Texas Lien Claim - General Contractor on Residential Project

Perfecting a statutory lien claim on a residential project requires that the General Contractor follow the same process and procedures and provide the same notices and affidavits as on commercial projects.  However, the deadline associated with filing the affidavit claiming lien is one month earlier when working on a residential project.

To perfect a statutory lien, a General Contractor must timely file an Affidavit Claiming Lien with the county clerk in the county where the property is located.

The lien affidavit must be filed by the fifteenth (15th) day of the third (3rd) month after the day on which the indebtedness accrues which is either:

• on the last day of the month in which the original contract was completed, settled, or abandoned; or
• on the last day of the month in which written notice by the General Contractor or Owner is received by the other party stating that the contract is terminated.

The Affidavit Claiming Lien must contain the following:

• a sworn statement of the amount of the claim;
• the name and last known address of the owner or reputed owner;
• a general statement of the kind of work done and materials furnished;
• the name and last known address of the person by whom the claimant was employed or to whom the claimant furnished the materials or labor;
• the name and last known address of the original contractor;
• a description, legally sufficient for identification, of the property sought to be charged with the lien;
• the claimant's name, mailing address, and, if different, physical address

The affidavit must be signed by the person claiming the lien and must be sworn to (the signature line of the affidavit must represent that the affidavit was “subscribed and sworn to” and the affidavit must be notarized). 

The General Contractor must then send notice that the lien affidavit has been filed and a copy of the lien affidavit to the Owner within five (5) business days of its filing.  The notice and copy must be sent by certified mail.  Failure to send the notice within the applicable time period will void the lien claim.

To enforce your lien claim, you must file suit within the later of:

• one year after the date after the last date you may have filed a lien affidavit; or
• one year after completion, termination, or abandonment of the work under the original contract.

 By: Sarah Berry, Attorney

What is a lien under Texas law?

A lien is the legal claim of one person upon the property of another person to secure the payment of a debt or the satisfaction of an obligation.  In the case of mechanic’s liens, the lien is intended to secure payment for labor or materials supplied in improving, repairing or maintaining real property.

A lien may be provided for in a contract, the Texas Constitution, or by a statute.  Constitutional liens are provided for in Article 16 Section 37 of the Texas Constitution.  Statutory liens are provided for in Chapter 53 of the Texas Property Code.  The Constitution and Property Code provide similar protections to lien claimants; however, the two procedures are distinct and independent of one another.  A contractual lien is provided for in an agreement between the parties in which they agree that the contractor is secured by a right of foreclosure and sale.  Contractual liens are not discussed further in this series of blog postings.

The text of the Texas Constitution and Texas Property Code is provided online by the Texas Legislature and may be found at the following link: http://www.statutes.legis.state.tx.us/

By Sarah F. Berry, Attorney  

If you are interested in attending a lien and bond claim workshop please contact Sarah Berry for more information.  Sarah@LPVLaw.com or (512) 472-2300.

Part 3: Texas Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00.

In reality, most public works projects in Texas are over $25,000.00 in value. When projects exceed $25,000.00 in value, the general contractor must post a payment bond in the amount of the prime contract for the protection of subcontractors and sub-subcontractors. Tex. Gov’t Code § 2253.021. If subcontractors are not paid by the general contractor, they can file a lawsuit to collect on the payment bond; however, before they can file suit, subcontractors must ensure that they have complied with strict notice requirements. If the notice requirements, including deadlines and content, are not properly met, the subcontractor will not be able to successfully sue to collect on the payment bond.

Under Texas law, Subcontractors (those having a contract directly with the general contractor) must give written notice to the prime contractor and surety not later than the fifteenth day of the third month following each month in which the labor or material was provided for which the claimant has not been paid (often called the “Third Month Notice”). Tex. Gov’t Code § 2253.041(b). If this deadline is not properly met, the subcontractor will have lost its ability to prevail in a lawsuit. Furthermore, the notice must identify specific details such as: the labor or materials provided; who they were provided to; and when they were provided; in addition to other required information. Additionally, a sworn statement must be included verifying the amount due. Tex. Gov’t Code § 2253.041(c). The notices must be mailed by the proper method and to the proper addresses. Tex. Gov’t Code § 2253.044.

Sending the required notices on time is crucial for subcontractors but is often overlooked until it is too late or sent incorrectly due to a misunderstanding of the applicable laws. Subcontractors often wait too long believing that they will work something out with the general contractor. When they eventually do seek help from an attorney, the deadline has already passed. Subcontractors should pay careful attention to their past due invoices and ensure they seek an attorney’s advice far enough in advance so that all deadlines can be met and the subcontractor’s rights protected.

Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.

Please visit our blog again in a few days for Part 4: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Retainage.

Texas Mechanic’s & Materialman’s Liens: Deadlines for Filing Affidavit of Lien

The rules regarding Texas mechanic’s and materialman’s liens can be very confusing and time consuming to understand. However, it is important to have a good working knowledge of the rules pertaining to deadlines; if deadlines are missed a Texas lien will be invalid. Following is a discussion of the computation of deadlines for filing of an affidavit of lien.

The deadline for filing an affidavit of lien with the Texas county clerk initially depends on two factors: (1) whether the construction project is residential or commercial and (2) when the “indebtedness accrued.”

If the construction project in Texas is commercial, the affidavit must be filed not later than the 15th day of the fourth calendar month after the day on which the indebtedness accrues. (Tex. Prop. Code 53.052(a)) For example, if the “indebtedness accrued” in January, the affidavit of lien would be filed by May 15th.

If the construction project in Texas is residential, the affidavit must be filed not later than the 15th day of the third calendar month after the day on which the indebtedness accrues.
(Tex. Prop. Code 53.052(b)) For example, if the “indebtedness accrued” in January, the affidavit of lien would be filed by April 15th.

When does the indebtedness accrue? This depends on whether or not the person filing the affidavit of lien is a general contractor or sub-contractor.

For a general contractor in Texas, the indebtedness accrues: (1) on the last day of the month in which a written declaration by the original contractor or the owner is received by the other party to the original contract stating that the original contract has been terminated, OR (2) on the last day of the month in which the original contract has been completed, finally settled, or abandoned. (Tex. Prop. Code 53.053(b))
To sum this up, the indebtedness accrues when the contract is terminated or the construction under the contract is finished or abandoned.

For a sub-contractor, the indebtedness accrues on the last day of the month in which the labor was performed or the material was furnished. (Tex. Prop. Code 53.053(c))

Here’s an example of the rules applied. You are a subcontractor in Austin providing labor for a residential construction project in Austin, Texas. Labor was last provided in January. Therefore, your lien would need to be filed by April 15th.