Q: What is a lien anyway?
A: A lien is right imposed by law allowing a person to sell property belonging to another if a debt related to the property is not paid. The property basically serves as collateral for the debt. There are contractual liens such as the mortgage on your home or the loan against your vehicle. There are liens imposed by law with mechanic’s liens being one of the most common. A mechanic’s lien is a powerful tool protecting those who provide and/or supply materials to a construction project even if you had no direct relationship with the owner of the property. Failure to take advantage of your mechanic’s lien rights is usually a regrettable mistake.
Q: Who can get a mechanic’s lien?
A: Generally, any contractor, subcontractor, laborer, mechanic, specialty fabricator, material supplier, architect, engineer, surveyor, demolisher or landscaper who has provided labor, materials, plans, plats, surveys, or landscaping to a construction project.
Q: What law controls mechanic’s liens?
A: Every state is different, but in Texas there are two basic types of mechanic’s liens, a constitutional lien and a statutory lien. The constitutional lien has been around for more than a hundred years and cannot easily be changed. The statutory mechanic’s lien laws are written by the Texas legislature in the Texas Property Code, and these laws are constantly evolving.
Q: What do I have to do to take advantage of the mechanic’s lien laws?
A: Providing proper notice of your claim is critical to obtaining a valid lien. The sooner you provide the notice, the more likely it is that you will get paid.
Although a constitutional mechanic’s lien claim has no specified deadlines and is generally created when you perform the work or supply the materials, it is essential to file a lien affidavit quickly to prevent a subsequent buyer or lender from cutting off your lien.
To perfect or create a statutory lien, not only must you send notices to various parties, but you must also file a lien affidavit with the county, and all of this must be done within specific time limits.
If you aren’t sure of what actions are required and how to perform them properly, I highly recommend contacting an experienced construction lawyer for advice. If you contact us, we will give you the advice you need for free!
Q: Do I need a written contract to get a mechanic’s lien?
A: It depends on the nature of the project and what kind of contractor/subcontractor you are. All residential projects require written contracts no matter what. And according to the Texas Property Code, architects, engineers, surveyors, demolishers and landscapers also require written contracts. All others generally do not have to have a written contract.
Q: After sending a demand letter, can I accept an offer from the property owner to pay my claim in full?
A: Once you’ve hired an attorney, I would not recommend accepting an offer to pay only the amount of your claim, since your attorney can also recover costs, interest, and attorney’s fees. If you accept the offer you will waive your right to collect any of these additional amounts, and will have to pay your attorney out of your own pocket.
Q: How do I enforce my mechanic’s lien?
A: If sending notices, filing affidavits and sending demand letters does not get you paid, your attorney must file a lawsuit to foreclose the lien. But beware! Most attorneys will charge you a significant hourly fee, or a significant percentage of your claim to represent you. That’s how they make a living. If we represent you, we make the other side pay all of our attorney’s fees. That’s how we make a living.
Q: Can a contractor have a mechanic’s lien without filing an affidavit?
A: Article 16 of the Texas Constitution provides that if you are an original contractor – that is, you have a contract directly with the property owner – the work that you complete in a workmanlike manner will automatically be secured by a constitutional mechanics’ and materialmen’s lien, without any requirement of filing an affidavit or notice.
However, it is highly recommended that even an original contractor file a lien affidavit as soon as possible after the work is completed to protect his or her lien from being cut off by a bona fide purchaser or lender. If someone without knowledge of your lien buys the property, for example, your lien against the property will be lost.
Q: How long can I wait before a lawsuit is filed?
A: I recommend filing your lawsuit as soon as possible after sending a demand. But certainly not longer than two years from the last day you could have filed your lien affidavit.
Q: For a claim less than $10,000, can I just file in justice court and save the attorney’s fees?
A: You could file suit against the party with whom you contracted, but note that a justice court does not have the power to issue an order of foreclosure. You can only obtain a money judgment which may prove difficult to collect. In addition, since in almost every case, we are able to recover the full extent of our attorney’s fees from the party we are suing, and we use those fees to refund to you any attorney’s fees you may have paid to us, you wouldn’t actually be saving anything by trying to handle the case on your own.
Q: How long will it take to collect my mechanic’s lien claim?
A: It varies, but generally ranges from less than thirty days up to as long as a year, but remember, your claim may earn interest at a rate of 18% per year.
Q: Can I recover interest on my claim?
A: If you contracted with the owner or the owner’s agent, normally you can recover interest at the rate of one and one-half percent per month (18% annually) starting the thirty-sixth day after your claim was submitted for payment. If you did not contract with the owner, unfortunately you can only recover interest from the party with whom you contracted.
Q: What is retainage?
A: There can be two forms of retainage, statutory retainage and contractual retainage.
The Texas Property Code requires all property owners to retain ten percent of the contract price for thirty days after the project ends. This is statutory retainage and it is mandatory. It is designed to provide a fund for all lien claimants. There are different notice and affidavit filing requirements to allow you participate in the statutory retainage.
Contractual retainage can be set forth in a contract between the claimant and some other party other than the property owner allowing a portion of what is due you to be withheld for some period after your work is complete. If your contract contains contractual retainage language, you must give notices to protect your right to recover the retainage.
Q: Do I have to sign an unconditional release of my claim before I can receive payment?
A: No, in fact the Texas Property Code was recently changed to deal with this issue. No waiver or release is valid unless it is conditional and complies with the form provided in the Texas Property Code. We can assist you in getting the proper form signed in exchange for payment.
Q: I have a claim for materials specifically designed for a particular project. Can I recover for work I performed even though the materials were never delivered?
A: Yes, you have specially fabricated materials. Provided you give proper timely notices and timely file your lien affidavit, you will have a valid mechanic’s lien, but note that the notice requirements are different for these type materials.
Q: Where can I get the information I need to send notices to the proper parties?
A: The Texas Property Code provides methods to request the necessary information, but you should feel free to contact our office and we'll be happy to assist you in getting your notices out on time.
Q: Why not use an online notice-filing site – they’re cheap and fairly easy to use?
A: You might save a little money up front, but be sure to read the fine print. This is a typical disclaimer found on every single notice-filing site we checked:
“DISCLAIMER: [ online service ] makes no warranty, express or implied for the use of this website. In no event shall [online service] be liable to anyone for any problem, claim or loss arising out of the use of [online service]. [online service] is not engaged in practicing law nor does [online service] provide legal advice.”
So what if they make a mistake or fail to understand the precise requirements of Texas construction law? Then YOU LOSE!
Texas courts steadfastly hold that a lien notice which fails to substantially follow the requirements of the lien notice statutes counts as no notice at all. Even the Constitutional Lien of a general contractor will be lost to a bona fide purchaser if the notice the contractor filed fails in any way to conform to the notice requirements of the statutes.
In a canvas of 186 recent online affidavit and notice filings by out-of-state online filing services, a whopping 72% were found to be fatally defective! In most of these cases, the contractors and subcontractors had thereby most likely lost their liens and were now at the mercy of those with whom they had contracted.
At the Law Offices of T. Rick Frazier, we know Texas Construction Law! Check our site – we don’t have a disclaimer like the one those online services all use. We stand behind our clients from start to finish. And when we collect their claims, in addition to the full amount of the claims and the interest awarded by the court, we refund to our clients any attorney’s fees they may have paid us. So, in the end, the online notice-filing services don’t actually save any money after all.
Q: There is a payment bond on the project, how does that affect my claim?
A: Generally, it will not affect a properly perfected lien claim. A bonded project, whether, commercial, or state or federal public work, just means you can no longer file a lawsuit to foreclose a lien on the property. Your claim is shifted to recovery on the bond. The bonding statutes have their own notice requirements involving timely notice to the surety, but please be aware that the time limit for filing a lawsuit against the surety is much shorter than the time to file a foreclosure lawsuit.
Q: The mortgage lender has foreclosed on the property. Is there any chance to recover my claim?
A: We have had very good success in recovering claims for contractors and subcontractors even after a lender foreclosure. As long as your mechanics’ and materialmen’s lien has been properly perfected, we can use a number of mechanisms provided by the Texas Constitution, the Texas Property Code, and the great body of legal precedent to keep your lien alive and get you paid!
Q: Why isn’t the general contractor considered the owner’s agent for lien purposes?
A: Normally, a general or original contractor is not the owner’s agent because the original contractor acts independent of the owner. In other words, the owner contracts with the original contractor for a finished project, but the original contractor controls how the project is ultimately constructed. Under §53.026 of the Texas Property Code, the “sham contract” provision, the original contractor will be deemed the owner’s agent if (1) the owner can effectively control the original contractor; or (2) the original contractor can effectively control the owner; or (3) the contract was made without good faith intention that the original contractor perform the contract.
There are many situations where the owner merely uses an agent to have work performed. Management companies that manage apartment complexes or shopping centers are typically only agents for the owner. Each situation must be carefully examined to determine its true status.
Q: My contract has an arbitration clause in it. How does that work?
A: Arbitration is supposed to be an alternative dispute resolution mechanism that saves time and money. One or more persons are appointed as arbitrator who will decide your case. Many owners, original contractors and even some subcontractors require arbitration clauses in their contracts. First, arbitration prevents you from proceeding with foreclosure until the arbitration process has been concluded in your favor. Second, if you lose at arbitration, there is no effective way to appeal the decision.
In my experience, especially with claims less than $10,000, arbitrations are no more cost and time effective than actual trials, but if you are forced to agree to an arbitration clause, you may have no choice but to muddle through the process.
Q: What is the most important thing I should know to protect my claim?
A: Do not wait too long! Never rely on the promises of the parties with whom you are dealing. The sooner you comply with the perfection requirements, the better. Just remember, an early notice can be revoked and a quickly filed affidavit can be released, but if you you wait too long there may be no funds to pay you.