Texas · Project bonds
Texas Payment Bond
Yes. Texas requires a payment bond on public work contracts over $25,000.
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Texas overview
Payment Bond in Texas
Texas has no statewide general contractor license. Electrical, HVAC, and some other trades are licensed by the state, and many cities and counties set their own registration and bond rules. Public works contracts follow a state bonding law.
Texas public work performance and payment bond law (Tex. Gov’t Code ch. 2253). Texas requires a performance bond and a payment bond on public work contracts above set dollar amounts.
A payment bond is a surety bond that guarantees a contractor will pay the subcontractors, laborers, and suppliers who work on a project. If the contractor does not pay, unpaid parties can claim against the bond instead of the project owner.
What a payment bond guarantees
The bond guarantees that people who supply labor, materials, or equipment to the project will be paid. If the contractor fails to pay, those parties file a claim against the bond.
It protects the owner from payment disputes that could disrupt the project, and it protects the people doing the work. Once a valid claim is paid, the surety recovers the cost from the contractor.
Why public projects require payment bonds
On private projects, unpaid parties can usually file a mechanics lien against the property. Liens generally cannot be placed on public property, so public owners require a payment bond instead. It gives claimants a remedy where a lien is not available.
Who can claim and how deadlines work
Claimants normally include subcontractors, laborers, and suppliers who worked directly for the contractor. Lower-tier parties can often claim too, if they give proper notice.
Notice and lawsuit deadlines are strict and vary. Under the federal Miller Act, a claimant who does not have a direct contract with the prime contractor must give written notice within 90 days of last furnishing labor or material and must sue within one year. State public works laws set their own deadlines.
How it works
How to get a payment bond in Texas
Share the contract
Send the project name, owner, contract value, and the payment bond form the owner requires.
Submit your financials
Provide a company financial statement and work-in-progress schedule. Smaller bonds can require less.
Underwriting review
An underwriter reviews the contractor and contract. Most reviews take one to three business days.
Sign, pay, and receive the bond
Sign the indemnity agreement and pay the premium. The executed bond is delivered for the owner.
Cost
What a Texas payment bond costs
Payment bonds are usually included with the performance bond, so there is typically no separate charge. The performance bond is generally 3% of the bond amount. Final approval and pricing are subject to underwriting.
What underwriters review
- Contract price and project type
- Contractor credit and financial strength
- History of paying subcontractors and suppliers on time
- Whether it is combined with a performance bond
- Length of the project
Estimate your premium
Typical cost: Usually included with the performance bond.
Who to contact
Texas licensing authority
Sources: Texas Department of Licensing and Regulation; Texas Statutes. Requirements change. Confirm with the agency before you buy.
Other contractor bonds in Texas
Contractor License Bond
Required by your state or city before you can get or renew a contractor license.
Bid Bond
Guarantees your bid. If you win and walk away, the owner is paid the difference.
Performance Bond
Guarantees you will finish the project under the contract terms.
Maintenance Bond
Covers defects in materials or workmanship after the project is finished.
Texas payment bond questions
Is a payment bond required in Texas?
Yes. Texas requires a payment bond on public work contracts over $25,000.
How much does a Texas payment bond cost?
Payment bonds are usually included with the performance bond, so there is typically no separate charge. The performance bond is generally 3% of the bond amount. Final approval and pricing are subject to underwriting.
What is a payment bond?
A payment bond guarantees a contractor will pay subcontractors, laborers, and suppliers on a project. Unpaid parties can claim against the bond if the contractor does not pay.
How much does a payment bond cost?
Usually nothing extra. Payment bonds are normally included with the performance bond, which is generally 3% of the bond amount. Final approval and pricing are subject to underwriting.
Who is protected by a payment bond?
Subcontractors, laborers, and suppliers on the project, and the owner, who is protected from payment claims. It does not protect the contractor.
Why can I not file a lien on a public project?
Mechanics liens generally cannot attach to public property. A payment bond gives unpaid parties a claim to pursue in place of a lien.
How long do claimants have to file?
It depends on the law that applies. For federal Miller Act projects, parties without a direct contract with the prime contractor give notice within 90 days and sue within one year. State laws set their own deadlines.
Do I need a payment bond and a performance bond?
Usually yes. Public owners that require one normally require both, and sureties typically issue them together.
Can I get a payment bond without a long track record?
Yes, on smaller projects with solid personal credit. Larger bond amounts need financial statements and project experience.
Payment Bond in other states
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