Home>Levelset Community>Legal Help>As a 2nd tier contractor in Texas, does my company have until the 4th month (15th) after services stop to file a lien?

As a 2nd tier contractor in Texas, does my company have until the 4th month (15th) after services stop to file a lien?

I am part of a staffing agency who supplied general labor to a company that was a subcontractor on a job. We filed a lien on June 14th 2017 and we have workers out on the job up until April 9th 2017. We sent 2/3 Month notices via certified mail also once the labor ceased (Account was suspended). It is my understanding that the lien should be valid, however I was reached out to by a person stating this: ""The Statute states that property owners are liable to a perfected lien only (1) the extent to which the owner withheld retainage from the original contractor, and (2) the extent to which the owner made payments to the original contractor after receiving fund-trapping notices from subcontractor(s). Above mentioned statute applied: 1) In order for Results (My company) to have a claim on the retainage the lien is statutorily required to be filed no less than 30 days after a project is abandoned. In this case Mid July is more than 30 days after Kuehn abandoned the project. We can evidence this by our having to pay a dumpster to be hauled off after Kuehn stopped communicating with us in May. Results would still have a claim if there was any retainage still paid/owed to Kuehn after their notice was sent, but in this case the entire 10% retainage amount was offset by unperformed, but paid for, work. 2) The first "fund trapping" notice LWORH received as Owners was, as stated in Results Lien Affidavit, June 14th 2017. We didn't make any payments to Kuehn after mid may as a result of their abandonment. Therefore there is not claim available for "trapped funds" either."" I am not familiar with this "30 day" rule of abandonment that he is speaking of above. Can you advise if this is a valid statement?

1 reply

Mar 9, 2020

Texas' mechanics lien rules and timeframes are some of the most confusing in the country, especially regarding retainage. So, for the most clarity on your situation, it'd be wise to seek out a local Texas construction attorney so that they'll be able to review your relevant project dates, documentation, and circumstances and advise on how best to proceed with claims. With that being said, let's look to the Texas Property Code to clear up some issues.

Abandonment and the deadline for liens on retainage

Texas retainage liens must abide by multiple rules created by the Texas Property Code. § 53-103(2) states that a lien on retained funds must be filed within 30 days after the earlier of the following three dates: (A) when the work is completed; (B) when the original contract is terminated; or (C) when the original contractor abandons performance under their contract. So, if the original contractor abandoned the job, a lien on retained funds would need to happen within 30 days of that abandonment. However, some other party's abandonment wouldn't affect this deadline.

Fund trapping notices and withholding payment

§ 53-081 of the Texas Property Code allows an owner to withhold payments from their GC if the owner receives any monthly notices, or if the owner receives a Notice of Contractual Retainage under § 53-057. So, if a subcontractor provided the owner with a Notice of Contractual Retainage, then that'd entitle the owner to withhold retainage from their GC, just like a monthly notice would. Often, subs will send a Notice of Contractual Retainage right at the start of the job. If that's the case, the owner's withholding would need to begin long before they received any monthly notice.

Owner's liability for mechanics liens of subs, suppliers, etc.

I think the above statements on an owner's limited liability for subs' and suppliers' mechanics liens is a bit oversimplified. Further, I'm not quite confident that an owner would be entitled to simply apply retainage withheld from their contractor to their contractor's overbilling and call it a day, with subs and suppliers being left out to the cold. For help navigating your dispute, it'd be wise to consult a local attorney who's intimately familiar with Texas' lien laws so they can advise on the best options for moving forward and getting paid.

Additional resources

In addition to the above, I think the articles below might be helpful. - My Lien Was Challenged: What Do I Do? - The 4 Steps to Take After Filing a Mechanics Lien

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