Category Archives: Construction Law

Changes to Mechanic’s and Materialman’s Liens Law Effective January 1, 2022

Major changes to Chapter 53 of the Texas Property Code go into effect on January 1, 2022.  On June 15, 2021, Governor Abbott signed into law House Bill 2237, which makes sweeping changes to the primary source of law for lien and bond claims in Texas.  The following is an overview of the changes that will have the greatest impact on contractors, subcontractors, and the attorneys who represent them.

Applicability of Changes

It is important to note that, while the changes go into effect on January 1, 2022, these changes apply only to an original contract entered into on or after the effective date.  Therefore, it will be especially important for subcontractors and suppliers to obtain a copy of the original contract between the owner and the prime contractor.  The date on which the original contract was entered into will dictate the appliable law.  Even if the subcontractor’s contract was signed after January 1, 2022, if the original contract pre-dates January 1, 2022, then the old law will apply.

Changes to Terminology

It is evident from the changes made that the legislature intended to simplify Chapter 53 to make it more accessible to the layman and to take away some of the technical requirements that often made the difference between a valid and an invalid lien.  Only time will tell whether these goals were achieved.  To that end, some defined terms were added, some were changed, while others were combined.  The following are just a few of the changes to words and phrases used in Chapter 53:

• “Improvement” – under the old version of the Act, the various things that qualified as “improvements” were somewhat scattered throughout the Act. The revision broadens the term, makes its use more consistent throughout the Act, and puts the entire definition in one location.
• “Prosecution of the work” has replaced “performance of the work.”
• “Consumption” has been replaced by “use” – For example: “Material” means all or part of the material, machinery, fixtures, or tools ordered and delivered for incorporation or use. Since the definition of “material” includes “machinery” or “tools,” the word “use” is more appropriate than “consumption.”
• “Purported original contractor” – the sham contract provision of Chapter 53 has been simplified by defining the term “purported original contractor.”
• “Retainage,” “retain,” “reservation” and “reserved funds” – the word “reserve” has replaced “retain” and “withhold” throughout the Act, as those two phrases had been used inconsistently. Also, “retainage” has been changed to “reservation” or “reserved funds,” when referring to the funds withheld by the owner.  However, a claimant still has a “claim for unpaid retainage.”  This was probably done to address uses of the term that were inconsistent with the statutory definition:  “Retainage” means an amount representing part of a contract payment that is not required to be paid to the claimant within the month following the month in which labor is performed, material is furnished, or specially fabricated material is delivered.

Substantive Changes

While the changes in terminology may be largely academic, there are quite a few substantive changes that will have an impact on perfecting and enforcing lien claims.  The following changes will have the greatest impact:

• Delivery of Notice – Under the original Act, all notices had to be delivered in person or sent via certified mail to be effective. Under the revised Act, notices can be sent via certified mail or “any other form of traceable, private delivery or mailing service that can confirm proof of receipt.”  However, certified mail will remain the preferred method, because it is effective upon “depositing or mailing.”
• Deadlines Extended by Weekends and Holidays – While the overwhelming majority of the deadlines established under Chapter 53 land on the 15^th day of the month, those deadlines were often shortened when the 15^th landed on a weekend or holiday. Under the revised Act, any deadline that falls on a weekend or holiday is extended to include the next business day.
• Licensed Professionals and Landscapers – A licensed professional (architect, engineer, or surveyor) no longer has to have a direct contractual relationship with the owner in order to have lien rights. This revision grants lien rights to consultants, such as HVAC designers, who previously did not have the ability to file a lien.  In addition, landscapers are no longer required to have a written contract in order to assert a lien claim.
• Subcontractor’s Retainage Lien Claims
  • The Intent to Lien Notice – a claim for retainage can be included, wholly or partially, in the standard 3rd-month notice. However, if the claim is purely retainage and no prior notices have been sent, a subcontractor must provide notice of an intent to file a retainage lien by the 30^th day after the date the claimant’s contract is complete, terminated, or abandoned, or the 30^th day after the date the original contract is complete, terminated or abandoned, whichever is earlier.  There is also a new standardized form for this notice.
  • The Lien Affidavit – The deadline for a subcontractor to file a retainage lien claim has been reduced from four months after the completion of the project to three months. A subcontractor claiming a lien for retainage must file a lien affidavit by the 15^th day of the third month after the month in which the original contract was completed, terminated, or abandoned.
• 2^nd Tier Subcontractors Have One Less Notice to Send – Under the original Act, 2^nd Tier Subcontractors, those subcontractors and suppliers who contract with a subcontractor, had to send notice to the original contractor by the 15^th day of the second month after each month during which work was performed. Under the revised Act, this is no longer a requirement.  The 2^nd Tier Subcontractors just have the 3rd-month notice requirement; there is no 2nd-month notice.  In short, all subcontractors, regardless of tier, now have the same notice obligations.
• Standardized Notice – Claimants no longer have to carefully read through a list of information that must be included in an intent to lien notice. The revised Act provides a standard form that must be used.  It is important to note that the new standard form requires the claimant to identify the “type of labor or materials provided,” which is information that was not previously required to be included in an intent to lien notice, just the lien affidavit.
• One-Year Statute of Limitations – The original statute of limitations to foreclose on a mechanic’s lien was one (1) year for residential projects and two (2) years for commercial projects. Now, it is one (1) year regardless of whether the project is commercial or residential.  This is a very significant change for commercial contractors.  The Act now reads, “Suit must be brought to foreclose the lien not later than the first anniversary of the last day a claimant may file the lien affidavit….”  A foreclosure suit that is barred by limitations cannot be revived by a suit that is solely brought to discharge the lien on the basis that the limitations have expired.

Minor Changes

There were a handful of changes worth mentioning, but which should not have a significant impact.

• Summary Motion to Remove Invalid or Unenforceable Lien – The notice of hearing requirement has been extended from 21 days to 30 days, and the claimant is entitled to expedited discovery of relevant information.
• Requirements for Residential Contracts and Lien Claims – The statutory disclosures for contracts involving improvements to residential homesteads, and the language that must be included in an intent to lien notice for a residential project, have been revised to reflect the changes in defined terms (discussed above). While the old disclosures are substantially similar to the new versions, residential contractors will need to update their forms.
• Lien Waivers No Longer Have to be Notarized – In an effort to reduce subcontractors’ costs, lien waivers no longer have to be notarized.

The changes made to Chapter 53 by HB 2237, when they go into effect, should make things easier for lien claimants.  The changes that will have the biggest effect on lien claimants is the required standardized notice forms and the reduced statute of limitations.  Once the industry fully adopts the standardized notices, the transition should be largely complete.  For our readers’ convenience, the new and revised forms can be found below.

2022 – Intent to Lien Notice – 3rd Month Notice
2022 – Notice of Claim for Unpaid Retainage
2022 – Residential Construction Contract Disclosures
2022 – Statutory Notice Language for Residential Liens

Lien Waivers
Lien Waiver- Conditional Final
Lien Waiver- Conditional Final Lien Waiver- Conditional Progress Payment
Lien Waiver- Unconditional Final
Lien Waiver- Unconditional Progress Payment

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Jacob D. Thomas is a civil litigation and board-certified construction lawyer helping individuals and businesses with their legal needs since 2003. Mr. Thomas was named a Texas Rising Star from 2015-2018 and a Texas Super Lawyer in 2020 and 2021. With his experience, knowledge, and skill, Jacob competently guides his clients through the complex legal system. Whether the situation calls for a hard-nosed fighter or a subtle negotiator, Jacob tailors his approach to each case based upon the particular needs of the client.

Texas Lien Law

Mechanic’s and Materialmen’s Liens

Mechanic’s and Materialmen’s Liens are legal tools for contractors and suppliers to collect payment for their goods and services. Texas law protects the interests of general contractors, subcontractors, and suppliers by providing them with lien rights against construction projects. A lien is a claim or legal right against assets used as collateral to satisfy a debt. However, the law is complex and full of many hurdles to overcome in order for a claimant to perfect (or secure) its lien.

Chapter 53 of the Texas Property Code is the primary—though not exclusive—source of Texas lien law. Chapter 53 describes the parties who are entitled to a lien, the notices that must be given, the form of the documents that must be filed, and a multitude of related rules, defenses, and restrictions. In fact, Texas lien law is so varied and complex that it poses a challenge to some of the state’s best lawyers. A claimant who chooses to wade into those waters without a lawyer’s assistance should proceed with great caution.

Determining Your Lien Rights

The first step is to determine whether a potential claimant is granted lien rights under the statute.  Not every person who is involved in a construction project has lien rights.  Certain trades, such as architects, engineers, landscapers, and demolition experts are required to have a written contract—a verbal contract will not suffice.  On residential projects, the original contractor must have a written contract, signed by the owners (e.g., both spouses) before the original contractor or any of its subcontractors can assert lien rights.  However, most contractors and subcontractors on a commercial project do not need to have a signed, written agreement with the upstream party in order to claim lien rights. A verbal contract can serve as the basis for a lien claim in most circumstances on commercial projects.

If a potential claimant qualifies (based on the above criteria), the next step is determining the proper notices that must be sent, to whom, and when.  The types of notices necessary to perfect a lien claim, and the accompanying deadlines, depend on a variety of facts. The types of notices are different for specially fabricated materials and claims for retainage (i.e., the portion of the agreed-upon contract deliberately withheld until the work is completed).

The specific wording of the notices will control whether an owner may withhold payment from a general contractor to satisfy a subcontractor’s claim. The deadline for the notices, how many notices the claimant must send, and to whom the notices must be addressed, varies depending upon the following: 1) whether the project is residential or commercial; 2) if the claimant is an original contractor, subcontractor, or supplier; and 3) whether the claim is for a progress payment, final payment, or retainage.

For example, a subcontractor, on a commercial project, must give notice of its intent to file a lien against the owner and general contractor by the fifteen day of the third month after each month in which work was performed for which payment has not been received.  In contrast, the same subcontractor, on a residential project, must send notice by the fifteenth day of the second month after each month in which work was performed, as well as additional, specific notice language.

Filing & Delivering Notice of Your Lien

Drafting and filing the lien affidavit is no less complex than the notices which must be sent in advance. The affidavit (or sworn statement of fact) claiming a lien must contain specific information and, under some circumstances, very specific wording. The information which must be included varies depending, again, upon whether the project is residential or commercial and whether the claimant is an original contractor, subcontractor, or supplier. In addition, the deadline for filing the lien affidavit varies based upon a number of factors (i.e., when the claimant’s work was performed, whether the project was completed, or the original contract terminated, and whether the owner has made a written demand for lien claimants to file their lien affidavits). A claimant may have lien rights, send the proper notices, and still fail to file a valid lien affidavit by the applicable deadline.

Even after a qualified claimant sends proper notices and timely files a valid lien affidavit, the owner of the project may still have defenses against the lien claim preventing a claimant from realizing a full recovery.  The deadline for filing suit to foreclose on a lien varies depending upon whether the project is residential or commercial. Liens against residential projects are only good for one year, while liens against commercial projects have a two-year statute of limitations.  In addition, the owner may have withheld the statutorily required retainage, thereby limiting the owner’s liability and protecting the project from foreclosure. In short, after a valid lien is perfected, the war is not over.

Seek Competent Legal Assistance

The Texas legislature has considered making changes to the Texas lien statutes to simplify the process. As of the writing of this article, no significant changes have occurred.  Perhaps one day the process will be easier, but until that day, it is vitally important for a potential lien claimant to seek the advice and assistance of an experienced construction lawyer.

Jacob D. Thomas is a civil litigation and construction lawyer in McKinney, Texas. Jacob has helped individuals and businesses with their legal needs since 2003. He has the confidence earned only through arduous study, preparedness, and experience.  Jacob competently guides his clients through the complex legal system. Contact Jacob today for assistance with lien claims or claims for payment.

Seek contract time extensions for weather delays. It is imperative for contractors and subcontractors to be aware of the change order processes in their contracts and follow the correct procedures for seeking an increase in their contract time, especially with the severe weather occurring in Texas this week. Do not put off submitting a change order seeking an extension of your contract time. Many contracts require that a change order arising from a delay must be submitted within a short period of time after the delay causing event. If the request for an extension is not submitted within that timeframe, the claim could be waived.

Avoid liquidated damages for delays caused by these abnormal weather conditions. Please contact the attorneys at Saunders, Walsh & Beard if you need assistance with reviewing your contracts or submitting requests for extensions of time.

 

Jacob D. Thomas is a civil litigation and construction lawyer in McKinney, TX, who has been helping individuals and businesses with their legal needs since 2003. With his experience, knowledge and skill, Jacob competently guides his clients through the complex legal system. Whether the situation calls for a hard-nosed fighter or a subtle negotiator, Jacob tailors his approach to each case based upon the particular needs of the client. Read more about Jacob here.

Texas law protects the interests of general contractors, subcontractors, and suppliers by providing them with lien rights against construction projects, but the law is complex and there are many hurdles to overcome in order for a claimant to perfect its lien. Chapter 53 of the Texas Property Code is the primary, though not exclusive, source of Texas lien law. Chapter 53 describes the parties who are entitled to a lien, the notices that must be given, the form of the documents that must be filed, and a multitude of related rules, defenses, and restrictions. Texas lien law is so varied and complex that it poses a challenge to some of the state’s best lawyers. A claimant who chooses to wade into those waters without a lawyer’s assistance should proceed with great caution.

The first step is to determine whether a potential claimant is granted lien rights under the statute. Not every person who is involved in a construction project has lien rights. Certain trades, such as architects, engineers, landscapers and demolition experts, are required to have a written contract; an oral contract will not suffice. On residential projects, the original contractor must have a written contract, signed by the owners (both spouses), before the original contractor or any of its subcontractors can assert lien rights.

If a potential claimant qualifies, the next step is determining the proper notices that must be sent, to whom, and when. The types of notices necessary to perfect a lien claim, and the deadlines for same, depend on a variety of facts. The types of notices are different for specially fabricated materials and claims for retainage. The particular wording of the notices will control whether an owner may withhold payment from a general contractor to satisfy a subcontractor’s claim. The deadline for the notices, how many that a claimant has to send, and to whom the notices must be addressed, vary depending upon whether the project is residential or commercial if the claimant is an original contractor, subcontractor, or supplier, and whether the claim is for a progress payment, final payment, or retainage.

Drafting and filing the lien affidavit is no less complex than the notices that have to be sent in advance. The affidavit claiming a lien must contain specific information and, under some circumstances, very specific wording. The information that has to be included varies depending, again, upon whether the project is residential or commercial and whether the claimant is an original contract, subcontractor, or supplier. In addition, the deadline for filing the lien affidavit varies based upon a number of factors: when the claimant’s work was performed; whether the project was completed or the original contract terminated; and whether the owner has made a written demand for lien claimants to file their lien affidavits. A claimant may have lien rights, send the proper notices, and still fail to file a valid lien affidavit by the applicable deadline.

Even after a qualified claimant sends proper notices and timely files a valid lien affidavit, the owner of the project may still have defenses against the lien claim that will prevent a claimant from realizing a full recovery. The deadline for filing suit to foreclose on a lien varies depending upon whether the project is residential or commercial. The owner may have withheld the statutorily required retainage, thereby limiting the owner’s liability and protecting the project from foreclosure. In short, after a valid lien is perfected, the war is not over.

The Texas legislature has considered making changes to the Texas lien statutes to simplify the process, but, as of the writing of this article, no significant changes have been made in years. Perhaps one day the process will be easier, but until that day, it is vitally important for a potential lien claimant to seek the advice and assistance of an experienced construction lawyer.

If you need assistance collecting payment for labor/materials you’ve provided to a project, please contact us to discuss the lien filing process and how we can help.

Jacob Thomas, a top-rated construction litigation attorney with Saunders, Walsh & Beard, weighs in on residential construction defect claims with Super Lawyers. Super Lawyers is a rating service of outstanding lawyers who have attained a high-degree of peer recognition and professional achievement. Mr. Thomas has been recognized as a Texas Rising Star by Super Lawyers every year since 2015.

CAN I SUE MY HOME BUILDER FOR SHODDY WORKMANSHIP?
Construction liability when weather causes damage based on defects

By Super Lawyers staff
Whether you are building a brand new home or undertaking major renovations, you will be required to put a tremendous amount of faith into the hands of a construction company. Unfortunately, in far too many cases, contractors can fail to live up to their end of the bargain; in turn, poor workmanship and construction defects cause serious problems.

As stressful and frustrating as dealing with a construction defect is for a homeowner, there are legal options available. Yes, negligent construction companies can be held liable for property defects.

How to Hold a Builder Liable for Poor Workmanship

Under the Texas Residential Construction Liability Act (RCLA), home builders can be held legally liable for damage caused by shoddy workmanship or construction defects. The RCLA provides very important legal protections to homeowners, property owners and real estate developers. Among other things, it gives them the right to sue for poor workmanship.

“Anytime a potential client calls me that has anything to do with residential construction, it’s the first thing I consider,” says Jacob D. Thomas, a construction litigation attorney at Saunders, Walsh & Beard in McKinney. “It’s the carrot and the stick. From the contractor’s perspective, it’s supposed to prevent people from running to the courthouse and filing a lawsuit. It gives the contractor an opportunity to inspect and make an offer of settlement. For the homeowner, if the contractor is a stand-up guy and is going to follow the law, it gives them a basis on which to communicate. It benefits both parties.”

The RCLA establishes a number of different procedural requirements that plaintiffs must meet prior to initiating a defect construction claim. Before a Texas homeowner or other party can file a lawsuit against a contractor under the RCLA, they must give the defendant (the construction contractor) at least 60-days’ notice.

After receiving an official construction defect notice, the responsible contractor will then have 35 days to conduct an inspection of a homeowner’s property. And after completing their inspection, they can make a written settlement offer to the homeowner. A settlement could include an agreement to conduct repairs, financial compensation, or some combination of both. However, if no agreement can be reached, the homeowner will then have the right to file a lawsuit.

“I’m of the opinion that the RCLA is actually quite beneficial for the homeowner,” says Thomas. “It very clearly sets out what kind of efforts need to be taken in advance, what needs to be in the demand letter, how it needs to be sent to the contractor. It creates a map to guide you through the initial process.”

Construction Defect Claims are Subject to Strict Deadlines

If you discovered a possible construction defect in your home, it is imperative that you take immediate action to protect your rights. The sooner you discuss your case with a Texas construction law attorney, the better off you will be. One of the most challenging things about construction defect claims is navigating the filing deadlines. In most cases, construction defects are not obvious to the naked eye. It is often years before a homeowner even has a chance to recognize the problem.

In Texas, plaintiffs must deal with both the statute of limitations and the statute of repose. Under the statute of repose, all construction defect claims in Texas must be filed within ten years of the date that the work was ‘substantially completed’. However, that is not the only relevant legal deadline. The statute of limitations also requires Texas homeowners to file a poor workmanship claim within two years of the date that they knew or should have known about the defect.

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Original Post Found Here: https://www.superlawyers.com/texas/article/can-i-sue-my-home-builder-for-shoddy-workmanship/ad9e2621-1c98-49a4-94b0-ea96318e021f.html