Texas Prompt Payment Act: A 2026 Deadline Guide for GCs

If you run payments for a general contractor in Texas, the Texas Prompt Payment Act is the law that decides how fast money has to move down your project — and how expensive it gets when it doesn't. Miss a deadline and you are not just annoying a subcontractor; you are accruing statutory interest and handing that sub the right to walk off your job. This guide breaks down the 2026 deadlines, the interest math, when you can legally withhold, and how to keep your pay cycle clean without turning your AP desk into a compliance department.

SureHold is not a law firm and this post is not legal advice. Verify any deadline against the statute and your own counsel before you rely on it.

What the Texas Prompt Payment Act actually requires

The Act lives in Chapter 28 of the Texas Property Code and governs private construction contracts — commercial and residential improvements. (Public work runs under a separate statute, Government Code Chapter 2251, so the numbers below are for private projects.) At its core, Chapter 28 sets two hard clocks that run down the payment chain.

Under Section 28.002, the sequence is:

Who pays whom	Trigger	Deadline
Owner → Contractor	Owner receives a written payment request for properly performed work	Not later than the 35th day
Contractor → Subcontractor	Contractor receives the owner's payment	Not later than the 7th day
Subcontractor → its subs/suppliers	Sub receives payment from the contractor	Not later than the 7th day

Two things trip GCs up here. First, the 35-day owner clock starts on a written payment request — informal emails and verbal check-ins do not start it, so your pay-app paperwork is what protects you upstream. Second, your 7-day clock to pay subs is short and it starts when you get paid, not when you get around to cutting checks. If money sits in your account for two weeks before you disburse, you have already blown the statute.

Interest, and why it adds up faster than you think

Late payment is not a soft foul. Section 28.004 says an overdue amount "bears interest at the rate of 1-1/2 percent each month" — that is 18% a year, and it starts accruing the day after the payment became due. There is no grace period baked into the statute.

Run the math on a real number. Hold $200,000 of a sub's approved progress payment 30 days past the deadline and you owe roughly $3,000 in statutory interest — on top of the principal. Do it across three subs on a busy month and the penalty alone can eclipse a project's margin. Prevailing claimants can also recover reasonable attorney's fees, which is why prompt-payment disputes in Texas so often settle the moment a demand letter cites Chapter 28.

When you can withhold — the good-faith dispute rule

The Act is not a blank check for subs. If you have a genuine dispute — defective work, a backcharge, a missing lien waiver — Chapter 28 lets you hold money back, but only within limits. A party disputing an amount may withhold no more than 110% of the disputed difference, and the notice of nonpayment "must include a list of specific reasons for nonpayment."

That 110% cap is the detail GCs forget. If a sub bills $50,000 and you believe $10,000 of it is defective, you may withhold up to $11,000 — not the whole $50,000. Everything above the disputed amount plus that 10% cushion is still due on the normal clock, still accruing interest if you sit on it. And "we're reviewing it" is not a specific reason; the statute wants an itemized objection, in writing, or your withholding is exposed.

The 10-day notice and the right to suspend work

Prompt payment cuts both ways, and this is the clause that gives it teeth. Under Section 28.009, a contractor or subcontractor who is not paid the undisputed amount on time may give the owner (and the owner's lender) written notice of nonpayment and intent to suspend. On the 10th day after that notice, they can lawfully stop work — and they are not liable for the resulting delay damages, and they get demobilization and remobilization costs when they come back.

For a GC, that means an unpaid sub can legally freeze a critical path while you wait on an owner draw, and you can find yourself both non-paying (downstream) and non-paid (upstream) in the same week. It also means you hold the same weapon against a slow-paying owner. Either way, the trigger is a piece of paper: no written notice, no protected suspension.

Where lien waivers fit the payment clock

Here is the tension every Texas GC lives with. The Prompt Payment Act pushes you to release money fast. Your lien risk pushes you to collect a signed waiver before the money leaves. Do them in the wrong order and you either pay late (interest) or pay unwaived (lien exposure). Texas makes this sharper than most states because it prescribes its waiver language by statute — we covered the four required releases in our guide to Texas lien waiver forms.

The clean answer is to make the waiver and the payment a single, coupled step instead of two disconnected emails. That is exactly the workflow SureHold automates: the conditional waiver goes out with the pay-app, the sub signs, and the release is tied to that signature — so you are not choosing between hitting the 7-day clock and protecting your title. This is the model behind lien waiver escrow: SureHold is the self-serve, transparently priced product that couples a payment release to a signed waiver, rather than leaving them as separate manual tasks. (It is not a bank and does not take custody of funds in the way an escrow agent would; the waiver-signature event is what gates the release.)

If you want the Texas-specific setup — statutory-form details, notice timing, and the state's substantial-compliance standard — start with our Texas lien waiver software page and the Texas lien waiver reference. For the general product overview across states, see lien waiver software.

What Texas GCs should do this quarter

A short, boring checklist beats a clever one here:

Timestamp every pay request. The 35-day owner clock only protects you if you can prove when a written request landed. Log it.
Disburse within 7 days of funding, not 7 days of "getting to it." Build the sub-payment run into the same day you post an owner draw.
Put objections in writing, itemized, at 110% max. A vague hold is worse than no hold — it starts the interest meter and undercuts your good-faith defense.
Keep the waiver on the same rail as the check. If collecting the signed release is a separate chore, it will lag the payment and reintroduce the lien risk you were trying to close.
Know the suspension trigger both ways. Track your written notices to owners, and treat any inbound nonpayment notice from a sub as a 10-day countdown, not a negotiation opener.

The Prompt Payment Act is not complicated, but it is unforgiving about timing, and the penalty compounds monthly. The GCs who stay out of trouble are the ones who took the human judgment out of when to pay and when to collect the waiver, and let a repeatable process carry it. If you want to see the coupled waiver-and-release flow on your own projects, create a free SureHold account and run one pay cycle through it.

Takeaway

Texas gives you 35 days to pay a contractor and 7 days to pass money down to subs, charges 18% annual interest the day you miss, caps disputed withholding at 110%, and lets an unpaid party suspend work 10 days after written notice. Treat those four numbers as fixed constraints on your pay cycle — and pair every release with its waiver so hitting the deadline never means dropping your lien protection.