06 / 20 / 2016

Texas Law Protects Builders

Texas law offers protection from slow-pays and withholding payments for tiny alleged non-conformance. It also protects you from conditioning past-due payment on free or accelerated future work and taking control of subs while passing the buck on payment. Fortunately, Texas law offer some protection:

  1. Liens: Even if your project lacks bond protection, you might still be able to leverage the right foreclosure on the property you worked on if you pay attention to your documents. Know if your project is eligible, and if your lien rights are statutory or constitutional. Subcontractors, especially, watch your notice and filing deadlines! If you contract directly with the landowner, your constitutional lien might have less formalities, but you still need a good contract, invoicing documents, and must use good follow-through practices. These are your rights and they are powerful tools. Don’t just give them away!
  2. Prompt Pay Act: Even if you miss out on a lien you have other options. Under the Prompt Pay Act, the owner of a private project must pay the general contractor within 31 days of the invoice. The contractors must each pay their own subcontractors within 10 days of receipt from above. There are also regulations preventing outrageous retainage practices. Provisions do exist for bona fide disputes of specific amounts, but the party obligated cannot hold back the entire invoice just by alleging a small complaint. Penalties include interest at the prime rate plus 1% and attorneys’ fees. This is a powerful second choice, but it requires your contracts, invoices and demands all be in order.
  3. Construction Trust Fund Act: Did you know that when an owner or a general contractor gets paid or takes a draw on the basis of your invoice, it technically holds your money in trust for you? Withholding or misapplying that money can be a breach of fiduciary obligations. It lets you chase the money down to whoever got it and can even lead to criminal liability. Knowing your rights here puts you in control when the other side says it spent your money.

Are you using these tools effectively? If not, or if you have questions, seek qualified construction counsel. The Vethan Law Firm, PC has been in business for 20 years and has offices statewide. VLF gets results for the folks who are the backbone of this economy.

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