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Texas Construction Fund Statute

Texas construction fund statute
Texas construction fund statute

Texas Construction Fund Statute

In Texas, the Construction Fund Statute stands as a pivotal piece of legislation aimed at safeguarding the interests of subcontractors, suppliers, and other parties involved in construction projects. Enacted to ensure that those contributing labor, materials, or services to a construction project are fairly compensated, the statute establishes mechanisms to secure payment and protect against non-payment or financial default. Let’s delve into the key components and implications of this important law.

Purpose and Scope

The Texas Construction Fund Statute, found in Chapter 162 of the Texas Property Code, provides a framework for establishing and maintaining construction funds on certain types of construction projects. It applies to projects where the original contract price exceeds a specified threshold, typically $5,000, and involves improvements to real property, such as construction, renovation, or repair work.

Creation of Construction Funds

Under the statute, owners or general contractors are required to establish construction funds and deposit funds into a designated account for the benefit of subcontractors, suppliers, and other parties entitled to payment. These funds serve as a form of security to ensure that those who contribute to the project receive proper compensation.

Fund Control and Disbursement

Once the construction fund is established, the owner or general contractor is obligated to maintain control over the fund and disburse payments to subcontractors and suppliers in accordance with the terms of the contract and applicable law. Failure to properly administer the fund or misappropriation of funds may result in legal consequences, including liability for damages and penalties.

Protection for Subcontractors and Suppliers

The Construction Fund Statute provides subcontractors and suppliers with important protections against non-payment or financial default by the owner or general contractor. If they are not paid for their work or materials, they may have recourse to the construction fund to recover their rightful payments, thereby mitigating the risk of financial loss.

Compliance and Enforcement

It is essential for parties involved in construction projects to understand and comply with the requirements of the Construction Fund Statute. Failure to adhere to the statute’s provisions may result in legal disputes, liens, or other adverse consequences. Moreover, the statute provides mechanisms for enforcement, allowing aggrieved parties to pursue legal remedies to enforce their rights under the law.


The Texas Construction Fund Statute plays a crucial role in promoting fairness and financial security in construction projects by establishing mechanisms to ensure prompt and proper payment to subcontractors, suppliers, and other stakeholders. By adhering to the requirements of the statute and maintaining compliance with its provisions, parties can help mitigate risks, avoid disputes, and uphold the integrity of the construction industry in Texas.