On June 15, 2021, Gov. Greg Abbott signed into law House Bill 2237, introducing major changes to Chapter 53 of the Texas Property Code 1. These changes, which took effect on January 1, 2022, reflect new rules and regulations surrounding the filing of a Texas mechanics lien and all steps that come with it, including notice requirements and deadlines.
Filing a mechanics lien in Texas can be fairly complicated, especially with regard to protecting your lien rights. There are various pre-lien notice requirements that you must serve, and the rules and deadlines vary depending on your role in a project.
One of the most important pre-lien notices in Texas is a preliminary notice that goes by many names: monthly notice, notice of non-payment, fund-trapping notice, notice of intent to lien, etc.
Some of these names are used differently in other states. A typical notice of intent to lien, for example, is a document that is sent to inform an owner of a mechanics lien that is about to be filed. In Texas, however, a Notice of Intent to Lien can refer to a monthly preliminary notice that is sent to preserve one’s lien rights.
This guide will sort through the confusion and clarify the requirements for the Texas monthly notice, from the specific deadlines to best practices.
What is a Texas Notice of Intent to Lien?
Technically, a notice of intent to lien is a document that is served on a property owner to let them know that you are about to file a mechanics lien against their property. This document is not a legal requirement in Texas, which means that you may file a Texas mechanics lien without having to first notify an owner about this plan.
What is required in Texas, however, is a monthly preliminary notice that is also sometimes called a Notice of Intent to Lien. This monthly notice is served, not to announce your mechanics lien plans, but to let a property owner and/or a general contractor know that you are yet to receive payment for your work on a given month.
Note that different resources refer to the Texas monthly preliminary notice by different names. Some articles call it a fund-trapping notice or a notice of non-payment, while the Texas Property Code labels it “Notice to Owner or Original Contractor.”
All these names refer to the same thing. A Texas fund-trapping notice, monthly notice, or notice of non-payment is required to preserve your lien rights. This notice must also be served for every month that you perform work on a project and for which you are yet to get paid.
Which parties are required to send a Texas monthly fund-trapping notice?
The Texas monthly fund-trapping notice requirements apply to various construction parties depending on what kind of project they are working on.
Construction projects in Texas may be classified into three general types: public works, private residential projects, and private non-residential projects. General contractors for any of these three types are not required to serve a monthly fund-trapping notice.
For public works projects, first-tier subcontractors and material suppliers are also exempted. This means that only lower-tier subcontractors and materialmen are required to serve a monthly fund-trapping notice for federal projects.
For private residential and non-residential projects, first-tier and lower-tier subcontractors and material suppliers are all required to send a monthly fund-trapping notice.
What information should appear in a Texas monthly fund-trapping notice?
The following information should be included in your monthly fund-trapping notice:
- Name and address of the claimant
This is your information.
- Name(s) and address(es) of the property owner(s)
This is the information of the project’s owner.
- Name and address of the general contractor
This is the information of your general contractor.
- Name and address of the party who hired you
This is the information of the party with whom you have a direct contract (if different from the general contractor).
- General description of work performed
This is a statement that explains the kind of work that you have performed on the project.
- Location of the project
This location must be sufficient for identifying the location (e.g. legal description of property).
- Dates covered in the preliminary notice
These are the start and end dates that cover your preliminary notice (i.e. if it is for the month of March, and you worked the entire month, you may write March 1 to March 31).
- Amount or estimated amount owed to the claimant
This is a reasonable estimate of the unpaid amount for the work that you have done in the applicable month.
Who must receive a monthly fund-trapping notice in Texas?
The property owner and the general contractor are the two main recipients of a Texas monthly fund-trapping notice. Whatever your role on a project is, you are expected to hand a preliminary notice to both general contractor and property owner.
When should a Texas monthly fund-trapping notice be sent?
Previosly, discussing the Texas fund-trapping notice due dates is complicated. This is because your notice requirements – the deadlines and the frequency of sending them – depend on your role in the project and on the type of the project.
However, after HB 2377 came into effect starting January 1, 2022, the deadline for fund-trapping notices is simpler. The second month notice is no longer required. This means that all subcontractors and lower-tier parties only have to serve the third month notice to the property owner and the prime contractor by the 15th day of the third month after providing labor or materials to a project.2
While serving a second month notice is no longer a requirement, you are still highly encouraged to do so. Serving notices have other benefits other than preserving your lien rights. It states allows you to have open and consistent communication with higher-tier parties. It also lets you remain “visible” in a project, and it can help you get paid quicker.
What happens when the Texas monthly notice is sent late?
Late monthly notices are not accepted in Texas. Failing to serve a monthly notice by the required due date means forfeiting your rights to file a mechanics lien to claim payment for that specific month.
It goes without saying that you must serve your fund-trapping notice days before the deadline to avoid potential issues in preserving your lien rights.
How is a Texas monthly fund-trapping notice delivered?
The monthly fund-trapping notice in Texas must be delivered by certified or registered mail. You are also encouraged to get a return receipt requested option for your certified mail, just so you can confirm that your notice has been received. Effective 2022, written notices may also be served via “any other form of traceable, private delivery or mailing service that can confirm proof of receipt.”3
Keep in mind, however, that a notice is considered “served” at the time of mailing. It is still best practice to keep track of all your paperwork, including the documents that you send out. For instance, a faulty fund-trapping notice can actually be considered valid if you can prove that the notice has been officially “received” by an owner or a general contractor.
Other Texas Pre-lien Notices
There are other pre-lien notices in Texas that are not the same as the monthly notice or the fund-trapping notice.
Residential Disclosure Notice
This notice applies to general contractors for residential projects. It is a disclosure statement that includes the general contractor’s rights and responsibilities, and its contents must be substantially similar to what is specified in Texas Property Code Sec. 52.255.
This disclosure notice must be sent by a general contractor to a property owner prior to executing a contract for a residential construction project.
Notice of Contractual Retainage
This notice applies to all potential lien claimants against a contract retainage. It is a simple document that contains the name and address of the claimant and the name and address of the subcontractor (if the retainage agreement is with a subcontractor). It must also state the existence of a requirement for retainage.
Starting 2022, this notice must be served on the property owner (and on the subcontractor, if the retainage agreement is with a subcontractor) on the 15th day of the third month after the completion, termination, abandonment of a project.4
Best practices when sending Texas pre-lien notices
1. Know which pre-lien notices apply to you
There are quite a number of pre-lien notices that may or may not apply to you. Knowing which ones are necessary to preserve your lien rights is key to ensuring that you are not forfeiting the option of filing a mechanics lien.
If you are a general contractor, you may not be required to file a 3rd month notice but there are other notices like the Residential Disclosure Statement that you may have to submit. Understanding the requirements that fit your role and the type of project you are working on is very important.
2. Know when to file the required pre-lien notices
Preserving your lien rights lies primarily in serving the required notices properly and on time. Note that late submissions are not accepted in Texas, which means that once you miss a deadline, there is no way to gain your lien rights back.
It is very important to serve your fund-trapping notices in Texas as early as possible. Waiting until the final due date before serving your notice is a bad idea – you may end up filling your notice with inaccurate information, and things can happen that could hinder you from mailing it on time.
3. Keep track of all your paperwork
Streamlining your paperwork is key to ensuring that all the information you need is ready. Since you are required to file a monthly fund-trapping notice in Texas, it will be very helpful if you have an organized record of all your invoices for each month.
The invoices will help in knowing the amount that you may need to recover from a delinquent client in a given month. Other than the invoices, keeping track of your shipping and delivery schedules, mailing receipts, and other documentation will greatly help you run a good and efficient business.
Further reading
- Property code Chapter 53. Mechanic’s, contractor’s, or materialman’s lien. (n.d.). Texas Constitution and Statutes. https://statutes.capitol.texas.gov/Docs/PR/htm/PR.53.htm
- Property code Chapter 53. Mechanic’s, contractor’s, or materialman’s lien. (n.d.). Texas Constitution and Statutes. https://statutes.capitol.texas.gov/Docs/PR/htm/PR.53.htm
- Property code Chapter 53. Mechanic’s, contractor’s, or materialman’s lien. (n.d.). Texas Constitution and Statutes. https://statutes.capitol.texas.gov/Docs/PR/htm/PR.53.htm
- Property code Chapter 53. Mechanic’s, contractor’s, or materialman’s lien. (n.d.). Texas Constitution and Statutes. https://statutes.capitol.texas.gov/Docs/PR/htm/PR.53.htm