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We have a job for the City of San Antonio where the GC is our customer

The project is $165K and it is our understanding that the City of San Antonio is required to have a bond for any jobs over $25K. They told us that they are not requiring a bond on this job as they have worked with this GC before and have had no issues. Since it is a City project if there is no bond we believe we have no lien rights - please advise.

1 reply

Jan 11, 2019

Texas law states that "[a] governmental entity that makes a public work contract with a prime contractor" shall require the contractor, before beginning the work, to execute to the governmental entity: . . .

(2) a payment bond if:

(A) the contract is in excess of $25,000, and the governmental entity is not a municipality or a joint board created under Subchapter D, Chapter 22, Transportation Code; or

(B) the contract is in excess of $50,000, and the governmental entity is a municipality or a joint board created under Subchapter D, Chapter 22, Transportation Code."

The general rule, then is that any public work over $25,000 requires a payment bond when the contracting agency is anything other than a municipality or a joint board created under the transportation code, and on all projects over $50,000 when contracted for by a municipality or a joint board created under the transportation code.

However, this does not apply to all projects, as there are a few exceptions to the bonding requirements. The bond scheme does not apply to public work contracts entered into by a state agency relating to work undertaken pursuant to Subchapter F or I, Chapter 361, Health and Safety Code (Solid Waste Act), or Subchapter I, Chapter 26, Water Code (Underground or Above Ground Storage Tanks). So, there are limited projects for which the bond requirements may not specifically apply.

It is true that liens are not allowed to encumber public property, so the bond claim framework (or, in a limited fashion, a lien on funds) is the mechanism for recovery of payment due. If there is no bond on a project, one could attempt to claim a lien upon funds (as generally reserved for projects under the bond requirement threshold), as set forth by TEX. PROP. CODE §53.231. Additionally, there may be an action available not only against the GC for nonpayment, but also against the contracting public entity for their failure to require the protection mandated by law.

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