Texas contractor lien waiver changes

Texas lien law is generally considered to be the most burdensome and confusing in the country. The intent of lien laws is to provide a statutory remedy to secure payment for labor and/or furnishing of materials, but this purpose can be lost in confusing and sometimes seemingly contradictory provisions. If not followed as written, the complex requirements can cause subcontractors and suppliers to lose certain lien rights that would otherwise be available to them.

Texas notice requirements can add up quickly on long projects, since more than one notice may be required for every month in which work was performed. The rules are cumbersome and one of many issues that causes headaches for Texas construction companies. In the upcoming months, Texas’ legislature will look to reform these lien laws . . . again.

What’s the Problem?

There have been previous attempts to modify, clarify, or streamline the labyrinthian Texas notice requirements, but so far, these attempts have failed. That is unfortunate for construction industry participants in the Lone Star state, as these requirements can become a problem – especially for parties lower on the contracting chain. While prime contractors are held to relatively minor requirements, most of the burden falls on subcontractors, and suppliers to send a multitude of notices. The language of the current law is worded in a manner that even give the term “legalese” a bad name, with notice requirements and deadlines such as,

“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.,”

can leave anyone confused and result in the loss of certain lien rights. Along with the issue of unclear provisions, the current laws require a multitude of different notices that need to be sent at certain times – and all throughout the project. When these requirements are not met, certain lien rights are lost. Without these lien rights, construction industry participants could find themselves in situations in which it is more difficult for them to get paid.

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Reform Takes Time

In 2013, a bill that died two years ago would have eliminated a lot of wordy, contradictory, confusing provisions, allowing contractors, subcontractors, and suppliers to better understand the requirements that must be met in order to be afforded the protection certain lien rights would give them. One of the largest issues addressed in the failed 2013 attempt at reform, had to do with the notice requirements. In the previous attempt, the notice requirements were made extremely easy by specifically listing time limits for notice, who notice must/can be submitted to, and what must be written in the notice. Unfortunately, that bill, along with the notice reform, died in the committee stage.

There was some progress in 2013, however. Laws concerning lien waivers were passed, restricting and refining the practice in the state of Texas.  Concerning lien waivers, states fall into two categories: 1) cleancut statutory forms that everyone can understand, and 2) the wild wild west where almost anything goes. Texas finally took a step into the first category, passing 58.234 which provides for 4 different forms that must be used in order for a lien waiver to be valid and enforceable.

With the knowledge that some positive movement regarding Texas lien laws is possible, the Texas Construction Association is expecting that a new lien law reform bill will be filed in Texas’s upcoming legislative session. Construction industry participants can hope that it is more successful than the 12013 reform attempt, and results in clear, understandable, and fair notice and lien requirements that allow the Texas mechanics lien process to function as intended.

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Texas Attempting to Reform Lien Laws Again
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Texas Attempting to Reform Lien Laws Again
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Texas is attempting to reform lien laws again. Here's what that could mean for construction contractors who work in Texas.
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