Prompt Payment Laws for Contractors: California and Texas Deadlines
How fast an owner must pay a contractor and a contractor must pay subs on private jobs in California and Texas, the interest and penalties, and retention.
By Seayora Editorial Team · Published · Facts checked · 4 min read
Short answer: On private construction in California, an owner must pay an undisputed progress payment within 30 days of a written demand, and a contractor must pay its subcontractors within 7 days of being paid, each with a 2% monthly penalty for late payment. Retention is due within 45 days of completion and passed down within 10 days. In Texas, an owner must pay within 35 days of a written payment request, contractors pay subs within 7 days, late amounts bear 1.5% interest a month, and an unpaid contractor may suspend work after 10 days’ written notice.
Key takeaways
- California: owner pays an undisputed progress payment within 30 days of written demand; 2% a month penalty (Civ. Code § 8800).
- California: contractor pays subcontractors within 7 days of receiving payment; 2% a month (Bus. & Prof. Code § 7108.5).
- California: retention released within 45 days of completion, and to subs within 10 days of receipt (Civ. Code §§ 8812, 8814).
- Texas: owner pays within 35 days of a written request; contractors pay subs within 7 days; 1.5% a month interest (Prop. Code §§ 28.002, 28.004).
- Texas: an unpaid contractor may suspend work 10 days after written notice of nonpayment (Prop. Code § 28.009).
What is a prompt payment law?
It is a statute that sets a deadline for paying for construction work and a penalty or interest for paying late. California and Texas apply theirs to private jobs, including work for private owners and landlords. A good-faith dispute lets the payer hold back part of the disputed amount, but not the whole payment.
| Payment | California | Texas |
|---|---|---|
| Owner to contractor | 30 days after a written demand for an undisputed progress payment | 35 days after receiving a written payment request |
| Contractor to subcontractor | 7 days after receiving each progress payment | 7 days after receiving the owner’s payment |
| Late payment | 2% a month penalty, plus attorney fees to the prevailing party | 1.5% a month interest; court may award fees |
| Disputed amount that may be withheld | Up to 150% of the disputed amount | Up to 110% of the difference on one to four homes; 100% on other projects |
| Retention | Owner pays within 45 days of completion; contractor pays subs within 10 days of receipt | Not set by Chapter 28; the lien law has its own reserve rules |
What does California require?
Unless the owner and direct contractor agree otherwise in writing, the owner “shall pay the direct contractor, within 30 days after notice demanding payment pursuant to the contract is given, any progress payment due as to which there is no good faith dispute.” In a good-faith dispute the owner may withhold up to 150% of the disputed amount. An owner who violates the section owes “a penalty of 2 percent per month on the amount wrongfully withheld, in place of any interest otherwise due,” and the prevailing party in a collection action recovers costs and attorney fees (Cal. Civ. Code § 8800).
Down the chain, a prime contractor or subcontractor must pay each subcontractor “not later than seven days after receipt of each progress payment,” unless otherwise agreed in writing, and may withhold no more than 150% of a disputed amount. A violation is grounds for discipline by the Contractors State License Board and carries a penalty, paid to the subcontractor, of 2% of the amount due per month; it applies to private and public works (Cal. Bus. & Prof. Code § 7108.5). If an owner withholds retention, it must be paid to the direct contractor within 45 days after completion (Civ. Code § 8812), and the contractor must pay each subcontractor its share within 10 days after receiving it (Civ. Code § 8814).
What does Texas require?
When an 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,” the owner must pay it, less amounts withheld as authorized by statute, “not later than the 35th day after the date the owner receives the request.” A contractor then pays each subcontractor its share within seven days of receiving the owner’s payment, and a subcontractor pays its own subcontractors within seven days after that. An unpaid amount bears interest of 1.5% a month from the day after it was due, and a court may award costs and attorney fees (Tex. Prop. Code Chapter 28).
In a good-faith dispute, including whether work was done properly, the party disputing may withhold up to 110% of the difference between the amounts claimed on a single-family home, duplex, triplex or quadruplex, and up to 100% on other projects. If an owner fails to pay the undisputed amount on time, the contractor or a subcontractor may suspend work on the 10th day after giving the owner (and, in defined cases, the owner’s construction lender) written notice that payment has not been received and of the intent to suspend (Tex. Prop. Code §§ 28.003, 28.009).
How should a contractor use these rules?
- Send payment requests in writing and keep proof of the date the owner received them; that date starts the clock.
- Pay your own subcontractors within seven days of being paid, or the same penalties apply to you.
- If a payment is disputed, ask the owner to identify the disputed amount, since only that part may be withheld.
- Keep the lien-notice deadlines running in parallel; prompt payment rules do not extend them (our lien notice guide).
Frequently asked questions
How long does an owner have to pay a contractor in California?
30 days after a written demand for an undisputed progress payment, unless the contract says otherwise in writing. Late payment carries a 2% monthly penalty.
How fast must a contractor pay a subcontractor in Texas?
Within seven days after receiving the owner’s payment for that subcontractor’s work. Late amounts bear interest at 1.5% a month.
Can a Texas contractor stop work if not paid?
Yes. If the owner does not pay the undisputed amount on time, the contractor may suspend work on the 10th day after giving written notice of nonpayment and of the intent to suspend.
Sources
- California Civil Code § 8800, Progress payment, California Legislative Information
- California Business and Professions Code § 7108.5, California Legislative Information
- California Civil Code § 8812, Retention payment, California Legislative Information
- California Civil Code § 8814, California Legislative Information
- Texas Property Code Chapter 28, Prompt Payment to Contractors and Subcontractors, Texas Legislature
How Seayora helps
Contractor invoicing: Each invoice carries its issue date and stays open until paid, so the day a payment request went out is on record.
This article is general information, not legal advice. Landlord-tenant law varies by state and city and changes often, so check the current rule for your property and talk to an attorney before acting on a dispute.
How we write and check these guides: editorial standards.
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