Late Fees on Invoices in Texas
What Texas contractors and small businesses need to know about charging late fees, interest rates, prompt payment laws, and mechanics lien deadlines.
Max Interest Rate
1.5% per month (18% per annum)
Small Claims Limit
$20,000
Justice Court
Mechanics Lien Deadline
The 15th day of the 4th month after the month the work was last performed (residential)
Texas Prompt Payment Act
Texas Prompt Payment Act, Tex. Gov't Code Ch. 2251
Texas requires government entities to pay contractors within 30 days of receiving an invoice. For private work, the contract terms govern, but the Texas Property Code provides mechanics lien rights that effectively enforce payment timelines.
Late fee rules for Texas invoices
Texas does not cap late fees on private contracts. However, courts may deem excessive fees unconscionable. A 1.5% monthly late fee is standard and enforceable.
If no rate is specified in the contract, Texas law allows up to 18% per annum on overdue amounts. Most contractors specify 1.5% per month in their terms.
Important disclaimer
This page provides general information about Texas late fee rules. It is not legal advice. Laws change, and your specific situation may have unique factors. For disputes involving significant amounts, consult a licensed attorney in Texas.
Demand letters and mechanics liens in Texas
Texas does not require a formal demand letter before filing a mechanics lien, but sending one is strongly recommended and often sufficient to collect payment.
Mechanics lien deadline: The 15th day of the 4th month after the month the work was last performed (residential). For commercial: 15th day of the 3rd month.
Sample late fee clause for Texas invoices
“Payment is due within the terms specified above. A late fee of 1.5% per month (1.5% per month (18% per annum) maximum per Texas law) will be applied to all balances remaining unpaid after the due date. Pursuant to the Texas Prompt Payment Act (Tex. Gov't Code Ch. 2251), the undersigned reserves all rights to pursue collection including but not limited to mechanics lien filing, small claims action (up to $20,000 in Justice Court), and referral to collections.”
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Start Free TrialFrequently asked questions — Texas
What is the maximum late fee I can charge on an invoice in Texas?▾
In Texas, If no rate is specified in the contract, Texas law allows up to 18% per annum on overdue amounts. Most contractors specify 1.5% per month in their terms. Always disclose late fee terms in your contract or invoice before work begins.
Does Texas have a prompt payment act?▾
Yes. Texas requires government entities to pay contractors within 30 days of receiving an invoice. For private work, the contract terms govern, but the Texas Property Code provides mechanics lien rights that effectively enforce payment timelines.
What is the small claims court limit in Texas?▾
The small claims court limit in Texas is $20,000. Claims are filed in Justice Court. You generally do not need an attorney for small claims.
How long do I have to file a mechanics lien in Texas?▾
In Texas, The 15th day of the 4th month after the month the work was last performed (residential). For commercial: 15th day of the 3rd month.
Do I need to send a demand letter before filing a lien in Texas?▾
Texas does not require a formal demand letter before filing a mechanics lien, but sending one is strongly recommended and often sufficient to collect payment.