On any construction site or project, there are a lot of moving parts. Projects can quickly fall to pieces when parties aren’t properly paid. Luckily, by filing a mechanic’s lien, you can obtain rightful paychecks and hold clients accountable with the backing of Texas law.
What Is a Mechanic’s Lien?
Liens are used when one party fails to complete the terms of an agreement with another party. Typically, a lien may be placed against a homeowner who misses too many mortgage payments.
In construction, mechanic’s liens are used to secure payment from clients who have not honored their payment obligations to a construction provider.
Mechanic’s liens are the most powerful legal tool contractors and other parties in the construction industry can use. Unfortunately, they can be very complicated and must be filed correctly. Without professional guidance from an attorney, you could render the lien invalid and be unable to obtain your payment.
Fortunately, mechanic’s liens are given higher priority for payment in the event the client goes bankrupt or experiences foreclosure. These liens can be used to recoup expenses related to both materials and labor costs.
Who Can File A Mechanic’s Lien In Texas?
In Texas, Property Code Chapter 53 allows for three different types of parties to file mechanic’s liens. These include:
- Any party who furnishes labor or materials
- Parties who fabricate specialty materials
- Design professionals
With such a broad categorization, everyone from contractors to architects has the ability to file a mechanic’s lien if their work or materials go unpaid.
Additionally, in Texas, there is no legal distinction between a contractor and a subcontractor when it comes to legal authority to file a lien. While there are some differences between general contractors and subcontractors in the filing process, they both have the right to seek payment from a client who has defaulted on the agreement.
Mechanic’s liens can be filed for work done on both commercial and private properties. Tasks including providing lumber, making custom cabinets, repairing a roof, painting, rental equipment, and labor can all be protected from nonpayment by a mechanic’s lien.
What’s the Process for Filing a Mechanic’s Lien in Texas?
When a client fails to pay, contractors can file a Notice of Lien with the county clerk’s office where the property is located. This opens the door for the contractor to foreclose on the property if needed, to secure their payment. However, it’s not as simple as filling out a form.
In Texas, subcontractors and suppliers with a written contract must provide a pre-lien notice after a designated period has passed with no payment. Failure to follow the smallest procedure can leave contractors and others without the legal might of a lien to obtain rightful payment. Because of this, it is incredibly important that anyone seeking to file a mechanic’s lien do so with the help of an experienced construction lawyer. General contractors are not subject to this pre-lien notice requirement but should still speak with a legal professional.
A mechanic’s lien should be filed within four months of when the job was finished or when work stopped. If filed any later, the lien could become unenforceable. Once the lien is filed, it will be given priority for payment based on its status and the date it was filed. Generally, higher priority is assigned to those who hold a contract with the non-paying party. This is why it’s important to take action promptly and correctly to maximize the ability to collect what you are owed.
What Is a Trapping Notice?
A trapping notice is essentially the same as a pre-lien notice. It’s given the name because it establishes a claim on the amount of payment you need from the client. You are “trapping” funds so you can receive them in the event of foreclosure. Trapping or pre-lien notices must be delivered in person to the recipient or by another method that supplies proof of receipt.
Again, general contractors are not subject to this requirement. Instead, they can file a constitutional mechanic’s lien, which is self-executing.
What Makes a Lien Enforceable?
In order for a lien to be valid and enforceable, certain procedures must be followed, such as filing a pre-lien notice and filing on time. However, you can strengthen the importance of your mechanic’s lien by taking steps before beginning work to ensure your contract is valid. While verbal agreements are enforceable in Texas, the law gives more credence to those put in writing.
Contracts are most binding when they include these crucial elements:
- A clear statement of the exchange of goods and services for payment
- That all parties are of sound mind and entering into the contract without force
- An indication that both parties agree to the contract terms, usually by providing their signatures
Having a well-written contract can be the first step to giving your mechanic’s lien higher priority. It can also serve as a powerful negotiating tool when your client first misses payments. Directing their attention to the terms of the agreement through a letter from your attorney can often get things back on track.
Filing an Affidavit of the Lien
Finally, both general contractors and subcontractors must file an affidavit of the lien. This provides proof they filed a lien and will ensure their claim follows the property, even if it is sold. Prospective buyers will be informed of any outstanding liens against the location and must accept and honor any debts if they complete the purchase.
The affidavit must contain specific information to be fully effective. Your business litigation lawyer at Feldman & Feldman can ensure it is complete by working with you to include the following details:
- A sworn statement listing the value of the claim
- Name and last known address of the property owner
- Statement of the work performed and materials used, especially if they were specifically fabricated for the job
- For subcontractors, a listing of work and materials for each month where payment was not made
- Name and last known address of the individual employing the claimant or receiving the work and materials
- Name and last known address of the general contractor
- Legal description of the property against which the lien is being filed
- Your name and address as the claimant
- Dates of any pre-lien notices sent to the property owner and the method used to send them (for subcontractors)
Your attorney may advise you to include a copy of the written contract you had with the other party, along with a copy of any pre-lien notices you sent. You do not have to provide a full list of the individual tasks done or materials provided, although it may help in quantifying the value of your claim. The affidavit must be signed by any parties to your claim against the property owner.
Get Help with Your Mechanic’s Lien
The statutes surrounding this action must be carefully interpreted by an experienced commercial litigation lawyer. Without legal help, you risk invalidating the lien. Even if you have been in business for many years, the details surrounding successfully executing a mechanic’s lien are complicated. Every step must be followed at the correct time, or your claim could be denied. When you begin your business dealings with a qualified contract and business litigation attorney at your side, you have a better chance of avoiding unwanted lien actions. You also have less worry when you are forced to file a mechanic’s lien.
At Feldman & Feldman, we have extensive experience working with the unique legal issues in the construction industry. Our team of Houston business law attorneys has built a powerful reputation for standing up for the rights of business owners and protecting them from those who fail to uphold their end of contracts and deals.
Our lawyers are comfortable managing cases for both plaintiffs and defendants in contract and tort matters and during appeals. We put our skills and training to work to achieve the best possible outcome in both state and federal courts, with jury and non-jury trials. If you have not been paid for your work or materials on a construction project, contact us today. We can help you file a mechanic’s lien and get you your rightful payment.