Part 4: Texas Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Retainage

Like in private construction projects, in Texas public works projects, general contractors hold back part of the contract price until the subcontractor fulfills the contract as “retainage.” The amount withheld is a percentage of the total contract price, often around 10%. The retained money is supposed to be paid to the subcontractor after the public works contract (the contract between the governmental entity and the general contractor) is completed. If the general contractor does not pay the retained money, the subcontractor can file a lawsuit to collect on the payment bond; however, the subcontractor must first meet the notice requirements.

The subcontractor must give notice to the general contractor and surety on or before 90 days after final completion of the public works contract. The notice must include the amount of the contract, any amount paid, and the outstanding balance. Tex. Gov’t Code § 2253.046. The notices must be mailed by the proper method and to the proper addresses.

Once again, sending the notices timely, to the correct people, and with the correct content is crucial to perfect a claim retainage.

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 5: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Rights to Information.

Part 1: Texas Public Works Construction Projects & Subcontractors

For the next couple of weeks we will be posting a series of blogs relating to Texas Public Works Construction Projects & Subcontractors. Construction or improvements to public property in Texas are commonly referred to as public construction, public works contracts, or public projects. Some examples of public property are schools, courthouses, hospitals, highways, and bridges. On public projects, a subcontractor provides materials or labor to a general contractor whose contract is with a public entity. Unlike private property projects, a subcontractor in Texas cannot place a lien against public property due to nonpayment. Consequently, in order to protect their interests and increase their odds of receiving payment in full, subcontractors must be aware of the process and deadlines specific to public projects. In most cases, subcontractors on public projects who have not been paid by the general contractor may make a claim on the payment bond posted by the general contractor. A payment bond is a bond posted by the general contractor for the protection of subcontractors and sub-subcontractors. In more limited circumstances, subcontractors may have limited lien rights in money owed to the general contractor.

Please visit our blog again in a few days for Part 2: Texas Public Works Construction Projects & Subcontractors: Prime Contracts Less Than $25,000.00.

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.

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.