Prompt payment laws can be powerful leverage.

Karalynn explains Texas prompt pay timelines, interest penalties, when generals and owners must pay subs and suppliers, and how subs can legally stop work when the GC gets paid but keeps your money.

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Key Takeaways

1. Prompt payment laws set deadlines for generals, subs, and suppliers to pay after receiving funds.

2. These laws allow contractors to charge interest on late payments even without a contract interest clause.

3. In Texas, GCs have seven days to pay subs after owner payment, invoices for materials must be paid in 35 days, and subs can send a 10-day notice and stop work once they confirm the GC was paid.

Timestamped Overview 00:10 Topic setup: prompt payment in general and specifically how it works in Texas. 00:30 Explanation that most states have prompt payment laws requiring GCs to pay subs, and subs to pay their subs and suppliers, within set timelines. 01:00 Overview of interest penalties for late payment, and explanation that normally you need a written contract to charge interest, but prompt payment laws give you that right by statute. 01:30 Introduction to Texas Property Code chapter 28 as the prompt payment statute, and explanation that once the GC gets paid by the owner, they have seven days to pay subs before interest can start. 02:00 Explanation that owners or GCs have 35 days to pay material invoices, and interest begins to accrue on day 36 whether or not you send a demand letter. 02:30 Discussion of the 1.5 percent per month, 18 percent per year interest rate in Texas and how this interest can be added to lien claims when you file. 03:00 Explanation that GCs can withhold up to 150 percent of disputed amounts if they claim defective work, and that no prompt payment interest accrues during that time on the properly disputed portion. 03:30 Introduction to a special Texas rule that allows a sub to stop work if they are not paid but the owner has already paid the GC, even when the contract has a pay-when-paid clause. 04:00 Steps for using this remedy: submit your pay application, verify that the owner has paid the GC (sometimes via public information request), and then send a letter saying you know they've been paid and will stop work in ten days if you are not paid. 04:30 Airport remodel example where the client had not been paid for months, confirmed the GC had been paid through a public information request, and sent a 10-day notice demanding $50,000 or they would stop work. 05:00 Outcome of the story: the client was paid after the letter, showing how effective the prompt pay stop-work remedy can be when used correctly. 05:20 Closing notes that this remedy must be used carefully and usually with an attorney's help to avoid breaching the contract, and that Texas prompt payment protections apply to public, private, and commercial projects.