes get overlooked is paying your subcontractors. You may wonder if there are specific timelines you must adhere to and what the legal implications are if payments are delayed.

Balancing multiple tasks and deadlines can make it easy to miss payment timelines, which can lead to strained relationships, project delays, and even legal complications. At Quadros Migl & Crosby, we understand the importance of adhering to Texas construction laws, including those governing payment schedules between contractors and subcontractors. With our experience in Texas business law and construction practices, we provide the clear, actionable guidance Texas contractors need to navigate payment timelines effectively.

Payment Schedules Between Contractors and Subcontractors in Texas

Under Texas law, contractors are generally required to pay subcontractors within a certain period after receiving payment for the work completed by the subcontractor. These timelines are designed to ensure subcontractors are compensated promptly and fairly for their contributions to the project.

The Texas Prompt Payment Act

The Texas Prompt Payment Act outlines specific timelines for payment between contractors and subcontractors based on when the contractor receives payment for the subcontractor’s work. According to the Act, a contractor must pay their subcontractors within seven days of receiving payment from the owner or client.

If payment is delayed beyond this period, the contractor may be liable for interest on the unpaid balance. This legislation aims to ensure a steady cash flow within the construction industry, reducing financial strain on subcontractors and promoting fair business practices.

In addition to the seven-day requirement, the Act also specifies that if a payment is withheld, the contractor must provide written notice to the subcontractor detailing the reasons for non-payment. This transparency helps prevent misunderstandings and provides subcontractors with the necessary information to address any issues.

Contractor and Subcontractor Payment Dispute Resolution

Contractors who consistently meet payment deadlines build a reputation for reliability, which is invaluable in the competitive construction industry. Therefore, maintaining accurate records and transparent communication regarding payment schedules is essential for both contractors and subcontractors. Clear documentation helps mitigate misunderstandings and provides a foundation for resolving any payment-related issues that may arise during the project.

In instances where payment disputes do occur, subcontractors have legal protections under Texas law to seek remedies for non-payment or delayed payment. The Texas Prompt Payment Act offers a framework that allows subcontractors to take action, including filing a claim for interest on overdue payments or initiating legal proceedings if necessary. Additionally, subcontractors can file a mechanic’s lien against the property where the work was performed, ensuring they have a claim to the property until payment is received.

Proactively addressing potential disputes by establishing clear contractual terms, maintaining open lines of communication, and adhering to legal requirements helps prevent escalation and promote a smoother working relationship.

Legal Representation for Texas Contractors and Subcontractors

Understanding and adhering to payment timelines is crucial for maintaining smooth operations and strong relationships in the construction industry. At Quadros Migl & Crosby, we offer expert guidance on Texas construction laws, including the Texas Prompt Payment Act, which mandates that contractors pay subcontractors within seven days of receiving payment from the owner.

Ensuring timely payments not only helps avoid legal complications but also builds a reputation for reliability. For comprehensive legal support in managing your payment schedules and resolving disputes, contact us at (713) 300-9662 or through our contact form.