Texas has fairly complicated rules when it comes to filing mechanics and materialmen’s liens. There are different requirements depending on the type of project you are working on, and there are also regulations that may only apply to certain construction parties.
This guide seeks to answer some of the fundamental questions that you may have about the Texas mechanics and materialmen’s lien. If you are a construction professional working in Texas, it is in your best interest to understand the different rules and regulations that apply to you.
What is a Texas mechanics lien?
Liens are a kind of security interest that is placed over a property in order to settle a debt or obligation that relates to such property. A mechanics lien is a specific type of lien that is exclusive to the construction industry.
A mechanics lien’s main purpose is for qualified construction parties to have a so-called “hold” over a property so they can get rightfully paid for their work. It is attached to a property’s records so potential buyers and financiers can see that the property has outstanding financial obligations. This limits a property’s market value and encourages property owners to settle the debts and have the lien removed.
Is there a difference between a mechanics lien and a materialmen’s lien in Texas?
No, not really. Texas Property Code Chapter 53 details all requirements for “Mechanic’s, Contractor’s, or Materialmen’s Lien.” The general provisions for all three statutory liens are the same.
The variations in Texas lien rules are based not necessarily on whether someone is a contractor or a materialman, but more on the type of project that they are working on (e.g. residential vs. non-residential) and their relationship with other construction stakeholders (e.g. first-tier material supplier vs. sub-sub-subcontractor).
Generally, however, a mechanics lien and a materialmen’s lien are the same legal document that a qualified party may file in order to get paid.
Who may file a mechanics and materialmen’s lien in Texas?
The Texas Property Code states that any party who “labors, specially fabricates material, or furnishes labor or materials for construction or repair” of a property has a right to file a mechanics or materialmen’s lien. This includes general contractors, subcontractors, material suppliers, engineers, architects, and other construction professionals.
Note that a lien generally only applies to houses, buildings, and fixtures. Mechanics and materialmen’s liens do not cover construction work performed on sidewalks, streets, and utilities that are considered public property.
Texas Preliminary Notices
Texas has various notice requirements for their construction professionals. The most common and arguably most important among them is the fund-trapping notice, also know as a notice of intent to lien or a monthly notice.
The rules for serving a fund-trapping notice vary depending on your role in a project. General contractors are not required to submit this pre-lien notice in Texas, while first-tier and lower-tier contractors and materialmen must serve this notice no later than the 15th day of each required month.
The deadline falls every 15th day of the 2nd or 3rd month following each month of performing work on a project. Depending on your role, you may either be required to serve a 2nd month notice or a 3rd month notice or both.
Failing to send the required pre-lien notices to the property owner and the general contractor automatically revokes your lien rights, so make sure that you comply with this requirement diligently.
Other Texas pre-lien notices include the Residential Disclosure Notice, which is required for general contractors working on residential projects; the Notice of Contractual Retainage, which applies to all potential lien claimants against a contractual retainage; and the Specially Fabricated Materials Notice, which must be served by construction parties who specially fabricate materials for a project.
Do all Texas mechanics liens have notice requirements?
No, not all Texas mechanics or materialmen’s liens have notice requirements. Texas actually has a constitutional mechanics lien that is automatic and self-executory, which means that it may be enforced without having to file an actual lien.
Texas Constitutional Lien
A Texas constitutional lien is a self-executory lien that applies to all construction parties that:
i. have a direct contract with a property owner,
ii. have made or repaired a building or a fixture (i.e. not a roadside or a public utility), and
iii. have supplied materials or goods that were incorporated into a project.
Constitutional liens in Texas apply to parties that are not necessarily general contractors. Electricians, plumbers, material suppliers, and equipment lessors may have constitutional liens as long as they are in direct contact with an owner.
How is a Texas Constitutional Lien different from a regular statutory mechanics and materialmen’s lien?
A constitutional lien in Texas is self-executory, which means that parties who are entitled to it are not mandated to serve any pre-lien notices or to file an affidavit of lien. Property owners are expected to know if these parties have not been paid, so they are also expected to settle outstanding debts without needing to receive fund-trapping notices.
Note that the rules and provisions listed in the Texas Property Code, from the notice deadlines to enforcement requirements, apply to regular statutory mechanics and materialmen’s liens.
What are the advantages and disadvantages of a Texas Constitutional Lien?
A Texas Constitutional Lien is good because it is automatic and self-executory. You do not have to serve pre-lien notices and you do not need to file an affidavit of lien in the local county recorder’s office. If you do not get paid, all you have to do is enforce your lien by filing a foreclosure lawsuit.
However, a Texas Constitutional Lien is limited only to those who are in a direct contractual relationship with a property owner. It is essentially useless for subcontractors and lower-tier materialmen who typically work under a general contractor.
For most construction participants in Texas, a regular statutory mechanics and materialmen’s lien is still the best way to recover payment from a delinquent client.
How to file a mechanics and materialmen’s lien in Texas
1. Record an Affidavit of Lien
2. Enforce your mechanics lien
1. Record an Affidavit of Lien
Filing an Affidavit of Lien in Texas is equivalent to recording the mechanics or materialmen’s lien itself. This implies that you must prepare an Affidavit of Lien form which must include all the required information.
According to Sec. 53.054 of the Property Code, the following details must be in your Texas Affidavit of Lien:
(1) a sworn statement of the amount of the claim;
(2) the name and last known address of the owner or reputed owner;
(3) a general statement of the kind of work done and materials furnished by the claimant and, for a claimant other than an original contractor, a statement of each month in which the work was done and materials furnished for which payment is requested;
(4) the name and last known address of the person by whom the claimant was employed or to whom the claimant furnished the materials or labor;
(5) the name and last known address of the original contractor;
(6) a description, legally sufficient for identification, of the property sought to be charged with the lien;
(7) the claimant’s name, mailing address, and, if different, physical address; and
(8) for a claimant other than an original contractor, a statement identifying the date each notice of the claim was sent to the owner and the method by which the notice was sent.
When must you record the Texas Affidavit of Lien?
For general contractors working on non-residential projects, a mechanics lien must be filed no later than the 15th day of the fourth month after the day when the debt starts to accrue. According to Texas rules, debt starts to accrue on:
(1) the last day of the month in which a written declaration by the original contractor or the owner is received by the other party to the original contract stating that the original contract has been terminated; or
(2) the last day of the month in which the original contract has been completed, finally settled, or abandoned.
For general contractors working on residential projects, a mechanics lien must be filed no later than the 15th day of the third month following the day when debt starts to accrue.
Note that even if general contractors have a direct contract with a property owner and have a constitutional lien automatically applied to them, they are still encouraged to file a mechanics lien if there is a payment dispute. Filing a mechanics lien is relatively less costly than pursuing a foreclosure lawsuit.
For subcontractors, materialmen and other construction parties working on non-residential projects, the filing deadline is on the 15th day of the fourth month following the day when debt starts to accumulate.
For those working on residential projects, the deadline is shorted by a month, so it falls on the 15th day on the 3rd month following the day of debt accrual.
Where do you record a Texas mechanics or materialmen’s lien?
You must record a Texas mechanics lien in the local country recorder’s office where your project is located.
2. Enforce your mechanics lien
If a client still has not produced payment after you have recorded a mechanics lien against their property, you must enforce the lien by initiating a foreclosure lawsuit. By enforcing a lien, you may be able to recover payment from the proceeds of the auctioned property.
Note that a Texas mechanics or materialmen’s lien must be enforced within a certain period of time. Liens are not effective forever, and they must be perfected before they expire.
A mechanics lien for residential projects is valid only for one year or within a year after the completion of work, whichever is later. A mechanics lien for non-residential projects, on the other hand, is valid for two years.
Best Practices When Filing a Mechanics and Materialmen’s Lien in Texas
1. Stay on top of the notice deadlines.
Serving the pre-lien notices is arguably one of the most important steps that you must do in order to protect your lien rights. Failure to serve the required pre-lien notices properly and on time will result in the revocation of your right to file a Texas mechanics or materialmen’s lien.
You are encouraged to serve the required notices way before the deadline. Prepare your pre-lien notice forms as early as possible by keeping track of your paid and unpaid invoices. If your bookkeeping records are organized, you should not have any trouble preparing and serving you fund-trapping notices.
2. Prepare and file an affidavit of lien, even if not required.
Construction professionals who qualify for an automatic constitutional lien may be tempted to just skip the filing process and go straight to the foreclosure lawsuit when payment disputes arise. However, filing a mechanics lien the regular way still has its advantages.
For one, a constitutional lien may not be claimed against a judicious client who may be acting in good faith and is simply not aware of the payment concern. A constitutional lien also has lower priority over a regular statutory lien in some courts, and filing a lawsuit is more expensive that recording an affidavit of lien.
Recording a mechanics lien by preparing and filing an Affidavit of Lien is still, therefore, a more effective way of recovering payment from a delinquent client.
3. Ensure that you are claiming an accurate and a reasonable amount.
When preparing your Affidavit of Lien or any other lien-related affidavits, always make sure that you include an accurate amount for the debt that you are claiming. Other pieces of information, including dates and descriptions, must also be written as accurately as possible.
Making false claims “intentionally, knowingly, and recklessly” is considered a misdemeanor offense in Texas. You may be punished by a fine of $4,000 or confinement in jail, so always take the extra mile in ensuring and verifying the accuracy of your documents.