Will an dispute over liquidated damages stop a General from paying out retainage? Can you still file a lien?

3 weeks ago

Can we still file a lien on a property 2 years after work is finished if the General Contractor is stating that they are in negotiations with the owner for liquidated damages?

Senior Legal Associate Levelset

Mechanics lien deadlines are strict, and they apply regardless of whether there’s an ongoing dispute or negotiation over payment. In Texas, the deadline for filing a mechanics lien is the 15th day of the fourth month after the day the indebtedness accrues – shortened to the third month if it’s residential work. Under § 53-053 of the Texas Property Code, indebtedness accrues (for the purposes of a lien claim) when the claimant last furnishes work to the project.

So, taken together, the deadline for a claimant to file their mechanics lien will be the 15th day of the 3rd or 4th month (depending on whether the project is residential) after the claimant last furnished labor or materials to the project. And, once this deadline passes, a mechanics lien cannot be filed to recover payment for work performed on the property.

Note, though, that even if a lien deadline has passed, there are always other options for recovery. More on that here: Can’t File a Lien? Here Are Some Other Options For Recovery.

General contractor refusing to release retainage
A general contractor may refuse to release retainage payments for any number of reasons – including disputes over damages. However, that doesn’t mean that their subcontractor can’t make a claim against them in order to obtain that retainage. Subs shouldn’t have to wait for their retention payment just because their contractor has a dispute with the property owner.

For more background on the Texas mechanics liens and retainage laws, here are some great resources:
(1) Texas Mechanics Lien Guide and FAQs
(2) Texas Retainage Overview

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