On February 24, 2021, House Bill 2237 was introduced in the Texas House of Representatives. This bill would make some considerable changes to Texas lien laws if passed — which is rare.
The last time there were any changes made to Texas lien laws was back in 2011, and any significant changes date even further back. Although this bill is still in its early stages, given the potential changes to the lien process in Texas, this article will cover the most noteworthy of the proposed changes under TX HB 2237.
Proposed changes to Texas lien laws under HB 2237
- Title: House Bill 2237 “Relating to mechanic’s, contractor’s, or materialman’s liens”
- Introduced by: Rep. Dustin Burrows
- Date Introduced: Filed on February 24, 2021
- Effective Date (if Passed): September 1, 2021
Subcontractor notice requirements simplified
This is perhaps the most significant change that could result from this legislation’s passage: If you are a subcontractor in Texas that’s typically lower on the contracting chain (i.e. not hired by the prime contractor, or a “remote sub”) you’re aware of the difficulties in providing the proper monthly notices on commercial projects.
Under the current scheme, a sub-subcontractor or supplier hired by a sub is not only required to provide a notice on the 15th day of the second month of each month to the prime contractor — they must provide a notice on the 15th day of the third month following each month to the property owner. That’s a lot to keep track of!
Learn more: How to Prepare & Send Texas Monthly Notices
If this bill passes, these notice requirements will be simplified.
Under these changes, such a subcontractor will only have to provide the “third month notice” to both the owner and the prime contractor. The “second month notice” will no longer be required on commercial projects — essentially eliminating the distinction between the various tiers of subcontractors.
Notice of Specially Fabricated Materials requirements eliminated
Another way this bill would simplify the notice process in Texas is the repeal of the statutes governing the Notice of Specially Fabricated Materials for both residential and non-residential projects.
Instead, this notice will be covered under the monthly notices that would typically be required from subcontractors, and the deadline for such notices would be calculated from the month materials were provided, “or the undelivered specially fabricated materials would normally have been delivered.”
Enforcement deadline shortened, with an option to extend
Currently, the deadline to enforce a mechanics lien claim in Texas on a non-residential project is two years from the last date the claimant could have filed their lien claim, or within one year of the completion, termination, or abandonment of the work under the original contract — whichever is later.
Under these proposed changes, the enforcement deadline on commercial projects would be a simple one year from the last date the claimant could have filed their claim. However, this can be extended. If a claimant and the property owner execute an agreement to extend the enforcement deadline, it must be filed before the enforcement deadline passes.
If filed, it can extend the deadline, but it can’t be extended longer than the “second anniversary of the date the claimant filed the lien affidavit.” Translated? The enforcement deadline can be extended up to two years after the date the claim was filed.
Subcontractor claim of liens on unpaid retainage deadline
If a subcontractor wants to file a lien on unpaid retainage in Texas, there’s a lot of factors to consider. The statute (Tex. Prop. Code §53.057) currently states that an affidavit claiming a lien on unpaid retainage must be filed the earliest of either:
- The general lien filing deadline for the specific type of project
- The 40th day after the date of completion listed in the owner’s Affidavit of Completion
- The 40th day after the termination or abandonment of the original contract
- The 30th day after the claimant receives a written notice of demand to file a lien affidavit
Under the proposed new deadline, a lien on retainage needs to be filed no later than the 15th day of the third month after the original contract is completed, terminated, or abandoned. Period.
Other possible significant changes
In addition to the changes listed above, there would be a few other changes as well that should be noted. These include:
Service of notices & documents: Service of any notices or other written communications required under Texas lien laws may be delivered either in person or by certified mail. Sending notices by registered mail would no longer be a viable option.
Deadline calculation: Currently, according to case law, if a deadline under Texas lien law falls on a legal holiday or a weekend then the notice or action must be completed prior to that date. Under this bill, when a deadline falls on a weekend or legal holiday, the deadline will be extended to the next business day.
Payment on demand: There’s one more change worth noting. There’s a seldom-used mechanism under §53.083 known as a “Demand for Payment to Owner.” Under this statute, a subcontractor who has complied with the notice requirements can make a demand for payment of withheld funds directly to the owner with a copy served on the GC. The GC has 30 days to notify the owner if they dispute the claim. Failure to notify the owner that the claim is disputed is deemed to be an assent to the claim — then the owner “shall pay the claimant.” This mechanism will be eliminated under this new legislation.
That’s the long and short of it. As mentioned above, this bill was just introduced, and there’s no telling if A. It will even be enacted, and B. What the bill will look like if it does. But given the impact of these changes, we’ll be keeping a close eye on its progress. Be sure to check back with us for any updates.