Texas subcontractor back charges: how to document and dispute deductions

What is a construction back charge?

A back charge usually describes a contractor's claimed cost for work it says a subcontractor should have performed or corrected. Common examples include cleanup, replacement work, damage repair or another crew finishing an incomplete item. The label does not establish that the cost is authorized, attributable to that subcontractor or reasonable.

The practical problem often appears on a pay application: an invoice is otherwise approved, but an unexplained deduction reduces the amount to be paid. Start by asking for the specific item and its supporting documents. A lump sum listed as field costs gives little basis for deciding whether to accept it.

This guide addresses payment administration on Texas private construction projects. Public work has a different statutory payment framework. Residential contracts can also have different withholding rules; classify the project before applying a commercial example.

Keep three questions visible: who was responsible for the work, what procedure the contract required before a deduction, and which costs can actually be supported. A disagreement on one question should not hide the others.

Check the subcontract before accepting or rejecting the charge

Locate the clauses governing scope, cleanup, correction of defective work, supplementation of crews, notice, cure opportunities and setoff. Check incorporated general conditions as well as the subcontract itself. Record the document version and the exact clause cited by the party imposing the charge.

Compare the alleged problem with the drawings, exclusions and approved changes. A subcontractor may have accepted responsibility for a task in a later change order even if it was excluded originally. Conversely, a general site expense does not become that subcontractor's obligation simply because its crew was present.

Build a chronology of the complaint, notice, response, access offered, correction attempt and replacement work. The chronology allows a reviewer to evaluate contract procedures without inventing a universal cure period that may not exist in the agreement.

An emergency, a disputed instruction or inaccessible work area can change the factual picture. Record those details instead of relying on a broad statement that the other party should have called first. Preserve the actual messages and supporting site records.

If the deduction remains unresolved, the construction payment demand guide shows how to present a reconciled balance and request an itemized response.

• Contract provision relied on for the deduction.
• Alleged deficiency, location and date discovered.
• Responsibility and scope documents, including approved changes.
• Notice sent, recipient and response history.
• Correction opportunity, actual access and any completed corrective work.

Ask for itemized costs and test them against the project record

Request photographs, daily reports, replacement subcontractor invoices, labor hours, equipment usage and any agreed markup basis. The evidence should identify the specific correction and show how the total was calculated. A quotation for future work and an invoice for completed work are different records.

Compare claimed hours with the actual activity and dates. Ask whether a replacement crew performed only corrective work or also added scope. Distinguish repair materials from upgrades. Check whether the same cost appears in another deduction or has already been credited elsewhere.

A signed daily report may confirm that work occurred without accepting liability for the cost. Record the purpose of each signature. Avoid assuming that every field acknowledgment is an approval of a deduction or that every missing signature defeats a claim.

Preserve your own photographs with their original dates and context. Include before-and-after views and identify the area shown. A close-up with no location can be difficult to connect to the disputed item months later.

Texas good-faith withholding limits: the project category matters

Property Code Section 28.003 permits limited withholding where a qualifying good-faith dispute exists. For projects other than a detached single-family residence, duplex, triplex or quadruplex, the limit is 100% of the difference between the amount claimed due and the amount the paying party claims is due. For those listed residential categories, the statute uses 110%.

Illustration: a $20,000 requested payment and a paying party's position that $17,000 is owed create a $3,000 difference. The commercial-category illustration uses $3,000, not the entire $20,000, as the statutory dispute-based withholding ceiling. The listed residential-category calculation would be $3,300.

This calculation alone does not establish when payment is due, whether the dispute is in good faith or how other authorized withholding applies. A claimed back charge is not automatically valid because it is below the ceiling. Contract entitlement and supporting facts still require review.

Review the Texas Prompt Payment Act's payment triggers alongside the deduction. Avoid treating an unpaid subcontractor invoice as proof that upstream funds were received, or treating a disputed item as justification for every unrelated balance.

Use a disputed-deduction ledger rather than silently reducing invoices

Fictional example: a first-tier subcontractor on a Texas private commercial project bills INV-104 for $20,000 of September work. At the October 15 cutoff, actual receipt R-1015 is $15,000 and is specifically allocated to that invoice. There is no retainage, tax, other invoice, accepted credit or pending extra in this example. Requested open balance is $5,000. This ledger records positions, not a finding of entitlement or a legally supportable lien amount.

The contractor identifies BC-14 as a $3,000 proposed deduction and says the other $2,000 is pending payment review. Keep both parts visible. The $3,000 is inside the $5,000 open balance; adding it again would wrongly show $8,000. A $15,000 check does not itself prove that the remaining $5,000 was settled or that the deduction was accepted.

BC-14's cost sheet lists 20 labor hours × $60 = $1,200, materials $900, disposal $600 and markup $300, totaling $3,000. The subcontractor requests responsibility, contract procedure and cost support for each item. Even a paid replacement invoice does not alone establish that the subcontractor caused the problem or owes every listed cost.

On October 22, assume the parties expressly agree in a dated written adjustment A-14 to reduce this invoice by $1,200, replacing the proposed $3,000 deduction for this example. Record that agreed adjustment once. Adjusted billing becomes $18,800; subtract the same $15,000 receipt to leave $3,800 open. The released $1,800 of the earlier disputed position is already included in $3,800; it is not new work, new cash or another credit. Preserve BC-14 and the agreement rather than overwriting the original invoice.

On October 27, a further actual $2,000 receipt R-1027 allocated to INV-104 leaves $1,800 open: $20,000 − $1,200 agreed adjustment − $17,000 cumulative cash. The agreement date and receipt date are different events. If the parties have not agreed the adjustment, retain the original disputed position instead of using this settlement snapshot.

Use the payment allocation guide for unidentified receipts and the customer statement reconciliation for a dated outward balance. Pending extras need their own change-order record; do not net unrelated disputes into BC-14.

Build an item-by-item deduction evidence log

For fictional BC-14, record the contractor's assertion and your response beside the source rather than marking an entire packet proved or rejected. Requested backup is not evidence already received. Preserve original dates, complete messages and document versions; a reviewer should distinguish a missing record from an unfavorable record.

Record the complaint, contract-notice transmission, recipient, access offered, response and actual corrective work separately. If an access date or responsible party is unknown, leave that question explicit. Do not invent a universal cure period, backdate a response or label an administrative review target a statutory extension.

• Identify invoice, deduction ID and exact contract/document versions.
• Retain original complaint, photos with location/date and complete correspondence.
• Track requested versus received cost support and each unresolved question.
• Separate proposed deduction, agreed adjustment and actual receipt fields.
• Save the decision author, date, agreement reference and revised balance.
• Keep actual work-month and notice-review tasks active while negotiations continue.

Write a specific response and ask for the undisputed payment

A focused response identifies the project, invoice, deduction reference, amount disputed and the reason for the objection. Point to the relevant scope provision or record. List any missing backup and ask for the stated basis for withholding. Keep the request factual rather than making accusations that the evidence does not support.

Offer a practical review step, such as a site walk, comparison of dated photographs or reconciliation of labor tickets. Record a response date for commercial follow-up. That requested date is an administrative target, not a substitute for a contractual or statutory deadline.

Ask the paying party to identify what it considers undisputed and when that amount will be paid. Do not sign a document acknowledging an agreed deduction if your position is still that the amount is disputed.

If payment is offered with a release, compare the release's amount, covered period and final-payment language with the actual settlement. The Texas lien waiver guide explains why conditional and unconditional documents need separate payment checks.

Keep notice review moving while the deduction is negotiated

Save the work dates, invoice date, payment requests, actual payments and deduction notices in one chronological packet. Negotiating a back charge does not itself establish an extension of a lien notice or filing deadline.

Review Texas monthly lien notice deadlines using the underlying project facts. A later deduction notice is not a safe reason to replace the original work month. The correct claim amount must still account for payments, valid adjustments and the legal basis of the dispute.

Before sending a statutory notice or filing an affidavit, have disputed amounts and required procedures reviewed. An invoice total is not automatically the legally supportable lien amount. Keep the amount asserted, amount conceded and amount under review visible.

Escalate promptly if a deadline is approaching, termination is threatened, access is denied or a broad settlement release is presented. Bring the contract, chronology and cost packet to the review so the discussion begins with evidence.

An original administrative response example

Illustrative wording for adaptation, not a legal notice: We received deduction BC-14 for $3,000 against invoice INV-104. Please identify the subcontract provision relied on, the affected location, dates, notice to our team and itemized cost support. Our attached work record identifies the area completed on September 9. Please confirm the status of the undisputed invoice portion separately.

Replace every reference with your actual records. If your contract sets a response period, assign the task immediately and have disputed language reviewed. A factual request for support is more useful than denying the charge without addressing the reason supplied.

Frequently asked questions about Texas construction back charges

Can a contractor deduct any amount it chooses? A deduction still needs a contractual and factual basis, and applicable payment law can limit withholding. The words back charge on a statement do not establish those requirements.

Do Texas contracts always require a chance to cure? Do not assume a universal procedure. Read the agreement and review the applicable law and facts. Chapter 28's specific suspension-related provisions should not be presented as a blanket rule for every deduction.

Is a paid replacement invoice conclusive proof? It can support what was spent but does not alone establish your responsibility, the reasonableness of the work or compliance with the contract.

Should I accept the deduction to receive partial payment? That is a settlement decision. Clarify payment allocation and review any waiver or release before accepting terms that may affect remaining claims.

Can Texas Notice Tracker decide whether a charge is valid? No. Use supported project, invoice and reminder records to organize the payment issue. Determining contract liability or the legally supportable claim amount requires review of the underlying facts.