Private construction projects are governed by chapter 53 of the Texas Property Code. An original contractor is granted mechanic’s lien rights under both the Texas Property Code and the Texas Constitution, article XVI, section 37. A subcontractor, however, is completely dependent on the provisions of chapter 53 of the Texas Property Code. Chapter 53 establishes a procedure whereby claimants owed money for their materials or labor may “perfect” a claim against retainage and trapped payments in the property owner’s possession. If the procedures outlined in chapter 53 are properly followed, the claimant can also establish a lien against the owner’s property which can be judicially foreclosed upon to generate funds to pay the claim. Chapter 53 of the Texas Property Code provides in pertinent part as follows
Sec. 53.001. DEFINITIONS. In this chapter:
(1) “Contract price” means the cost to the owner for any part of construction or repair performed under an original contract.
(2) “Improvement” includes:
(A) abutting sidewalks and streets and utilities in or on those sidewalks and streets;
(B) clearing, grubbing, draining, or fencing of land;
(C) wells, cisterns, tanks, reservoirs, or artificial lakes or pools made for supplying or storing water;
(D) pumps, siphons, and windmills or other machinery or apparatuses used for raising water for stock, domestic use, or irrigation; and
(E) planting orchard trees, grubbing out orchards and replacing trees, and pruning of orchard trees.
(3) “Labor” means labor used in the direct prosecution of the work.
(4) “Material” means all or part of:
(A) the material, machinery, fixtures, or tools incorporated into the work, consumed in the direct prosecution of the work, or ordered and delivered for incorporation or consumption;
(B) rent at a reasonable rate and actual running repairs at a reasonable cost for construction equipment used or reasonably required and delivered for use in the direct prosecution of the work at the site of the construction or repair; or
(C) power, water, fuel, and lubricants consumed or ordered and delivered for consumption in the direct prosecution of the work.
(5) “Mechanic’s lien” means the lien provided by this chapter.
(6) “Original contract” means an agreement to which an owner is a party either directly or by implication of law.
(7) “Original contractor” means a person contracting with an owner either directly or through the owner’s agent.
(8) “Residence” means a single-family house, duplex, triplex, or quadruplex or a unit in a multiunit structure used for residential purposes that is:
(A) owned by one or more adult persons; and
(B) used or intended to be used as a dwelling by one of the owners.
(9) “Residential construction contract” means a contract between an owner and a contractor in which the contractor agrees to construct or repair the owner’s residence, including improvements appurtenant to the residence.
(10) “Residential construction project” means a project for the construction or repair of a new or existing residence, including improvements appurtenant to the residence, as provided by a residential construction contract.
(11) “Retainage” means an amount representing part of a contract payment that is not required to be paid to the claimant within the month following the month in which labor is performed, material is furnished, or specially fabricated material is delivered. The term does not include retainage under Subchapter E.
(12) “Specially fabricated material” means material fabricated for use as a component of the construction or repair so as to be reasonably unsuitable for use elsewhere.
(13) “Subcontractor” means 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.
(14) “Work” means any part of construction or repair performed under an original contract.
(15) “Completion” of an original contract means the actual completion of the work, including any extras or change orders reasonably required or contemplated under the original contract, other than warranty work or replacement or repair of the work performed under the contract
Sec. 53.002. MORE THAN ONE ORIGINAL CONTRACTOR. On any work there may be more than one original contractor for purposes of this chapter.
Sec. 53.003. NOTICES. (a) This section applies to notices required by Subchapters B through G and K.
(b) 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.
(c) 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. This subsection does not apply if the law requires receipt of the notice by the person to whom it is directed.
(d) If a written notice is received by the person entitled to receive it, the method by which the notice was delivered is immaterial
SUBCHAPTER B. PERSONS ENTITLED TO LIEN; SUBJECT PROPERTY
Sec. 53.021. PERSONS ENTITLED TO LIEN. (a) A person has a lien if:
(1) the person labors, specially fabricates material, or furnishes labor or materials for construction or repair in this state of:
(A) a house, building, or improvement;
(B) a levee or embankment to be erected for the reclamation of overflow land along a river or creek; or
(C) a railroad; and
(2) the person labors, specially fabricates the material, or furnishes the labor or materials under or by virtue of a contract with the owner or the owner’s agent, trustee, receiver, contractor, or subcontractor.
(b) A person who specially fabricates material has a lien even if the material is not delivered.
(c) An architect, engineer, or surveyor who prepares a plan or plat under or by virtue of a written contract with the owner or the owner’s agent, trustee, or receiver in connection with the actual or proposed design, construction, or repair of improvements on real property or the location of the boundaries of real property has a lien on the property.
(d) A person who provides labor, plant material, or other supplies for the installation of landscaping for a house, building, or improvement, including the construction of a retention pond, retaining wall, berm, irrigation system, fountain, or other similar installation, under or by virtue of a written contract with the owner or the owner’s agent, trustee, or receiver has a lien on the property.
(e) A person who performs labor as part of, or who furnishes labor or materials for, the demolition of a structure on real property under or by virtue of a written contract with the owner of the property or the owner’s agent, trustee, receiver, contractor, or subcontractor has a lien on the property.
Sec. 53.022. PROPERTY TO WHICH LIEN EXTENDS. (a) The lien extends to the house, building, fixtures, or improvements, the land reclaimed from overflow, or the railroad and all of its properties, and to each lot of land necessarily connected or reclaimed.
(b) The lien does not extend to abutting sidewalks, streets, and utilities that are public property.
(c) A lien against land in a city, town, or village extends to each lot on which the house, building, or improvement is situated or on which the labor was performed.
(d) A lien against land not in a city, town, or village extends to not more than 50 acres on which the house, building, or improvement is situated or on which the labor was performed.
Sec. 53.023. PAYMENT SECURED BY LIEN. The lien secures payment for:
(1) the labor done or material furnished for the construction or repair;
(2) the specially fabricated material, even if the material has not been delivered or incorporated into the construction or repair, less its fair salvage value; or
(3) the preparation of a plan or plat by an architect, engineer, or surveyor in accordance with Section 53.021(c).
Sec. 53.024. LIMITATION ON SUBCONTRACTOR'S LIEN. The amount of a lien claimed by a subcontractor may not exceed:
(1) an amount equal to the proportion of the total subcontract price that the sum of the labor performed, materials furnished, materials specially fabricated, reasonable overhead costs incurred, and proportionate profit margin bears to the total subcontract price; minus
(2) the sum of previous payments received by the claimant on the subcontract.
Sec. 53.025. LIMITATION ON ORDINARY RETAINAGE LIEN. A lien for retainage is valid only for the amount specified to be retained in the contract, including any amendments to the contract, between the claimant and the original contractor or between the claimant and a subcontractor.
SUBCHAPTER C. PROCEDURE FOR PERFECTING LIEN
Sec. 53.051. NECESSARY PROCEDURES. To perfect the lien, a person must comply with this subchapter.
Sec. 53.052. FILING OF AFFIDAVIT. (a) Except as provided by Subsection (b), the person claiming the lien must file an affidavit with the county clerk of the county in which the property is located or into which the railroad extends not later than the 15th day of the fourth calendar month after the day on which the indebtedness accrues.
(b) A person claiming a lien arising from a residential construction project must file an 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.
(c) The county clerk shall record the affidavit in records kept for that purpose and shall index and cross-index the affidavit in the names of the claimant, the original contractor, and the owner. Failure of the county clerk to properly record or index a filed affidavit does not invalidate the lien.
Sec. 53.054. CONTENTS OF AFFIDAVIT. (a) The affidavit must be signed by the person claiming the lien or by another person on the claimant's behalf and must contain substantially:
(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.
(b) 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.
(c) The affidavit is not required to set forth individual items of work done or material furnished or specially fabricated. The affidavit may use any abbreviations or symbols customary in the trade.
Sec. 53.055. NOTICE OF FILED AFFIDAVIT. (a) A person who files an affidavit must send a copy of the affidavit by registered or certified mail to the owner or reputed owner at the owner's last known business or residence address not later than the fifth day after the date the affidavit is filed with the county clerk.
(b) If the person is not an original contractor, the person must also send a copy of the affidavit to the original contractor at the original contractor’s last known business or residence address within the same period.
Sec. 53.056. DERIVATIVE CLAIMANT: NOTICE TO OWNER OR ORIGINAL CONTRACTOR. (a) Except as provided by Subchapter K, a claimant other than an original contractor must give the notice prescribed by this section for the lien to be valid.
(b) If the lien claim arises from a debt incurred by a subcontractor, the claimant must give to the original contractor written notice of the unpaid balance. The claimant must give the notice not later than the 15th day of the second month following each month in which all or part of the claimant’s labor was performed or material delivered. The claimant must give the same notice to the owner or reputed owner and the original contractor not later than the 15th day of the third month following each month in which all or part of the claimant’s labor was performed or material or specially fabricated material was delivered.
(c) If the lien claim arises from a debt incurred by the original contractor, the claimant must give notice to the owner or reputed owner, with a copy to the original contractor, in accordance with Subsection (b).
(d) To authorize the owner to withhold funds under Subchapter D, the notice to the owner must state that if the claim remains unpaid, the owner may be personally liable and the owner’s property may be subjected to a lien unless:
(1) the owner withholds payments from the contractor for payment of the claim; or
(2) the claim is otherwise paid or settled.
(e) The notice must be sent by registered or certified mail and must be addressed to the owner or reputed owner or the original contractor, as applicable, at his last known business or residence address.
(f) A copy of the statement or billing in the usual and customary form is sufficient as notice under this section.
Sec. 53.057. DERIVATIVE CLAIMANT: NOTICE FOR CONTRACTUAL RETAINAGE CLAIM. (a) A claimant may give notice under this section instead of or in addition to notice under Section 53.056 or 53.252 if the claimant is to labor, furnish labor or materials, or specially fabricate materials under an agreement with an original contractor or a subcontractor providing for retainage.
(b) The claimant must give the owner or reputed owner notice of the retainage agreement not later than the 15th day of the second month following the delivery of materials or the performance of labor by the claimant that first occurs after the claimant has agreed to the contractual retainage. If the agreement is with a subcontractor, the claimant must also give notice within that time to the original contractor.
(c) The notice must contain:
(1) the sum to be retained;
(2) the due date or dates, if known; and
(3) a general indication of the nature of the agreement.
(d) The notice must be sent by registered or certified mail to the last known business or residence address of the owner or reputed owner or the original contractor, as applicable.
(e) If a claimant gives notice under this section and Section 53.055 or, if the claim relates to a residential construction project, under this section and Section 53.252, the claimant is not required to give any other notice as to the retainage.
Sec. 53.083. PAYMENT TO CLAIMANT ON DEMAND. (a) The claimant may make written demand for payment of the claim to an owner authorized to withhold funds under this subchapter. The demand must give notice to the owner that all or part of the claim has accrued under Section 53.053 or is past due according to the agreement between the parties.
(b) The claimant must send a copy of the demand to the original contractor. The original contractor may give the owner written notice that the contractor intends to dispute the claim. The original contractor must give the notice not later than the 30th day after the day he receives the copy of the demand. If the original contractor does not give the owner timely notice, he is considered to have assented to the demand and the owner shall pay the claim.
(c) The claimant’s demand may accompany the original notice of nonpayment or of a past-due claim and may be stamped or written in legible form on the face of the notice.
(d) Unless the lien has been secured, the demand may not be made after expiration of the time within which the claimant may secure the lien for the claim.
Sec. 53.085. AFFIDAVIT REQUIRED. (a) Any person who furnishes labor or materials for the construction of improvements on real property shall, if requested and as a condition of payment for such labor or materials, provide to the requesting party, or the party's agent, an affidavit stating that the person has paid each of the person's subcontractors, laborers, or materialmen in full for all labor and materials provided to the person for the construction. In the event, however, that the person has not paid each of the person's subcontractors, laborers, or materialmen in full, the person shall state in the affidavit the amount owed and the name and, if known, the address and telephone number of each subcontractor, laborer, or materialman to whom the payment is owed.
(b) The seller of any real property shall, upon request by the purchaser or the purchaser’s agent prior to closing of the purchase of the real property, provide to the purchaser or the purchaser’s agent, a written affidavit stating that the seller has paid each of the seller’s contractors, laborers, or materialmen in full for all labor and materials provided to the seller through the date specified in the affidavit for any construction of improvements on the real property and that the seller is not indebted to any person, firm, or corporation by reason of any such construction through the date specified in the affidavit. In the event that the seller has not paid each of the seller’s contractors, laborers, or materialmen in full for labor and material provided through the date specified in the affidavit, the seller shall state in the affidavit the amount owed and the name and, if known, the address and telephone number of each contractor, laborer, or materialman to whom the payment is owed.
(c) The affidavit may include:
(1) a waiver or release of lien rights by the affiant that is conditioned on the receipt of actual payment or collection of funds when payment is made by check or draft;
(2) a warranty or representation that certain bills or classes of bills will be paid by the affiant from funds paid in reliance on the affidavit; and
(3) an indemnification by the affiant for any loss or expense resulting from false or incorrect information in the affidavit.
(d) A person, including a seller, commits an offense if the person intentionally, knowingly, or recklessly makes a false or misleading statement in an affidavit under this section. An offense under this section is a misdemeanor. A person adjudged guilty of an offense under this section shall be punished by a fine not to exceed $4,000 or confinement in jail for a term not to exceed one year or both a fine and confinement. A person may not receive community supervision for the offense.
(e) A person signing an affidavit under this section is personally liable for any loss or damage resulting from any false or incorrect information in the affidavit.
SUBCHAPTER E. REQUIRED RETAINAGE FOR BENEFIT OF LIEN CLAIMANTS
Sec. 53.101. REQUIRED RETAINAGE. (a) During the progress of work under an original contract for which a mechanic's lien may be claimed and for 30 days after the work is completed, the owner shall retain:
(1) 10 percent of the contract price of the work to the owner; or
(2) 10 percent of the value of the work, measured by the proportion that the work done bears to the work to be done, using the contract price or, if there is no contract price, using the reasonable value of the completed work.
(b) In this section, “owner” includes the owner’s agent, trustee, or receiver.
Sec. 53.102. PAYMENT SECURED BY RETAINAGE. The retained funds secure the payment of artisans and mechanics who perform labor or service and the payment of other persons who furnish material, material and labor, or specially fabricated material for any contractor, subcontractor, agent, or receiver in the performance of the work.
Sec. 53.103. LIEN ON RETAINED FUNDS. A claimant has a lien on the retained funds if the claimant:
(1) sends the notices required by this chapter in the time and manner required; and
(2) files an affidavit claiming a lien not later than the 30th day after the earlier of the date:
(A) the work is completed;
(B) the original contract is terminated; or
(C) the original contractor abandons performance under the original contract.
Sec. 53.105. OWNER'S LIABILITY FOR FAILURE TO RETAIN. (a) If the owner fails or refuses to comply with this subchapter, the claimants complying with this chapter have a lien, at least to the extent of the amount that should have been retained from the original contract under which they are claiming, against the house, building, structure, fixture, or improvement and all of its properties and against the lot or lots of land necessarily connected.
(b) The claimants share the lien proportionately in accordance with the preference provided by Section 53.104.
Sec. 53.106. AFFIDAVIT OF COMPLETION. (a) An owner may file with the county clerk of the county in which the property is located an affidavit of completion. The affidavit must contain:
(1) the name and address of the owner;
(2) the name and address of the original contractor;
(3) a description, legally sufficient for identification, of the real property on which the improvements are located;
(4) a description of the improvements furnished under the original contract;
(5) a statement that the improvements under the original contract have been completed and the date of completion; and
(6) a conspicuous statement that a claimant may not have a lien on retained funds unless the claimant files the affidavit claiming a lien not later than the 30th day after the date of completion.
(b) A copy of the affidavit must be sent by certified or registered mail to the original contractor not later than the date the affidavit is filed and to each claimant who sends a notice of lien liability to the owner under Section 53.056, 53.057, 53.058, 53.252, or 53.253 not later than the date the affidavit is filed or the 10th day after the date the owner receives the notice of lien liability, whichever is later.
(c) A copy of the affidavit must also be sent to each person who furnishes labor or materials for the property and who furnishes the owner with a written request for the copy. The owner must furnish the copy to the person not later than the date the affidavit is filed or the 10th day after the date the request is received, whichever is later.
(d) Except as provided by this subsection, an affidavit filed under this section on or before the 10th day after the date of completion of the improvements is prima facie evidence of the date the work under the original contract is completed for purposes of this subchapter. If the affidavit is filed after the 10th day after the date of completion, the date of completion for purposes of this subchapter is the date the affidavit is filed. This subsection does not apply to a person to whom the affidavit was not sent as required by this section.
Sec. 53.124. INCEPTION OF MECHANIC'S LIEN. (a) Except as provided by Subsection (e), for purposes of Section 53.123, the time of inception of a mechanic's lien is the commencement of construction of improvements or delivery of materials to the land on which the improvements are to be located and on which the materials are to be used.
(b) The construction or materials under Subsection (a) must be visible from inspection of the land on which the improvements are being made.
(c) An owner and original contractor may jointly file an affidavit of commencement with the county clerk of the county in which the land is located not later than the 30th day after the date of actual commencement of construction of the improvements or delivery of materials to the land. The affidavit must contain:
(1) the name and address of the owner;
(2) the name and address of each original contractor, known at the time to the owner, that is furnishing labor, service, or materials for the construction of the improvements;
(3) a description, legally sufficient for identification, of the property being improved;
(4) the date the work actually commenced; and
(5) a general description of the improvement.
(d) An affidavit filed in compliance with this section is prima facie evidence of the date of the commencement of the improvement described in the affidavit. The time of inception of a mechanic’s lien arising from work described in an affidavit of commencement is the date of commencement of the work stated in the affidavit.
(e) The time of inception of a lien that is created under Section 53.021(c), (d), or (e) is the date of recording of an affidavit of lien under Section 53.052. The priority of a lien claimed by a person entitled to a lien under Section 53.021(c), (d), or (e) with respect to other mechanic’s liens is determined by the date of recording. A lien created under Section 53.021(c), (d), or (e) is not valid or enforceable against a grantee or purchaser who acquires an interest in the real property before the time of inception of the lien.
Sec. 53.154. FORECLOSURE. A mechanic's lien may be foreclosed only on judgment of a court of competent jurisdiction foreclosing the lien and ordering the sale of the property subject to the lien.
Sec. 53.156. COSTS AND ATTORNEY'S FEES. In any proceeding to foreclose a lien or to enforce a claim against a bond issued under Subchapter H, I, or J or in any proceeding to declare that any lien or claim is invalid or unenforceable in whole or in part, the court may award costs and reasonable attorney's fees as are equitable and just.
Sec. 53.158. PERIOD FOR BRINGING SUIT TO FORECLOSE LIEN. (a) Except as provided by Subsection (b), suit must be brought to foreclose the lien within two years after the last day a claimant may file the lien affidavit under Section 53.052 or within one year after completion, termination, or abandonment of the work under the original contract under which the lien is claimed, whichever is later.
(b) For a claim arising from a residential construction project, suit must be brought to foreclose the lien within one year after the last day a claimant may file a lien affidavit under Section 53.052 or within one year after completion, termination, or abandonment of the work under the original contract under which the lien is claimed, whichever is later.
If you or your business needs dependable advice about any aspect of Texas construction law and how to seek damages for not being paid for your services or goods, please contact one of our experienced construction law attorneys. We also represent our construction clients in litigation to enforce contractual rights, mechanic’s liens, and warranties of workmanship or materials whenever necessary. Our familiarity with alternative dispute resolution can also protect our clients when the terms of your contract bind you to arbitration rather than civil litigation under Texas law.
The breadth of our experience in simple or complex construction projects allows us to handle the legal needs of owners and developers, general contractors and construction managers, subcontractors and materialmen. Further, our lawyers will provide prompt and attentive service with contract negotiation and documentation, review of performance for payment and lien waivers, and claims against performance and payment bonds. We’ll work closely with you to minimize your risk while protecting your interests throughout your participation in the project.
We handle commercial debt collection and debt collection defense, for businesses across the nation that have matters residing in Texas. To speak with a knowledgeable, dedicated, and aggressive attorney, call (214) 880-9988 for a free consultation today!