Texas Lien Law and Notice Requirements: An Overview

Texas Lien Law & Notice Requirements

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There are a lot of reasons why

getting paid is tough in your industry

One of these reasons is that compliance with the

labyrinthian rules to secure lien rights is difficult.

Mechanics liens provide security for parties on construction projects - BUT only if they are valid.

And to be valid, mandatory notice & lien requirements MUST be met.

The Problem is that Texas notice and lien requirements are some of the most complex in the country

So What Makes Texas

Requirements so Confusing?

1.There are a lot of them

2.Some of them repeat

3.Deadlines are calculated oddly

4.Some requirements are intrusive.

NOTICES

THE EASY PART (kind of)Traditional “start of work” notices work in much the same manner as notices in most other states

Notice of Contractual Retainage (§53.057)

Notice of Specially Fabricated Materials (§53.058) Request for Termination (§53.107) Request for Surety information (§53.159)

These notices are sent at the START of the project, and are only required to be sent ONCE.

The confusing part is that references to these notices are scattered throughout the entire mechanics lien statute. !

Once it has been determined that one or more must be sent, however, it’s easy.

Now, the FUN Part

Monthly (recurring) Notices

Monthly NoticesThis type of notice is unique in that it is a recurring requirement based on months in which work was performed, but for which

the claimant was not paid.

Unfortunately, there is no specific name set by statute, so they often go by different names:“2nd and Third Month Notice,”

“Fund Trapping Notice,” “Notice of Intent,” “Unpaid Balance Notices”

Which parties must send these notices?

Commercial Projects

On Residential projects, all parties without a contract directly

with the property owner must only send a 2nd month notice.

How Exactly Are Deadlines Calculated?

2nd Month Notice:  Must be delivered no later than the 15th day of the second month following each month in which the lien claimant furnished labor or materials for which he is still unpaid. NOTE: If the 15th is a Saturday, Sunday, or holiday, the deadlines is before the 15th, not after.

!

!

3rd Month Notice:  Must be delivered no later than the 15th day of the third month following each month in which the lien claimant furnished labor or materials for which he is still unpaid. NOTE: If the 15th is a Saturday, Sunday, or holiday, the deadlines is before the 15th, not after.

REMEMBER: The deadlines are based on the month in which unpaid work

was performed.

RECAP

LIENS

After the confusing mess that is the Texas notice requirements, the lien requirements don’t look too bad. There are still some potentially confusing rules and requirements, however. Some of these rules benefit the potential lien claimant, and some of these rules complicate matters.

Are liens as confusing?

* Built Directly into the Texas Constitution !

* No filing or Notice is strictly necessary !

* Practically, however, should be filed and treated the same as a regular statutory lien (constitutional lien is not enforceable against a third party without actual knowledge of the lien, and filing the lien and providing notice thereof not only may encourage payment, but provides that notice)

Constitutional Liens

* This is what most people mean when discussing Texas mechanics liens

!

* Filing & Notice is strictly necessary !

* Additional Rules may apply

Statutory Liens

* Must have written contract !

* Contract must be filed with the county clerk !

* If owner is married, the contract must be signed by both spouses

!

* Specific wording must be included on lien

Liens on Homesteads

The rule that the contract must be signed by BOTH spouses if the property owner is married holds true EVEN IF THE PROPERTY IS ONLY IN ONE SPOUSE’S NAME

This means that a contractor performing work on a homestead is put in a position where he must explicitly ask or otherwise determine if the property owner with whom he is contracting is married in order to meet the duty imposed by Texas lien law.  If the property owner is married and the contract is not signed by both parties, no lien can attach.

Specific Wording RequiredCertain specific wording is required for a lien to attach to a homestead:

NOTICE: THIS IS NOT A LIEN. THIS IS ONLY AN AFFIDAVIT CLAIMING A LIEN.

The 2nd Month Notice must also contain specific wording to be effective to protect a future lien against a homestead.

Texas Lien and Notice Requirements are tricky

I’m hopeful this presentation helped provide some

clarification

Questions?