For a Texas commercial project involving a leasehold interest, should the true property owner (the landlord) be included on the lien affidavit?
2 replies
May 15, 2020
Hello,
If the owner (landlord) is giving a rent credit or in any way paying for the improvements you may be able to lien the whole property, not just the leasehold. If it was only the tenant paying for the improvements it’s not legally required to give notice to the owner (landlord) but I would anyway, but they do not need to be included in the lien.
Feel free to reach out if you have any further questions.
Karalynn Cromeens
Managing Partner
Tel: (713) 715-7334
http://www.TheCromeensLawFirm.com
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May 22, 2020
Lien rights of contractors, subcontractors and suppliers making improvements for a tenant are generally limited to the interest of the tenant and will not attach to the owner’s property. Results to be obtained through a foreclosure of a lien on a leasehold interest are often less than satisfactory. The purchaser at foreclosure would take whatever rights the lessee held. A purchaser at foreclosure would, essentially, be buying the right to occupy the premises and make monthly lease payments, all subject to the terms of the lease. Depending on the nature of the lease, that may be of little value to the claimant. Worse yet, the filing of a lien may constitute a "default" under the terms of the lease. If the lease is terminated by the landlord, the “lienable” interest, including an interest in the removeables, likely terminates as well.
However, the relationship between the owner and the tenant should not be taken for granted. The tenant/landlord relationship may also be an owner/contractor relationship. Stated differently, the owner of the property may have entered into a contract with the tenant to act as the general contractor for the construction on the leased premises. A close examination of the relationship between the owner and its tenant is important. For example, the owner may have entered into a contract with the tenant for construction and leasing of a space in the property. The tenant/contractor may not be required to make rental payments until construction is completed. Stated differently, the lease term may not start until construction has been completed. The rights of the owner and tenant may be determined as of the date the tenant/contractor, started construction on the property, which may be well before the commencement of the lease. In such a situation, the contractor with a contract with the tenant/contractor may be entitled to a lien on the owner's property because the owner contracted with the tenant to act as the general contractor.
This may be a complicated situation requiring further investigation of the landlord/tenant relationship. Also, please be aware of the short time limitations for filing a mechanic's and materialmen's lien. We encourage you to consult with your attorney as soon as possible to assist you in this regard. Each project is unique and requires proper investigation of the facts.
This response is for general information only and is not meant to be legal advice for you or your company. This response does not create an attorney-client relationship between you or your company and Fahl & Donaldson, PLLC.