Texas is infamous for having what may be the most confusing, jumbled set of lien laws in the nation. As it stands, the state’s notice requirements are a mess, yet remain toughest in the country. Texas construction attorneys have taken notice of this issue, and since 2013 a group has been working to make changes to Texas lien law. Many building groups and associations in Texas have appointed attorneys to join in on the project.
The group of attorneys working on the project recently distributed what the revisions currently look like. However, Texas legislature won’t be in session until January, so more revisions will almost certainly be made before any new laws are proposed. We’ll get into some of the exciting new proposals, but first let’s look at the biggest issue with the current Texas lien laws: notice requirements.
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Notices Under Current Texas Law
One of the main reasons changes to Texas lien law are needed is the poorly constructed notice system. The sheer number of titles for notice documents is overwhelming- they are referred to as Lien Notices, Preliminary Notices, Pre Lien Notices, and several other terms. Two and Three Month notices are also part of the mix. The timing of all of these notices creates a web of deadlines and requirements in which lien claimants often get stuck, leaving their claims to die from procedural issues. If you need a guide to navigating current requirements, here’s how to file your Texas lien. For a quick look guide, here’s a helpful graphic.
Proposed Changes to Texas Lien Law
Notice of Furnishing
Among the proposed changes is a dramatic overhaul to the notice system. Rather than the confusing system of various liens and timing requirements, under the new lien laws a subcontractor or supplier would only need to file one document at the beginning of the project. This document, called a Notice of Furnishing, would be required to preserve a potential claimant’s lien rights. A subcontractor or supplier would file a Notice of Furnishing at the outset of work. Prime contractors would not need to file the document. The notice would include basic information of the claimant, identify information on the project, and provide a general description of labor and materials to be furnished. The Notice of Furnishing would be sent to both the prime contractor and owner.
Lien Agents
This is where the revisions get really interesting. The proposal calls for the foundation of a lien agent system for property owners. Under this new system, an owner could appoint a third party that is registered with the Texas Department of Insurance as a lien agent. This agent would create and maintain a website containing furnishing information for notices that may be filed on the project. The website would also include the capability of giving and receiving notices. All notices, namely the new Notice of Furnishing documents, would be sent and received through the site. Additionally, a Notice of Commencement that includes information on the owner, the project, prime contractors, and lenders would be posted to the site.
Mechanics Lien Affidavit
The last major change proposed includes revisions to the actual mechanics lien. On the new mechanics lien affidavit, the date of sending a Notice of Furnishing must be identified. Statements identifying which work was completed in each month would no longer be required. The new deadline for filing a mechanics lien would move to the 15th day of the fourth month after work under the original contract was completed or after the original contract was terminated. For residential projects, the deadline would be the 15th day of the third month. Other than these changes, the mechanics lien affidavit would remain largely unchanged.
Issues
The above changes to Texas lien law are exciting. They present a real step toward fairness in construction payment, which is what Levelset is all about. There are still some kinks to work out, though. For instance, retainage and fund trapping provisions do not appear in the current proposal, which would open owners to more liability. Subcontractors and suppliers might complain that no timing provisions appear, either. Without some sense of urgency created throughout the life of the project, payments may slow down. And finally, no new regulations protect owners, subs, or suppliers from instances where prime contractors are paid but fail to send payments down the chain. Considering that is one of the most prominent reasons liens get filed, it must be addressed.
Takeaway
We may finally be seeing improvements to Texas lien law! While that is a cause for excitement in and of itself, the actual revisions are energizing, too. Streamlining the notice process is a change that Texas desperately needs. Improving communication, which may be the key to fixing the construction payment problem, appears to be paramount to the authors. Publishing project information, including information on the owner and lenders, would be huge in eliminating procedural mishaps that extinguish many claims. All of this, while also relieving property owners- liens will no longer appear out of nowhere since all parties that want to enforce lien rights must have already filed a Notice of Furnishing. Sure, there are a few tweaks that need to be made, but the law is moving in the right direction. With any luck, revisions will be ready in time for a proposal to the Texas Legislature in January.
