In Texas, mechanics’ liens are created by constitutional right and by statute. A Constitutional Lien is available only to contractors in direct contractual privity with the owner for the improvements to the property. Statutory mechanics’ liens may be asserted, similar to other states, by general contractors, subcontractors, materialmen, mechanics, or artisans. A Texas mechanics lien that is filed with regard to work performed on privately owned property attaches to and encumbers the fee simple ownership of the property.
Real estate brokers of commercial property also have Texas mechanics lien rights for unpaid commissions in the state of Texas.
For public projects, a lien against monies due the prime contractor may be filed. The Texas public mechanics lien claim is against monies due, not against the real property or improvements.
Contractors, as well as subcontractors, sub-subcontractors and suppliers who have a contract with a general contractor or a subcontractor can file a Texas construction lien. Architects, engineers and surveyors are also entitled to Texas statutory liens so long as their design is utilized in the performance of the construction work.
A Texas Mechanics lien must be filed by the 15th of the fourth calendar month after the day on which the indebtedness accrued or the third month for a residential project. The timing depends upon when the indebtedness accrued which can depend on the tier of lien claimant. In the case of an original contractor has a contract with an owner, the owner’s debt accrues the last day of the month in which (1) the original contract is completed, finally settled or abandoned, or (2) either the owner or contractor receives from the other a written notice of contract termination.
In the case of a subcontractor, a debt accrues on the last day of the month in which the claimant performed labor or furnished materials.
Texas pre-lien notices, known as Disclosure Statements, are required in residential construction. The original contractor should furnish a Disclosure Statement to the owner before it enters into a contract for construction. Essentially, the contractor should attach a list of subcontractors and suppliers. A signed periodic statement that lists the bills or expenses that the original contractor intends to pay or have been paid under its request for payment must also be provided. If the Texas lien claimant is not the original contractor, notice of unpaid amounts must be given directly to the owner and the original contractor. Specifically, any Texas lien claimant must file its Affidavit of Lien in accordance with Texas statute.
Over the next few days, we’ll be discussing the significance of an owner’s “final acceptance” and payment for work performed on a construction project. This act, while seemingly just another part of the construction phase and closeout, results in the triggering of many rights, waivers of rights, and warranty issues for the owner, contractor, suppliers and subcontractors. It even has an effect on the contractual responsibilities of the design professionals. The series is based on an excellent article written by Joseph C. Staak, Esq. of Smith Currie & Hancock.
Upon completion of a construction project, the owner will “accept” the work and thereafter release final payment to the contractor. Generally this final acceptance is performed by the project archietect. Typically, a contract sets procedures for the administrative closeout of the project, including clauses covering substantial completion, reduction and release of retention, final inspection of the work, final acceptance, and final payment.
As can be expected, contractors usually focus most heavily on what is necessary to receive final payment. However, “final acceptance” by the owner is the most important closeout event as far as the contractual and legal relationship of the parties. Under the common law of contracts, upon final acceptance, the owner takes control and ownership of the project and the risk of loss passes from the contractor to the owner. Final acceptance generally means acceptance of the work as completed, including any deficiencies known to exist. At that point, the owner’s contract rights against the contractor become far more limited. Therefore, final acceptance of the work should be considered the most significant contract event only after contract award.
On many projects, mechanics lien claims are substantially limited or destroyed because the owner did not know the claimant was working on the Project. In most states, pre-lien notices are required in order to file a lien claim, and waiting to provide the notice can limit lien rights.
Providing a notice that work is being performed or materials are being delivered is, in many States, required either by statute or by contract. While this may seem like just another paperwork headache, it is a vital part of the construction process that should not be overlooked.
Many notices are not given simply due to inadvertence or not knowing the statutory or contractual requirements. But notices are also kept back for another reason: many contractors and suppliers think that providing a notice will create animosity on the project.
On a normal project, nothing could be further from the truth. Pre-lien notices, which are usually provided at the beginning of a project, are simply informational. The notices let the owner and the general contractor know who is working on the project so that everyone knows everyone. Think of notices as sort of an introduction…an introduction that protects you when payment is not made.
To file a pre-lien notice on one of your projects, visit http://lienitnow.com.