Filing a mechanics lien is a legal right exclusive to the construction industry. However, the right to file a mechanics lien to recover payment is applicable only to private construction projects. For public projects, construction participants may recover payment from delinquent clients by making a construction bond claim.
In Texas, certain construction participants have to serve a monthly preliminary notice in order for their construction bond claims to take effect. This guide explains everything you need to know about filing the Texas monthly notice in relation to construction bond claims for publicly funded projects.
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- Who must serve a Texas monthly notice for public projects?
- When must you serve Texas monthly notices for public projects?
- Consequences of failing to serve a monthly notice for Texas public projects
- How to serve a Texas monthly notice in relation to construction bond claims
- Best practices when serving a Texas monthly notice
Who must serve a Texas monthly notice for public projects?
For public projects, all construction participants who have no direct contractual relationship to the general contractor are required to serve a monthly notice.
The general contractor is typically the party who has furnished the bond claim. Therefore, they are responsible for making sure that lower-tier parties are properly compensated.
Subcontractors and material suppliers who do not have a direct contract with the prime or general contractor must then notify them of an outstanding payment via a monthly notice to essentially warn them of a possible construction bond claim.
Keep in mind that laborers who only have claims for their wages are exempted from having to file the monthly notice.
When must you serve Texas monthly notices for public projects?
Texas monthly notices are served every 15th day of the second month following each month a construction party furnished labor/materials and was not compensated for their work. Note that this preliminary notice applies to each month when you render your services but do not get fully paid for those services.
If, for example, you worked on a government project in January, you have to serve a notice by March 15, assuming that your employer has still not paid you for your January services. This requirement applies to every succeeding month that you work on the project and for which there is an outstanding payment.
It is important to note that if the 15th day of the second month lands on a weekend (Saturday or Sunday) or a statutory holiday, you have to serve your notice earlier. Say, for instance, that March 15 falls on a Sunday, make sure that you serve your notice by March 13, which is a Friday.
Consequences of failing to serve a monthly notice for Texas public projects
If you are one of the parties required to serve monthly notices and you do not serve a valid notice on time, chances are your bond claim for that specific month will not be awarded. You may, therefore, end up not getting paid for the services that you furnished to the project.
Always remember that failing to serve a monthly notice can be fatal to your construction bond claim, so make sure that you fulfill this requirement diligently.
How to serve a Texas monthly notice in relation to construction bond claims
1. Prepare the Texas monthly notice form
Texas has no prescribed template for the monthly notice in relation to construction bond claims. In general, your monthly notice must have the following information:
- Your name and address
- The name and address of the general contractor
- The name and address of the party who hired you
- The location of the project (e.g. street address, legal property description)
- A description of the services that you furnished during that specific month
- The amount of the outstanding payment
- The month or months for which your services have not been paid in full
As with any construction document, make sure that you verify the accuracy of the information that you include in your monthly notice. The amount must always be a reasonable estimate of the payment that you are yet to receive. Do not try to pad the amount just so you can recover more money as doing so may subject you to fines and penalties.
2. Deliver the Texas monthly notice to the general contractor
Once your Texas monthly notice form is all complete, serve the document on the general contractor via certified mail with return receipt requested or via registered mail.
Again, it is very important to take note of the applicable deadline. Missing the deadline for a specific month may invalidate your potential construction bond claim for that month.
Best practices when serving a Texas monthly notice
1. Use a template for your Texas monthly notice form
For recurring Texas monthly notice requirements, it is best practice to use a template and to simply update the applicable information. All the basic details should be the same for every project except the outstanding balance or payment for each month. If you have a good template to work with, keep that template and make sure that all the information written on it is accurate.
2. Follow a regular schedule
Because the Texas monthly notice is a recurring notice requirement even for public projects, it is best to keep a regular schedule when serving one. Serving a notice on the first day of each month is a good business practice as you do not risk the chance of missing the monthly deadline. You may also match the schedule with the day you send out your invoice if you issue your invoices monthly.
The idea is to keep a regular schedule that minimizes the risk of failing to serve the Texas monthly notice completely. Remember that not serving a valid notice is fatal to your potential payment claim via the general contractors’ construction bond.
3. Do not forget to serve the actual bond claim
It is very important to remember that the monthly notice is not the same as the bond claim. The notice simply sends a notification to the general contractor telling them that you have unpaid balance for a certain month.
If you want to recover the payment for that month, you have to serve the bond claim by the 15th day of the third month following the month when you furnished the unpaid services.