Message: in texas if a general contractor pays a subcontractor prior to notice is the GC still responsible for the debt in full?
Feb 27, 2020
Mechanics liens are encumbrances against the improved property itself. The ultimate power of a mechanics lien is that the property can be sold to satisfy the debt. So the obligation to pay to avoid foreclosure generally falls on the property owner, who can then attempt to recover the amount of any double payment from the party who originally failed to pay, or from the GC pursuant to the contract between them.
Texas law requires that a derivative claimant (a party who did not contract directly with the property owner) provide "monthly" notices run order to retain lien rights. Some people in Texas call these notices "fund-trapping" notices, because the receipt of these notices "authorize[s] the owner to withhold funds" from the GC to ensure payment of the noticing party. Note that the receipt of the notice obligates the owner to withhold funds or be subject to a lien filing encumbering their property. The GC is not specifically addressed.
In many contracts, it is standard for the GC to be required to keep the project free from lien claims. If such a clause exists, it may be that the owner could initiate a breach of contract suit and recover damages arising from the lien filing.
And, in an enforcement lawsuit, the owner, the GC, and the non-paying subcontractor, will all likely be named in the action.