H.B. No. 1429
1-1 AN ACT
1-2 relating to prompt payment to contractors and subcontractors in
1-3 connection with improvements to real property.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Title 4, Property Code, is amended by adding
1-6 Chapter 28 to read as follows:
1-7 CHAPTER 28. PROMPT PAYMENT TO CONTRACTORS AND
1-8 SUBCONTRACTORS
1-9 Sec. 28.001. DEFINITIONS. In this chapter:
1-10 (1) "Contractor" means a person who contracts with an
1-11 owner to improve real property or perform construction services for
1-12 an owner.
1-13 (2) "Improve" means to:
1-14 (A) build, construct, effect, erect, alter,
1-15 repair, or demolish any improvement on, connected with, or beneath
1-16 the surface of real property;
1-17 (B) excavate, clear, grade, fill, or landscape
1-18 real property;
1-19 (C) construct a driveway or roadway;
1-20 (D) furnish any material, including trees or
1-21 shrubbery, for the purpose of taking any action described by
1-22 Paragraphs (A)-(C) of this subdivision; or
1-23 (E) perform any labor on or in connection with
1-24 an improvement.
2-1 (3) "Improvement" includes all or any part of:
2-2 (A) a building, structure, erection, alteration,
2-3 demolition, or excavation on, connected with, or beneath the
2-4 surface of real property; and
2-5 (B) the act of clearing, grading, filling, or
2-6 landscaping real property, including constructing a driveway or
2-7 roadway or furnishing trees or shrubbery.
2-8 (4) "Owner" means a person or entity, other than a
2-9 governmental entity, with an interest in real property that is
2-10 improved, for whom an improvement is made, and who ordered the
2-11 improvement to be made.
2-12 (5) "Real property" includes lands, leaseholds,
2-13 tenements, hereditaments, and improvements placed on the real
2-14 property.
2-15 (6) "Subcontractor" means a person who contracts to
2-16 furnish labor or material to, or has performed labor or supplied
2-17 materials for, a contractor or another subcontractor in connection
2-18 with a contract to improve real property.
2-19 Sec. 28.002. PROMPT PAY REQUIRED. (a) If an owner receives
2-20 a written payment request from a contractor for an amount that is
2-21 allowed to the contractor for properly performed work or suitably
2-22 stored materials, the owner shall pay the amount to the contractor,
2-23 less any statutory offsets, not later than the 45th day after the
2-24 owner receives the request.
2-25 (b) A contractor who receives a payment under Subsection (a)
2-26 or otherwise from an owner in connection with a contract to improve
2-27 real property shall pay each of its subcontractors the portion of
3-1 the owner's payment, including interest, if any, that is
3-2 attributable to work performed or materials suitably stored by that
3-3 subcontractor if payment for stored materials is provided for in
3-4 the contract, to the extent of that subcontractor's interest in the
3-5 owner's payment. The payment required by this subsection must be
3-6 made not later than the seventh day after the date the contractor
3-7 receives the owner's payment.
3-8 (c) A subcontractor who receives a payment under Subsection
3-9 (b) or otherwise from a contractor in connection with a contract to
3-10 improve real property shall pay each of its subcontractors the
3-11 portion of the payment, including interest, if any, that is
3-12 attributable to work performed or materials suitably stored by that
3-13 subcontractor if payment for stored materials is provided for in
3-14 the contract, to the extent of that subcontractor's interest in the
3-15 payment. The payment required by this subsection must be made not
3-16 later than the seventh day after the date the subcontractor
3-17 receives the contractor's payment.
3-18 Sec. 28.003. EXCEPTION FOR GOOD FAITH DISPUTE; WITHHOLDING.
3-19 If a good faith dispute exists concerning the amount owed for a
3-20 payment requested or required by this chapter, the owner,
3-21 contractor, or subcontractor disputing its obligation to pay or the
3-22 amount of payment may withhold from the payment owed not more than
3-23 110 percent of the difference between the amount the obligee claims
3-24 is due and the amount the obligor claims is due. A good faith
3-25 dispute includes a dispute regarding whether the work was performed
3-26 in a proper manner.
3-27 Sec. 28.004. INTEREST ON OVERDUE PAYMENT. (a) An unpaid
4-1 amount required under this chapter begins to accrue interest on the
4-2 day after the date on which the payment becomes due.
4-3 (b) An unpaid amount bears interest at the rate of 1-1/2
4-4 percent each month.
4-5 (c) Interest on an unpaid amount stops accruing under this
4-6 section on the earlier of:
4-7 (1) the date of delivery;
4-8 (2) the date of mailing, if payment is mailed and
4-9 delivery occurs within three days; or
4-10 (3) the date a judgment is entered in an action
4-11 brought under this chapter.
4-12 Sec. 28.005. ACTION TO ENFORCE PAYMENT. (a) A person may
4-13 bring an action to enforce the person's rights under this chapter.
4-14 (b) In an action brought under this chapter, the court may
4-15 award costs and reasonable attorney's fees as the court determines
4-16 equitable and just.
4-17 Sec. 28.006. NO WAIVER. (a) Except as provided by
4-18 Subsection (b), an attempted waiver of a provision of this chapter
4-19 is void.
4-20 (b) A written contract between an owner and a contractor for
4-21 improvements to or construction of a single-family residence may
4-22 provide that the payment required under Section 28.002(a) be made
4-23 not later than a date that occurs before the 61st day after the
4-24 date the owner receives the payment request. Notwithstanding
4-25 Section 28.004(b), an unpaid amount under contract subject to this
4-26 subsection that allows payment later than the date otherwise
4-27 required under Section 28.002(a) bears interest at the rate of
5-1 1-1/2 percent each month.
5-2 Sec. 28.007. LEGAL CONSTRUCTION. (a) This chapter may not
5-3 be interpreted to void a contractor's or subcontractor's
5-4 entitlement to payment for properly performed work or suitably
5-5 stored materials.
5-6 (b) Nothing in this statute shall be interpreted to change
5-7 the rights and obligations set forth in Chapter 53, Property Code.
5-8 Sec. 28.008. EXCEPTION FOR FAILURE OF LENDER TO DISBURSE
5-9 FUNDS. The date of payment required of the owner pursuant to
5-10 Section 28.002(a) shall change from the 45th day after the date the
5-11 owner receives the payment request to the 5th day after the owner
5-12 receives loan proceeds, in the event that:
5-13 (1) the owner has obtained a loan intended to pay for
5-14 all or part of a contract to improve real property;
5-15 (2) the owner has timely and properly requested
5-16 disbursement of proceeds from that loan; and
5-17 (3) the lender is legally obligated to disburse such
5-18 proceeds to the owner, but has failed to do so within 45 days after
5-19 the date the owner received the contractor's payment request.
5-20 SECTION 2. This Act applies only to a contract to improve
5-21 real property entered into on or after the effective date of this
5-22 Act.
5-23 SECTION 3. This Act takes effect September 1, 1993.
5-24 SECTION 4. The importance of this legislation and the
5-25 crowded condition of the calendars in both houses create an
5-26 emergency and an imperative public necessity that the
5-27 constitutional rule requiring bills to be read on three several
6-1 days in each house be suspended, and this rule is hereby suspended.