Overall Vote Recommendation

Yes

Principle Criteria

Free Enterprise

Property Rights

Personal Responsibility

Limited Government

Individual Liberty

Digest

HB 3290 would amend Section 53.101, Property Code, to revise the time period during which an owner must reserve certain funds under a construction contract for the benefit of mechanic’s lien claimants. Under current law, an owner must reserve 10 percent of the contract price, or 10 percent of the value of the work, during the progress of the work and for 30 days after completion. The Committee Substitute for HB 3290 would replace that fixed post-completion period with a reservation period ending on the earlier of the 31st day after completion of the work or the 61st day after a certificate of occupancy is issued for the improvement or the improvement is first used for its intended purpose.

The Committee Substitute also would require the owner, subject to Section 28.003, Property Code, to pay 50 percent of the reserved funds not later than the deadline tied to certificate of occupancy or first use. This would create a partial-release requirement for retained funds while preserving the applicability of existing prompt-payment provisions governing disputed payments.

The bill would apply only to contracts entered into on or after its effective date. Contracts entered into before that date would continue to be governed by prior law.

The originally filed version of HB 3290 and the Committee Substitute both amend Section 53.101, Property Code, to revise the period during which an owner must reserve funds under a construction contract for the benefit of mechanic’s lien claimants. Both versions replace the current 30-day post-completion reservation period with a period ending on the earlier of the 31st day after the work is completed or the 61st day after a certificate of occupancy is issued for the improvement or the improvement is first used for its intended purpose.

The principal substantive difference is that the Committee Substitute adds a new Subsection (a-2). That provision would require the owner, subject to Section 28.003, Property Code, to pay 50 percent of the funds reserved under Subsection (a) not later than the deadline tied to issuance of a certificate of occupancy or first use of the improvement. The originally filed bill did not include this partial-payment requirement; it only revised the duration of the owner’s reserve obligation.

The Committee Substitute also slightly restructures the wording of Subsection (a-1). The filed version states that “after the completion of work” the owner must reserve the funds for the revised period, while the Committee Substitute states more directly that the owner must reserve the funds described by Subsection (a) for that period. This appears to be a drafting clarification rather than a major policy change. Both versions contain the same applicability provision for contracts entered into on or after the effective date and the same September 1, 2025, effective date.

Author (5)

Keith Bell

Pat Curry

Mark Dorazio

Keresa Richardson

Elizabeth Campos

Contact the Author

Rep. Keith Bell

Capitol Phone:

(512) 463-0458

Capitol Office:

EXT E2.508

E-Mail:

[email protected]

Visit Official Website

Fiscal Notes

According to the Legislative Budget Board (LBB), HB 3290 is not anticipated to have a significant fiscal implication to the state. The fiscal note assumes that any costs associated with implementing the bill could be absorbed using existing resources.

For the 2026–27 biennium, the bill therefore does not appear to create a material state cost, savings, revenue loss, or revenue gain. The LBB does not identify any new personnel, technology, administrative, or enforcement costs that would require a separate appropriation.

The fiscal note also states that no significant fiscal implication to units of local government is anticipated. The bill’s practical effects are primarily on private construction-contract retainage and mechanic’s lien reserve timing, rather than on state or local government budgets.

Vote Recommendation Notes

Texas Policy Research recommends that lawmakers vote YES on HB 3290 because it makes a narrow, targeted change to an existing construction-payment statute without materially expanding government power. The bill does not create a new agency, office, program, fund, or enforcement bureaucracy. It also does not grant new rulemaking authority to a state officer, department, agency, or institution, and it does not create or increase a criminal offense.

The bill addresses a specific ambiguity in current law. Under existing law, an owner must reserve certain funds under a construction contract for 30 days after completion, but the bill analysis notes that current law does not define “completion” for purposes of establishing an objective timeline for release of the final 10 percent owed under the contract. House Bill 3290 responds by tying the reserve period to clearer project milestones: the 31st day after work is completed, or the 61st day after a certificate of occupancy is issued or the improvement is first used for its intended purpose.

The bill does not increase the burden on taxpayers in any significant way. The Legislative Budget Board found no significant fiscal implication to the state and assumed any implementation costs could be absorbed using existing resources. The LBB also found no significant fiscal implication for units of local government.

The main liberty concern is regulatory burden. The Committee Substitute requires an owner, subject to an exception for a good-faith dispute, to pay 50 percent of the reserved funds by the 61st day after a certificate of occupancy is issued or the improvement is first used. That is a state-directed payment rule affecting private construction contracts. However, the requirement is limited, tied to objective project events, and operates within an existing mechanic’s lien reserve framework rather than creating a new regulatory system.

On balance, HB 3290 improves predictability in construction payments, reduces ambiguity over when retained funds must be released, and avoids meaningful government growth or taxpayer exposure. While it imposes a modest compliance obligation on construction owners, that burden is narrow and connected to an already-existing statutory reserve requirement.

Free Enterprise

The bill has a modestly positive free-enterprise impact because it may reduce uncertainty in construction payments. The bill analysis explains that current law does not define “completion” for purposes of determining when reserved funds must be released, which can create uncertainty on large commercial projects. By tying release obligations to clearer project milestones, the bill may reduce payment disputes and improve predictability. The concern is that it adds a state-directed partial-payment requirement, but that requirement is limited and operates within an existing mechanic’s lien framework.

Property Rights

The bill has a mixed effect on private property rights. On one hand, it limits an owner’s discretion over retained contract funds by requiring 50 percent of reserved funds to be paid by a specified deadline, subject to a good-faith dispute exception. On the other hand, it helps protect contractors’ and subcontractors’ interest in payment for work performed and reduces the risk that funds will be withheld indefinitely because of uncertainty over project completion. The score is moderate because the bill both constrains owner control and improves payment certainty for other private parties.

Personal Responsibility

The bill generally supports personal responsibility by clarifying the duties of owners and the payment expectations of contractors and lien claimants. Rather than shifting responsibility to a state agency, it sets clearer rules for private parties operating under an existing statutory framework. Owners remain responsible for reserving required funds, while contractors receive a more objective timeline for when reserved funds should be released.

Limited Government

The bill is favorable from a limited-government standpoint. It does not create a new agency, program, fund, enforcement system, or rulemaking authority. The bill analysis expressly states that no additional rulemaking authority is granted, and the fiscal note finds no significant fiscal implication to the state or local governments. The bill does impose a limited statutory payment rule, but it does so within an existing mechanic’s lien reserve structure rather than expanding bureaucracy or taxpayer exposure.

Individual Liberty

The bill has little direct effect on individual liberty. It does not create criminal penalties, authorize surveillance, restrict personal conduct, or impose a new licensing requirement. The bill analysis states that the committee substitute does not create or increase a criminal offense and does not change eligibility for community supervision, parole, or mandatory supervision. Its impact is limited to payment timing in construction contracts already governed by mechanic’s lien law.

Related Legislation

SB 1530 (Same As)

View Bill Text and Status