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.
Saunders, Walsh & Beard is a business and litigation law firm in McKinney, Texas. Formed in 2012, today SWB has more than 16 attorneys. The firm assists individuals and businesses with commercial, business and tort litigation, construction law, corporate and partnership formation and expansion, employment law, insurance disputes, judgment collection, personal jurisdiction, and real estate. We believe the client’s “experience” is of paramount importance. Explore our practice areas and see why the attorneys of Saunders, Walsh & Beard are ranked by their clients and peers as among the best in their fields.