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.