Texas lien law overview
Texas lien laws have some of the most complex and difficult requirements of any state. Through this course you will develop a strong understanding of Texas lien law requirements and learn best practices for navigating the requirements so you can feel confident securing payment.
Securing lien rights in Texas is more complicated than in other states
How other states work
In the majority of states there are required notices that must be sent at the start of the job to secure lien rights. These notices, called preliminary notices, are typically sent once at the start of the job. So long as a party sends this one document the right way to the right people at the start, a party secures the right to file a valid mechanic’s lien or bond claim if they’re not paid on the project. These notices promote transparency on the job site and allow property owners, general contractors, and other parties to track who is working on site and who needs to get paid.
How Texas is different
In Texas, there are multiple kinds of notices that may be required or allowed to be sent at the beginning of a construction project. These notices acts to protect certain rights and request certain information. Notices required during this period include: (i) Notice of specially fabricated materials; (ii) request for notice of termination; (iii) request for surety and bonding information.
Texas is also unique in that it has a separate notice requirement for securing lien rights on retainage held within the contract. This document, called the Notice of Contractual Retainage, secures the right to file a lien on retainage if retainage is not paid out after the termination, abandonment, or completion of a project.
Finally, Texas is one of the only states that requires notices be sent for each month where work is performed or materials are delivered and a party is not paid. These monthly notices requirements exist for everyone who is not contracted directly with the property owner. These recurring notices go by many names – “first and second notices,” “fun trapping notices”, and more – but for our purposes in this course we will call them “monthly notices” because they are ongoing and recurring requirements to secure lien rights. This nature of this requirement can cause a lot of additional paperwork that is difficult to manage every month.
Texas notices are unique, not only in scheme, but in deadline. The deadline for every Texas notice other than a notice for contractual retainage claim, is the 15th of the month. And, since Texas monthly notices contain language that is a bit aggressive and indicates non-payment, many Texas construction participants don’t want to send the notices unless and until absolutely necessary. This can make the 15th of the month an extremely stressful and busy day for companies performing work in Texas as they scramble to get notices out the door last minute.
The penalties for not providing the required notices in Texas can be severe. Failure to deliver monthly notices when required (even if just one day late) precludes the ability to file a valid mechanics lien for the amount due for the labor or material furnished in the month(s) associated with the improper notice(s). And, failure to provide a notice of specially fabricated materials means that a claimant may only file a lien for materials that were actually delivered and incorporated into the project (provided other notice requirements are met). That’s why it’s important to be compliant and establish a consistent process for sending notices correctly to keep your options open in the event you’re not paid.