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What are the other options to collecting money if we have missed the deadline to file a lien

We are a small start up company. We recently started having an issue with collecting payments on invoices. We started using level set as we were unfamiliar with the lien process. We have a handful of invoices that did not make the deadline to file a lien - what other options do we have to collect money? Can we still file a lien? What is the best way for us to move forward?

1 reply

Jul 22, 2019

This is a good question. While mechanics liens are one of the most powerful ways for construction participants to ensure they (eventually) get paid, they are definitely not the only avenue to payment.

First, the question of whether a lien can be filed after the deadline is more complicated than it may seem to be. First, deadline calculation can be tricky for some projects. While Texas bases the lien deadline on the claimant's own furnishing of labor or materials, some states use the end of the project as a whole. And, in Texas, the deadline and whether an additional "claim document" is required is dependent on the project type.

Generally speaking, recorder's offices do not act as gatekeepers for lien filings. They are not allowed to make legal judgments regarding the validity of the lien claim, and accordingly, most of the time will allow liens to be recorded even if late, in an insufficient form, or improper for other reasons (i.e. on homestead property where the original contract was not recorded). It's not a good idea to file a lien that is known to be improper, as it can conceivably open the claimant up to counter-claims, but for liens on the edge, filing and hoping it leads to collection, and just releasing the lien prior to the owner incurring any damages if requested to do so is one potential option.

Other than attempting to file a lien to recover the money due there are different options, as well. These options can include litigation or turning the debt over to a collection agency. Since a lawsuit can ultimately be required to enforce a mechanics lien, the extra burden may not be too great to consider filing in court to recover.

If the amount meets the thresholds, an action may be filed in small claims court in order to speed up the process and avoid some of the costs associated with litigation in a "traditional" court. This is not an option when the debt is large, however. Additionally, Texas has several legal requirements with respect to construction payment, that can form the basis for a suit to recover payment.

Texas has prompt pay statutes that require payment to a sub/supplier within 7 days after payment is received by the party above. And, Texas has strict rules and requirements regarding construction funds, and can impose significant penalties if the funds are mishandled. Each of these rules can form the basis of a suit to recover, along with general claims of breach of contract, etc.

I hope you are able to use the mechanics lien process to make sure that all your work can be secured in the future, but just because a lien may not be the right option in some situations, it doesn't mean you can't recover anyway.

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