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Texas Mechanic's Lien


UNDERSTANDING THE MECHANIC’S LIENS


Constitutional v. Statutory Lien

Texas’ mechanic’s and materialman’s lien offers contractors providing labor and/or materials (including “Roll-Offs”) under a written agreement certain protections aimed at securing payment obligations. The mechanic’s lien provided by the Texas Constitution (i.e., constitutional mechanic’s lien) is a “self-executing” lien. In other words, the constitutional lien generally does not require contractors to take any additional steps beyond furnishing labor or materials directly to the property owner to perfect their lien interest. 


However, the mechanic’s lien provided by the Texas Property Code (i.e., statutory mechanic’s lien) offers far better protections and an increased likelihood of securing payment for the contracted services. Generally, a statutory mechanic’s lien requires:

  1. Notices given to the property owner and, if applicable, the original contractor before filing a lien claim;

  2. A mechanic’s lien affidavit to be timely recorded for the lien to be enforceable; and 

  3. If the claim is not paid, the claimant to timely file suit. 


For all intents and purposes, this guide focuses on the statutory mechanic’s lien for private projects. For public projects, see the “Public Projects” section below.


Categories of Claimants

The procedures for perfecting a mechanic’s lien depend on the claimant’s relationship with the property owner. An original contractor is defined as “a person contracting with an owner either directly or through the owner’s agent.” A subcontractor is defined as “a person who has furnished labor or materials to fulfill an obligation to an original contractor or to a subcontractor to perform all or part of the work required by an original contract.” First-tier subcontractors are those subcontractors having an agreement with the original contractor. Conversely, second-tier subcontractors and suppliers (and all lower tiers) do not have an agreement with the original contractor. Tex. Prop. Code §53.001(7), (13).



NOTICE REQUIREMENTS

Proper Notice (All Claimants)

Any notice or other written communication may be delivered in person to the party entitled to the notice or to that party's agent, regardless of the manner prescribed by law. If notice is sent by registered or certified mail, deposit or mailing of the notice in the United States mail in the form required constitutes compliance with the notice requirement. Tex. Prop. Code §53.003(b), (d). For notice and filing deadlines.


Notice of Contractual Retainage Agreement

A notice of contractual retainage should be sent to all parties who may be potentially liable for the payment of retainage (e.g., property owner, original contractor, first-tier contractor). After receipt, such parties will be on notice to withhold the appropriate retainage. This notice must be sent no later than the earlier of: (i) the 30th day after the date the claimant's agreement providing for retainage is completed, terminated, or abandoned; or (ii) the 30th day after the date the original contract is terminated or abandoned.


The notice must general state (i) the existence of the requirement for retainage, (ii) the name and address of the claimant, and (iii) if the agreement is with a subcontractor, the name and address of the subcontractor. The notice must be sent to the last known business or residence address of the property owner or the original contractor, as applicable. Tex. Prop. Code §53.057(a)-(d).


Notice Before Filing a Lien Affidavit

A mechanic’s lien affidavit, which (when properly filed) establishes a mechanic’s lien, carries certain notice requirements before AND after its filing. These notices differ depending on the category of the claimant. 

Original Contractor: An original contractor is not required to send a notice before filing a mechanic’s lien affidavit; the only notice required is the notice that must be sent after filing the lien affidavit. 


First-Tier Subcontractors: First-Tier Subcontractors must send a letter by certified mail, return receipt requested, to the property owner and the original contractor informing them of the unpaid claim not later than the 15th day of the third calendar month following each month in which the services were performed. 

Second-Tier Subcontractors: Second-Tier Subcontractors and lower must send a letter by certified mail, return receipt requested, first to the original contractor informing them of the unpaid claim not later than the 15th day of the second calendar month following each month in which the services were performed, and secondly to the property owner AND the original contractor not later than the 15th day of the third calendar month following each month in which the services were performed.


A copy of the billing statement in its usual and customary form is sufficient as notice. However, when sending notice to the property owner, a subcontractor can authorize the owner to withhold funds by stating in the notice that if the claim remains unpaid, the owner may be personally liable and the owner's property may be subjected to a lien unless: (i) the owner withholds payments from the contractor for payment of the claim; or (ii) the claim is otherwise paid or settled (known as “fund-trapping”). Tex. Prop. Code §53.056.


Notice After Filing a Lien Affidavit

After filing a lien affidavit, additional notices are required in order to perfect the mechanic’s lien. 


Original Contractor: The original contractor must send a copy of the lien affidavit by registered or certified mail to the property owner at the last known business or residence address not later than 5 calendar days after the date the affidavit is filed with the county clerk. 


Subcontractors: The claimant must send a copy of the affidavit by registered or certified mail to: (1) the property owner at the owner’s last known business or residence address, and (2) to the original contractor at the original contractor’s last known business or residence address, not later than 5 calendar days after the date the affidavit is filed. Tex. Prop. Code §53.055.


MECHANIC’S LIEN AFFIDAVIT

Filing A Mechanic’s Lien Affidavit

The lien affidavit is the instrument used to claim a mechanic’s lien. It must be recorded in the property records by submitting the lien affidavit and recording fee to the county clerk of the county in which the property is located.


Non-Residential Projects: A claimant must file a mechanic’s lien affidavit with the county clerk of the county in which the property is located not later than the 15th day of the fourth calendar month after the day on which the indebtedness accrues.


Residential Projects: A claimant must file a mechanic’s lien affidavit with the county clerk of the county in which the property is located not later than the 15th day of the third calendar month after the day on which the indebtedness accrues. Tex. Prop. Code §53.052.


Accrual of Indebtedness

The day on which “the indebtedness accrues” differs depending on the category of the claimant. Indebtedness to an original contractor accrues: (i) on the last day of the month in which a written declaration by the original contractor or the owner is received by the other party stating that the original contract is terminated; or (ii) on the last day of the month in which the original contract has been completed, finally settled, or abandoned. Indebtedness to a subcontractor accrues on the last day of the last month in which the services were performed. Tex. Prop. Code §53.053(b)-(c).


Contents Of The Lien Affidavit

The mechanic’s lien affidavit must contain all of the statutory requirements in order to be valid and accepted. The lien affidavit must be signed by the person claiming the lien, or by another person on the claimant’s behalf, and must contain:

  • a sworn statement of the amount of the claim;

  • the name and last known address of the owner or reputed owner;

  • 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;

  • 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;

  • the name and last known address of the original contractor;

  • a description, legally sufficient for identification, of the property sought to be charged with the lien;

  • the claimant's name, mailing address, and, if different, physical address; and 

  • 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.

For an example of a mechanic’s lien affidavit containing the statutorily mandated information. The claimant may attach to the affidavit a copy of any applicable written agreement or contract and a copy of each notice sent to the owner and, if applicable, the original contractor. The affidavit is not required to set forth individual items of work performed or material furnished. Tex. Prop. Code §53.054(b)-(c).



ENFORCEMENT OF MECHANIC’S LIEN


Foreclosure of Mechanic’s Lien

After a claimant has complied with all notice and filing requirements, the statutory mechanic’s lien is perfected. A contractor may enforce a perfected mechanic’s lien against a private construction project by filing a lawsuit seeking the foreclosure of the lien. Once filed, it is in the court’s sole discretion whether to foreclose on the lien. 

The judgment entered in such a proceeding shall foreclose the lien and order the sale of the property subject to that lien. However, the perfection of a mechanic’s lien does not guarantee a claimant payment. Instead, it improves the claimant’s chances of payment and gives him a right to a share of any funds available or that should be available to pay mechanic’s lien claimants after the foreclosure sale. Tex. Prop. Code §53.154.


Limitations to Filing Suit

There are two different time limitations by which a claimant must file suit to foreclose a mechanic’s lien. 


Non-Residential Private Projects: a claimant must file suit to foreclose the lien: (i) within 2 years after the last day the claimant could have filed the lien affidavit under the Texas Property Code, or (ii) within 1 year after completion, termination, or abandonment of the original contract under which the lien is claimed, whichever is later.

Residential Projects: a claimant must file suit to foreclose the lien: (i) within 1 year after the last day the claimant could have filed the lien affidavit under the Texas Property Code, or (ii) within 1 year after completion, termination, or abandonment of the original contract under which the lien is claimed, whichever is later. Tex. Prop. Code §53.158.


Release 

Once payment of the debt securing the lien is received, a lien release will need to be filed in the same property records that the original lien was filed. If you receive a written request to release the lien, you must file the release within 10 days from the date of receipt of the request. Finally, a copy of the release should be sent to the party who made the written release request. Tex. Prop. Code §53.152.



CONTRACT LANGUAGE AND INFORMATION

Service Contract Language

It is best practice to ensure that specific lien language exists before executing an agreement to deliver labor and/or materials. Although the lack of lien language in an agreement does not prevent a contractor’s ability to bring a mechanic’s lien claim in the future, the presence of lien language serves as preliminary notice of the contractor’s rights to seek a mechanic’s lien for nonpayment. Suggested mechanic’s lien language is given below. 


“In the event of nonpayment, [NAME] reserves the right to seek all protections provided under the Texas Property Code, including filing a mechanic’s lien against the property to which services are to be rendered.”


Requesting Information

Another important right afforded to contractors under the Texas Property Code is the right to information about the project. Once an agreement to provide services is executed, contractors may request certain information from the property owner and all parties above them in the contracting chain. The information that may be requested differs depending upon the category of the party to which the request is made.

The request for such information should state that the Texas Property Code requires a response within 10 days of receipt of the request, and you may also wish to include a self-addressed, stamped envelope and check for reimbursement of reasonable expenses. While there is no deadline for requesting this information, every contractor will need this information to perfect a statutory mechanic’s lien claim. Delay may cause you to miss a mandatory deadline and result in forfeiture of lien rights. Tex. Prop. Code §53.159.


OTHER CONSIDERATIONS

Property Code Payment Bonds

Property Code Payment Bonds (“PCPB”) are payment bonds posted by an original contractor, only. When a valid PCPB has been filed, subcontractors cannot foreclose liens against the project, or file suits against the property owner; the PCPB is a subcontractor’s sole security in the event the contractor does not pay. The best way to perfect a claim against a PCPB is to follow the requirements for filing a lien against the project. Alternatively, a PCPB claim may be perfected by giving the required mechanic’s lien notices, BUT, rather than providing the standard notices to the property owner, such notices must instead be given to the bonding company.

The time limits for filing a lawsuit against a PCPB are strict. Suit may not be filed against the PCPB until 60 days after the claim is perfected. Also, a lawsuit on a bond claim must be brought within 12 months after the claim is perfected. Tex. Prop. Code §53.202.


Specially Fabricated Materials

Under Texas law, “specially fabricated material” denotes materials furnished in a specific project. In other words, a custom-made or made-to-order item that is unsuitable for use in another project. Given [NAME]’s current offerings, consideration of mechanic’s liens for “specially fabricated material” is not necessary. However, the notice and filing requirements are substantially the same. 


Homestead Property

If services are to be rendered on a homestead, the original contractor must first execute a written agreement setting forth all of the terms to which the labor and/or materials are to be provided. The contract must be signed by both spouses (if the owner is married) and must be filed with the county clerk of the county in which the homestead is located. Furthermore, all lien notices and the lien affidavit must contain the specific notice language applicable to homesteads in order to be effective. Tex. Prop. Code §53.254.



PUBLIC PROJECTS


Coverage

Government Code Chapter 2253 (formerly the McGregor Act) applies to “public building” or “public work” contracts between prime contractors and any governmental authority organized under the laws of the State of Texas. Be conscious of your role in a public project, as additional notices, carrying shorter time limits, are required of claimants that do not have a contract directly with the prime contractor.


Notice Requirements 

Not later than the 15th day of the third month following each month in which unpaid labor and/or materials was furnished, written notice of the claim and sworn statement of the account must be sent to the prime contractor and the prime contractor's bonding company. For Second-Tier Subcontractors, written notice of the unpaid balance must be sent to the prime contractor not later than the 15th day of the second month next following each month in which the services were delivered.


Enforcement

After the claim has been “perfected” (by giving required notices), the prime contractor and its bonding company are given a 60 day period to investigate and settle the claim before becoming subject to the filing of suit. The limitation to file suit is 1 year from the date the payment bond claim is filed.

 
 
 

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