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Can a general contractor withhold payment from a subcontractor?

On Behalf of | Oct 28, 2026 | Construction Law |

Cases of a general contractor withholding payment from a subcontractor are not uncommon. Subcontractors often take legal action against contractors for refusing to pay. So, is withholding payment legal? And what can a subcontractor do?

Here is what you should know:

When can a general contractor withhold payments?

A general contractor can legally withhold payment from a subcontractor in certain circumstances as governed by state laws. Texas law allows a contractor to do so only when a good-faith dispute exists regarding the work. 

Generally, a contractor in Texas is required to pay a subcontractor within seven days of receiving payment from the property owner. However, when a good faith dispute exists regarding the quality of work, performance, obligations or the amount owed, payment can be withheld or delayed. 

For instance, if a subcontractor:

  • Installed materials that failed to meet industry standards or the contractor’s specifications
  • Performed labor that failed to meet building codes
  • Failed to finish their scope of work
  • Caused physical damage to other parts of the construction site because of poor scheduling or workmanship
  • Caused project delays
  • Failed to pay material suppliers or sub-subcontractors
  • Performed extra work without a fully executed, signed change order

Such mistakes can significantly impact a project’s quality, timeline and budget. Nonetheless, a contractor can simply claim a mistake to withhold payment. They must establish a good-faith dispute. 

What can a subcontractor do? 

When payment is withheld, a subcontractor can challenge the decision. They can file a mechanic’s lien against the property. By gathering solid evidence that disproves the contractor’s claims, a subcontractor can recover what they are owed.

Withholding payments in the construction industry is one of the most common disputes. If you are in such a dispute, consider legal guidance to make informed decisions to protect yourself and your career.

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