We have previously written about how changes to Texas lien law may be on the horizon and how construction groups have lobbied for changes to Texas lien law. Well, it looks like some of those changes may be might be in the works. Earlier this month, House Bill 3065 and Senate Bill 1506 were introduced in the Lone Star State. The bills are identical, and would go into effect in May of 2018 if passed. This week, we will discuss the litany of changes that would occur under these proposed changes to Texas lien law. Because there are so many proposed changes to Texas lien law, we had to break them up into sections: The Basics; Lien Website and Filing a Lien; Notices; Liability and Priority; Waiver, Foreclosure, and Bonding Off a Lien; and finally Repealed Revisions and Recap.
The Lien Website (53.011)
Lien websites and online registries are being utilized across a few different states. Essentially, they serve as an online meeting place for property owners, contractors, subs, and anyone else who may provide labor or materials to a project. By using the online resource, an owner can easily see who is performing work on the property, and the payment chain is clarified. For the laborers and materialmen, information on the property owner and parties up the chain becomes readily available, and it is far easier to determine how payments will make their way down the chain. What’s more, the site serves as one central location where property owner or general contractor can communicate important information throughout the duration of the project. When used properly, online registries/ lien websites make life easier for all parties involved by increasing transparency and communication. For this reason, the proposed bills suggest that Texas join the likes of Utah, North Carolina, and Pennsylvania by bringing the payment chain into cyberspace.
Posting on Lien Website
Under the proposed legislation, the secretary of state would be required to establish and maintain a lien website. The site would have to provide an online form for each notice or written communication required (more on those soon). The site must also allow a person to electronically obtain a form and post the notice or written communication on the site.
Searching the Lien Website
The site must allow a party to search notices and written communications that have been posted on the website with a full or partial:
- Owner Name
- Project name
- Project Address
- Project real property legal description
- Original contractor name
- Name of person posting notice/written communication
Lien Website Fees
The lien website may charge a fee to an owner for posting a notice of commencement. However, the lien website may not charge any party for:
- electronically obtaining a form
- posting a notice or written communication to the site
- using the search functions
The bill does not contain any information about the amounts of any fees. As it stands, much of the specifics about the proposed lien website have been left open for the Texas secretary of state to flesh out. While the details will be important in determining the usefulness of a Texas lien website, it will undoubtedly improve communication and transparency on construction sites.
Filing a Lien
Unfortunately, a lien may not be filed through the lien website under the bill. The following are some key provisions for filing a lien under the proposed House Bill 3065/ Senate Bill 1506. While the filing process remains the same, the terminology, timing, and location of a claim would be altered.
Filing a Lien Claim Affidavit (53.052)
While the document is currently simply referred to as an affidavit under statute, as stated in the headline above, this would now be called a “lien claim affidavit.”
The first notable difference under this section would be a clarification as to when the clock starts to file a lien claim. Currently, the clock begins on the “day on which the indebtedness accrues.” Under this legislation, this would be clarified to state that the clock starts on the “date the work under the original contract is completed or the original contract is terminated.” The time frame to file an affidavit would remain the same – a claimant must file the affidavit no later than the 15th day of the fourth calendar month. Under proposed legislation, this time period wouldn’t start until the project is finished or the general contract is terminated. 53.052(a). Under 53.052(b), this period remains one month shorter for residential projects (no later than the 15th day of the third calendar month).
53.052(c) clarifies that a lien claim affidavit must be filed in the county where the property is located. In the case of a railroad, the lien claim affidavit must be filed in a county into which the railroad extends. .
53.052(d) is a new section which states that a general contract is terminated on the date that an owner posts a notice of termination to the lien website when a notice of commencement has been filed (we’ll speak more on the notice of commencement soon). If a notice of commencement has not been filed, the owner must send a notice of termination to each party who has filed a notice of furnishing (we’ll have more on this, too).
Contents of Lien Claim Affidavit (53.054)
There would be no more monthly notices!
The new legislation would treat contractors and subs alike rather than require parties down the chain to submit monthly statements or work done/material furnished. A claimant would also be able to use broad descriptive terms, abbreviations, or symbols customary in the trade to describe the work that was done or the material that was furnished.
Ability to Withhold for Benefit of Claimants (53.081)
The current system allowing an owner to withhold sums when a lien claim is eminent would be overhauled under the proposed bill. Rather than the previous notice system, the process would be simplified. If a lien claim affidavit is filed or if an owner receives a notice of filed lien claim affidavit from a party other than the general contractor, the owner could then withhold payments from the general contractor in an amount necessary to pay the claim asserted. However, an owner may only withhold to the extent that they are not already withholding as retainage.
Time for Which Funds are Withheld (53.082)
As for the amounts withheld under 53.081, the owner retain funds until payment is made or until the claim is otherwise settled, discharged, or determined to be invalid by the court.
These are just some basic alterations under the proposed changes to Texas lien law. Be on the lookout for the next post in this series regarding proposed changes to the Texas notice system. Other posts to follow include: Priority and Waiver and Foreclosure.
We regularly put out content regarding Texas lien law, so head over to the Texas tag on the blog for more on the Lone Star State.