LIEN LAW 50 states

By
Richard Gary Thomas
Thomas, Feldman & Wilshusen, L.L.P.
Dallas, Texas

PRIVATE WORK

CONSTITUTIONAL MECHANIC’S LIEN
(Art. 16, 37, Texas Constitution):

Who May Claim: Original contractor (includes any mechanic, artisan or materialman who deals directly with owner).

Required Notice and Timing: None: self- executing.

Lien Affidavit Filing: None: self-executing. However, execute a statutory lien affidavit in time and manner described below to defeat a bona fide purchaser.

Suit Filing: Four years [general contract statute and Uniform Commercial Code (UCC) statute].

Contractual Waivers: Lien rights may be waived in a written agreement prior to or during the course of construction.

Waivers After Commencement of Work : Lien rights may be waived in a written agreement and do not have to be conditioned upon payment. Special care should be exercised to preserve rights for unpaid progress billings, retainage, unbilled extra work and disputed claims when signing any partial lien release.

STATUTORY MECHANIC’S LIEN ON COMMERCIAL PROPERTY
(Texas Property Code, Chapter 53):

Who May Claim: Original contractor (includes any contractor or materialman who contracts directly with the owner), first and second-tier subcontractors and materialmen for unpaid progress billings, retainage and specially fabricated material. Unclear if remote subcontractors or materialmen protected. Architects, engineers, surveyors, landscape contractors and demolition contractors should consult an attorney regarding statutory limitations affecting their rights.

Required Notice and Timing for Original Contractor for Unpaid Progress Billings and Retainage: None.

Required Notice and Timing for First and Second-Tier Subcontractors and Materialmen for Unpaid Progress Billings: Notice to the owner not later than the 15^th day of the third month following each month in which all or part of the labor was performed or materials were furnished. Copy to original contractor.

Notice must state the amount and contain the following statutory warning: “If the bill remains unpaid, the owner may be personally liable and the owner’s property subjected to a lien unless the owner withholds payment from the contractor for payment of the bill, or the bill is otherwise paid or settled.”

Additional Required Notice and Timing for Second-Tier Subcontractors and Materialmen for Unpaid Progress Billings: Notice to original contractor not later than the 15^th day of the second month following each month in which all or part of the labor was performed or materials were delivered. Additional notice to owner not later than the 15^th day of the third month following each month in which all or part of the labor was performed or materials were furnished as set forth above. Notice to the owner must contain statutory warning above.

Required Notice and Timing for First and Second-Tier Subcontractors and Materialmen for Retainage: Notice to the owner (and original contractor if claimant is second-tier) of terms of agreement to withhold retainage not later than the 15^th day of the second month following the first month in which labor was performed or materials were delivered following agreement to withhold retainage. Notice must contain (1) the sum to be retained, (2) the due date or dates, if known, and (3) a general indication of the nature of the agreement. In the alternative, send periodic notice(s) of unpaid retainage as set forth above for unpaid progress billings.

Required Notice and Timing for Original Contractors, First and Second-Tier Subcontractors and Materialmen for Specially Fabricated Material: Notice to the owner (and original contractor if claimant is second-tier) not later than the 15^th day of the second month in which claimant received and accepted the order for the material. Notice must contain a statement that the order has been received and accepted, and the price of the order.

In addition, if material is delivered or the normal delivery date has passed: notice to the owner (and original contractor if claimant is second-tier) for unpaid progress billings as described above. Unclear if additional notice is required if material not delivered and normal delivery time has not passed, but conservative approach would be to send notice as set forth above for unpaid progress billings.

Lien Affidavit Filing for Original Contractor for Progress Billings and Retainage: Not later than the 15^th day of the fourth month after written termination, completion or abandonment of the contract. Copy to owner not later than five (5) days after filing.

Lien Affidavit Filing for First and Second-Tier Subcontractors and Materialmen for Unpaid Progress Billings: Not later than the 15^th day of the fourth calendar month after the last day of the last month in which the claimant performed labor or provided materials. Copy to owner and original contractor not later than five (5) days after filing.

Lien Affidavit Filing for First and Second-Tier Subcontractor and Materialmen for Retainage: Same as above for unpaid progress billings, but not later than the 30^th day after the work under an original contract with the owner is complete. Copy to owner and original contractor not later than five (5) days after filing.

Lien Affidavit Filing for First and Second-Tier Subcontractors and Materialmen for Specially Fabricated Material: Not later than the 15^th day of the fourth month following the last day of the last month the materials were delivered or would normally have been required at the job site or the last day of the last month any material breach or termination of the original contract by the owner or original contractor of the subcontract under which the specially fabricated material was furnished. Copy to owner and original contractor not later than five (5) days after filing.

Special Warnings: Mandatory requirements for lien affidavit set forth in Tex. Prop. Code Ann. §§53.054 and 53.055 (Vernon Supp. 2000). All notices and lien affidavit copies must be sent via certified or registered mail.

Suit Filing: Suit must be filed within two years after the last day claimant may file a lien affidavit or within one year after completion, termination or abandonment of work under original contract under which lien is claimed, whichever is later.

Contractual Waivers: Lien rights may be waived in a written agreement prior to or during the course of construction. Pay-if-paid clauses will affect the enforceability of a lien if payment does not occur.

Waivers After Commencement of Work: Lien rights may be waived in a written agreement and do not have to be conditioned upon payment. Special care should be exercised to preserve rights for unpaid progress billings, retainage, unbilled extra work and disputed claims when signing any partial lien release.

PAYMENT BOND CLAIM ON PRIVATE BONDED JOB:
(Texas Property Code, Chapter 53, Subchapter I)

Who May Claim: First and second-tier subcontractors and materialmen for unpaid progress billings, retainage and specially fabricated material. Unclear if remote subcontractors and materialmen protected. Architects, engineers, surveyors, landscape contractors and demolition contractors should consult an attorney regarding statutory limitations affecting their rights.

Required Notice and Timing: Take all steps set forth above under “Statutory Mechanic’s Lien on Commercial Property”; or, in the alternative, notice, as set forth above, to the original contractor (if required) and notice to the surety instead of the owner. Notice in this manner must be given in the same time and manner set forth above, but the content need provide only fair notice of the amount and the nature of the claim asserted. Best practice is to do both of the above.

Lien Affidavit Filing: Same as above under statutory mechanic’s lien on commercial property; or fair notice, as set forth above, to the original contractor and surety. Best practice is to do both of the above.

Special Warning: All notices and lien affidavit copies must be sent via certified or registered mail.

Suit Filing: If bond is recorded at time lien is filed, suit must be filed not less than 60 days, nor more than one year, after perfection of the claim by notice of filing or both. If bond is not recorded at time lien is filed, the time for filing suit is extended to two years.

Contractual Waivers: Lien rights may be waived in a written agreement prior to or during the course of construction. Pay-if-paid clauses may affect the enforceability of a lien if payment does not occur.

CLAIM AGAINST BONDS TO INDEMNIFY AGAINST LIENS (“BOND AROUND”):
(Texas Property Code, Chapter 53, Subchapter H”):

Who May Claim: Any party with a valid lien perfected in accordance with the requirements of Chapter 53 of the Texas Property Code.

Required Notice and Timing: Situation exists only when a valid lien has been perfected and a third party has purchased an indemnity bond — in effect “bonding around” the lien — and followed the prescribed procedure for serving said bond.

Lien Affidavit Filing: Assumes a valid lien has been filed.

Suit Filing: Suit regarding the items to be removed must be filed against the surety not more than one year after service of notice of the bond, or after date on which underlying lien claim becomes unenforceable.

PRIORITY LIEN AND RIGHT TO REMOVE PERSONAL PROPERTY OR “REMOVEABLES”:

Who May Claim: Original contractors, first and second-tier subcontractors and materialmen.

Required Notice and Timing: Same as “Statutory Mechanic’s Liens on Commercial Property” as set forth above. It applies only to “removeables,” i.e., items that can be removed without material injury to the structure. However, this right is only applicable against a lender or other mortgage holder. Hence it is only a priority right.

Lien Affidavit Filing: Same as “Statutory Mechanic’s Liens on Commercial Property” as set forth above.

Suit Filing: Effective only after foreclosure or in priority of lien dispute with another lien holder. Not effective against the owner. There is no “self-help.”

STATUTORY MECHANIC’S LIEN ON RESIDENTIAL PROPERTY AND LIEN FUNDS HELD BY THE OWNER:
(Texas Property Code, Chapter 53)

Who May Claim: Original contractor, first and second-tier subcontractors and materialmen for unpaid progress billings, retainage and specially fabricated material for one to four unit residential structure that is owned by one or more persons to be used, or intended to be used, as a dwelling by the owner. Unclear if remote subcontractors or materialmen protected. Architects, engineers, surveyors, landscape contractors and demolition contractors should consult an attorney regarding statutory limitations affecting their rights.

Required Notice and Timing for Original Contractors for Unpaid Progress Billings and Retainage: Provide “Disclosure Statement” to the owner prior to signing construction contract. After signing construction contract, file it with county clerk’s office in county where property is located. Prior to starting work, provide owner with “List of subcontractors and suppliers” who are to provide labor, materials/services to project (this list must be updated within 15 days of adding or terminating any subcontractor or supplier on the project unless waived in writing). Must provide a “Disbursement Statement” with each pay application and provide a “Final Bills-Paid Affidavit” with final pay application. Requirements for these forms set forth in Tex. Prop. Code Add. §§ 53.251-53.260 (Vernon Supp. 2000).

Required Notice and Timing for First and Second-Tier Subcontractors and Materialmen for Unpaid Progress Billings and Retainage: See “Required Notice and Timing” for “Statutory Mechanic’s Liens on Commercial Property” above. Notice requirements are the same as for commercial property except for timing. All first and second tier subcontractors and materialmen must send notices to original contractor and owner by the 15^th day of the second month following each month in which all or part of the labor was performed or materials were delivered. Notices for retainage and specially fabricated materials are the same as for commercial property.

Lien Affidavit Filing for Original Contractor for Progress Billings and Retainage: Not later than the 15^th day of the third month after written termination, completion or abandonment of contract. Copy to owner not later than five (5) days after filing.

Lien Affidavit Filing for First and Second-Tier Subcontractors and Materialmen for Progress Billings: Not later than the 15^th day of the third month after the last day of the last month in which the claimant performed labor or provided materials. Copy to owner not later than five (5) days of filing.

Lien Affidavit Filing for Original Contractors, First and Second-Tier Subcontractors and Materialmen for Specially Fabricated Material: Not later than the 15^th day of the third month following the last day of the last month the materials were delivered or would normally have been required at the job site, or, the last day of the last month any material breach or termination of the original contract by the owner or original contractor of the subcontract under which the specially fabricated material was furnished. Copy to owner and original contractor not later than five (5) days of filing.

Special Warning: Homesteads: Additional requirements must be met in order to obtain a lien on a homestead. The construction contract must be signed by both spouses and contain mandatory warning (see Tex. Prop. Code Ann. §53.254 (Vernon Supp. 2000) for form). An affidavit for lien filed on a homestead must contain the following notice in at least 10-point boldface print at the top of the page: “NOTICE: THIS IS NOT A LIEN. THIS IS ONLY AN AFFIDAVIT CLAIMING A LIEN”. Other mandatory requirements for lien affidavit set forth in Tex. Prop. Code §§53.054 and 53.055 (Vernon Supp. 2000). All notices and liens must be sent via certified or registered mail.

Suit Filing: Suit must be filed within one year after the last day a claimant may file a lien affidavit or within one year after completion, termination or abandonment of work under original contract under which lien is claimed, whichever is later.

PUBLIC WORK

CLAIM AGAINST BOND WHEN PRIME CONTRACT EXCEEDS $25,000¹:
(Texas Government Code, Chapter 2253)

Who May Claim: First and second-tier subcontractors and materialmen for unpaid progress billings, retainage and for specially fabricated items. Unclear if remote subcontractors and suppliers protected. No bond protection for original contractors.

Required Notice and Timing for First and Second-Tier Subcontractors and Materialmen for Unpaid Progress Billings: Notice to the original contractor and to its surety or sureties on or before the 15^th day of the third month following each month in which all or part of the claimed labor was performed or materials were furnished. Notice must contain: (1) A sworn statement of account stating: “The amount claimed is just and correct and that all just and lawful offsets, payments, and credits known to affiant have been allowed”; (2) the amount of retainage applicable to the account that has not become due; (3) reasonable description of labor and/or materials; (4) name of party to whom labor and/or materials delivered; (5) dates of performance/delivery; (6) whether the contract is oral or written; (7) the amount of the contract and (8) the amount claimed.

If no written agreement exists, notice must also itemize the amount due and provide invoices or documents identifying the labor or material, the job and the destination of delivery.

If written agreement contains unit price agreement, sworn statement of account must also contain statement of those completed and partially completed units. A list of units and unit prices set by the contract must be attached to the statement.

Additional Required Notice and Timing for Second-Tier Subcontractors and Materialmen for Unpaid Progress Billings: Written notice to the original contractor on or before the 15^th day of the second month following each month in which labor was done or materials delivered. A copy of the statement sent to the subcontractor will suffice. Additional notice, in the form set forth above, to the original contractor and the surety on or before the 15^th day of the third month following each month in which all or part of the claimed labor was performed or materials were furnished as set forth above.

Required Notice and Time for Second-Tier Subcontractors and Materialmen for Specially Fabricated Material: Notice to original contractor on or before the 15^th day of the second month after the receipt and acceptance of an order for a specially fabricated item stating that such order has been received and accepted.

Required Notice and Time for First and Second-Tier Subcontractors and Materialmen for Retainage: Notice to the original contractor and surety of retainage claim on or before 90 days after completion of prime contract between original contractor and awarding authority. Notice should contain statement of the amount of the contract, the amount paid, if any, and the outstanding balance.

Additional Required Notice and Timing for Second-Tier Subcontractors and Materialmen for Retainage: Notice to the original contractor of terms of agreement to withhold retainage not later than the 15^th day of the second month following the first month in which labor was performed or materials were delivered following agreement to withhold retainage. Notice must indicate generally the nature of the retainage. If this notice not sent, suggest sending periodic notice(s) of unpaid retainage as set forth above for unpaid progress billings. Additional notice in the form set forth above on or before 90 days after completion of original contract between original contractor and awarding authority as set forth above.

Special Warning: All notices must be sent via certified or registered mail. Unclear if additional notice of claim for specially fabricated material must be sent by any claimant if specially fabricated materials never delivered to the project but conservative approach would be to send additional notice in the form for unpaid progress billings and retainage.

Lien Affidavit Filing: No lien allowed on public buildings or property.

Suit Filing: Suit must be filed not less than 60 days after notice is given and no later than one year after the date of filing the claim.

Contractual Waivers: Rights to assert bond claims may be waived in a written agreement prior to or during the course of construction. Pay-if-paid clauses will affect the enforceability of a bond claim if payment does not occur.

Waivers After Commencement of Work: Rights may be waived in a written agreement and do not have to be conditioned upon payment. Special care should be exercised to preserve rights for unpaid progress billings, retainage, unbilled extra work and disputed claims when signing any partial release.

¹ For public works contracts not exceeding $25,000, see Subchapter J, Chapter 53, Texas Property Code for requirements to perfect lien on money due to public works contractor.