How to Navigate Construction Liens On Residential Property In Texas with Ben House

Contruction lawyer Ben House explains section 50(a) of Texas lien law in this free CLE webinar.

Transcript

Seth Bloom: (00:03)

All right. Well, I guess we’ll let some people trickle in, uh, and we’ll get started now. Um, my name’s Seth Bloom and I’m the senior director of attorney services at Levelset, uh, here in new Orleans, Louisiana. We also have a big presence in Texas and an Austin office. So doing our first CLE in Texas is very important to us. And we’ve chosen one of our stars as far as a participating lawyer, uh, in the construction field. And that’s been house from house per round and house, uh, located in the greater Houston area. Uh, so today it’ll be a CLE course, uh, navigating construction lanes on residential. So I’m super excited to introduce Ben and look forward to everyone getting credit for CLE out there. This is part of our new approach to providing education, uh, for attorneys, uh, within the Levelset community. So Ben have at it.

Ben House: (01:07)

Thank you Seth. Very much. Thank you for having me on thank you for helping me with this process. Uh, uh, this is my first time teaching, uh, CLE to everybody out there. So, um, please bear with me. I’ve I’ve made a dry run. I think we’re looking at about an hour. I’m going to try to shorten it up. Um, I take a little bit of a different approach with CLE. Uh, I’m a South Texas grad, which means we’re all about, uh, getting it done, you know? Uh, and, uh, so I’m going to tell you that the CLE, the angle I’m going to take is less about strict study of jurisprudence. More about, I want to help folks. This is really targeted to folks who don’t do, uh, construction lien work day in and day out. It’s I titled my presentation navigating construction lanes on residential property.

Ben House: (02:00)

Uh, I should’ve called it. Why you don’t have a constitutional lien on residential property because that’s, that’s pretty accurate. I mean, you gotta do it, right. Um, companies like Levelset attorneys. That’s why involvement, uh, from somebody who knows what they’re doing is important because the law, uh, any lawyer can tell you this, especially construction lawyers, didn’t tell you, lane law in Texas is complicated. Uh, it is, it’s not a thing you can delve into with any amount of confidence, uh, unless you’ve put some time and effort into it. So the point of my presentation today is to help a practitioner who may do contract law all the time to give, to help you have a set of red flags that go off in your head. When you see certain situations, that’s what I’ve built, this, this presentation around. So you don’t have to look on my face anymore. I’m going to put a, my, a PowerPoint up here for most of the remainder of this. All right. So just to double check in, am I you say in a PowerPoint here? I am looking good, looking good. Okay. You just got to double check the zoom every once in a while.

Ben House:: (03:14)

Navigating construction lanes on residential property.

Ben House: (03:21)

All right. About your presenter. I’m going to let y’all read through this. If you want to. Uh, like I said, South Texas college of law, I did am juror contracts. Uh, I had a bachelor’s of science in construction science from a and M college of architecture. Uh, do have a pretty, pretty good verdict on, on lanes. Uh, you know, back back several years ago, actually, I got that verdict on my birthday and that’s my website at the bottom. Okay. So that’s me. I do about half of my practice is purely construction. Other half is other real estate commercial, uh, contract litigation. Um, that kind of thing. That’s who I am. Alright. Constitutional lanes. Do I qualify? That’s the first question you ask, and I’m going to back up a little bit here. Constitutional liens are one of those things where a builder comes into your office and always says, Hey, well, you know what?

Ben House: (04:22)

I know I got a constitutional lien. You know, I know I’ve been working on this, this fellow’s house. And, uh, you know, I didn’t send any the notice letters. I didn’t hire a lawyer. Okay. You know, but look, I did this, this work three months ago, he’s not paying me. I get a constitutional lien. Don’t I, and a lot of lawyers, lots of lawyers, uh, you know, can fall into the bear trap. Uh, yeah, I think that’s true because generally what goes around is it constitutional liens are a pretty automatic and pretty Bulletproof. Um, you use constitutional lanes mostly, mostly when you have mr. Deadlines to use statutory liens, the notice deadlines. I’m not going to talk too much about statutory lanes in this presentation, but constitutional lanes are called constitutional lanes because they are in the Texas constitution. So, okay. This is where your analysis begins.

Ben House: (05:13)

Does my client’s work qualify for constitutional constitutionally under article 16, examining the meaning of mechanic artisan and material, man, why do we have to examine these meanings? Because these are the three words use in the constitution after that happened. And there’s, there’s like one line in article 16, section 37 of the constitution that says mechanic artists and material men working on a, uh, uh, article or building gets constitutionally. Okay, great. What does a mechanic, artist and material, man. Alright, I’m not going to you notice I don’t have the definitions in here. I thought about that. I decided against it. That’s because the definitions of these are based out of common law. I’m not even going to read them off to you because there’s a lot of cases. There’s some key cases that will tell you generally what they are, but when somebody comes into your office and it’s, um, it’s usually an architect or an engineer, they come and they say, Hey, do we have a constitutionally?

Ben House: (06:15)

That’s actually a very difficult question to answer because it’s very, fact-based, uh, you have to determine if they fall into first, one of these three categories, mechanic, artisan material, man, there’s a lot of language behind all three of these categories. Uh, but this is probably the broadest part of whether you get a constitutional lien protection. What that means to say is what I mean to say by that is as we’ll go through, you’ll see it gets skinnier and skinnier, depending on what type of work was actually done, that kind of thing. Uh, okay. Uh, and we can compare this with statutory lien and qualifications that I do PR provide you, uh, the definition of it is quote unquote furnishes labor or materials for the construction or repair of an improvement to real property. That’s in the Texas government code, which is in turn cited by the Texas property code.

Ben House: (07:12)

If you’re starting to think that, wow, there’s a lot of statutes that internally cite one another. And the operations between the statutes and rules is fuzzy. You’re figuring this out because it is, and they are, uh, so Texas property code says, if you’re that you are a, uh, you, you can lean under statutory liens, but if you want to set story lane, of course, you got to, uh, you gotta send your notice letters in and you got, and the notice letters gotta be right, and they gotta be sent certified mail and they gotta be sent to the right parties. Um, they gotta be issued timely. Uh, there’s a lot of rigamarole there. It catches a lot of folks out again, unless you use a service or an attorney or something like that. Um, so as attorneys, we got to know, uh, what to tell our clients and when to tell them about that kind of thing, that’s outside the scope of this presentation though, uh, feel to potential claimants under statutory lien rules is broader.

Ben House: (08:11)

Yes, it is because it’s a simpler, it’s, it’s at least a simpler analysis. Uh, and the, with constitutional lean, there’s a lot more because the language of the constitution is so sparse, there’s been a lot more and frankly, some kind of old case law, uh, determining who is what, whether your engineers or architects, uh, fall into those categories. And like I said, it’s a truly fact-based investigation. So for instance, an engineer comes to your office. Architect comes to your office and says, I’ve drawn some drawings for a building. Uh, I, okay. Was the building built? When was it built? Were your drawings incorporated, was another drawing corporate. What was your drawing incorporated into? Okay. As I go through these, uh, these slides, you’re going to see why those questions are important and there’s a lot of them. And then after collecting all those facts, it’s our duty as lawyers, uh, to figure out under the case law, if, uh, they meet, uh, the kind of the stricter, uh, bottle-necking language of the constitution, um, my rule of thumb.

Ben House: (09:19)

And you’ll see why I hope, I hope you’ll see why this is the case. And this is my rule of thumb. I pull this from anywhere other than me, uh, if no work was performed on or materials utilized within the property, the property, the, uh, the building or article concern, that’s for the lawyer, be concerned if you’re representing an architect or an engineer or a construction manager, um, that has not actually physically done any work, uh, on one of these properties. And hasn’t been paid for some kind of intellectual work that they have, that they have done be worried as far as constitutional liens go. Um, my understanding of, of, uh, statutory liens is they’re a lot broader in that context. So feel safer about statutory field, less slate, safe about constitutional, but if your guy comes in and says, look, I’m the builder, I’m there. It’s my crew. We’re building on the property in question. Okay. Be less concerned there because you know, uh, your constitutional, at least this part of a constitutional lien, uh, has been met.

Ben House: (10:30)

Okay. My guy or gal did some work for homeowners, so we at least get a constitutional lane. Right. That’s what I started with the presentation off with, I get one, right? Uh, nah, nah, we gotta keep going. Keep going, gotta keep our analysis up the next two requirement of an article or building again, straight language from the constitution. So you gotta look at how it’s been interpreted, uh, by, by the court since constitutional lien is only available for articles or buildings that have been made or repaired by the lien claimant. So something, remember my rule of thumb, something has been done on this article or this building, if nothing has been done, if we’re just talking about in theory kind of stuff, be concerned, at least about a constitutionally articles is roughly equivalent to goods or channels. So what does that mean if I’m not working on the building specifically, if I’m working on something that went within the building, do I still get a constitutional lien on a good or channel? Yeah, you should, but we’ll see a little later there’s some limitations to that.

Ben House: (11:45)

Okay. So ANM operating co-case, I’m going to back up a little bit and M operating co uh, is a case out of the Eastern district bankruptcy courts from 1995, for whatever reason, a lot of the jurisprudence in this area is from the early nineties, early to mid nineties, 93, 95. There’s a couple of cases from 87. We’re going to talk about, or there’s one case somebody said, we’re going to talk about, uh, a pretty important case from 1957. It’s a Texas Supreme court case, which is the only reason I’m talking about it really, but this case as bankruptcy courts do this case gives a really good analysis of what has to be done to get yourself the constitutional lien. It makes sense that this stuff comes up in bankruptcy court because they’re always trying to figure out who has claims against who and whether those claims are valid.

Ben House: (12:38)

And the federal courts of course are required to, by their rules to submit long and detailed orders. And they do the new great job of it. We all know that, uh, and the, this is, uh, basically I’ve, I’ve kind of, um, uh, stated the basics of, of their order. And that is okay, what do you gotta do? Build her better half? Oh, I wanted to back up and tell you about the facts of the case. So, uh, this is a case about a supplier of nozzles, flanges and stubs, and other fittings that were incorporated into, uh, uh, the debtor it’s bankruptcy court, right? High pressure vessels used a lot utilized to separate oil. Uh, so this is kind of an oil and gas, but it’s a construction case, nevertheless, and, uh, that party that supplied those nozzles and flanges that were incorporated into the end device and the end machine say, say an article, maybe qualify.

Ben House: (13:38)

The supplier is a material men, quote unquote for, uh, purposes of establishing the constitutional mechanics lane. Um, this is going to be a little bit important a little bit later, but the supplier, uh, to keep this in the back of your mind supplier did not make the goods himself. Okay. The supplier was a company that had a personnel that, that may be units or a subcontractor that may be units. Um, so what ANM held in effect in reality was that constitutional lean applies to a final article. To the extent the value of the material supplied, uh, became a simulated, uh, with the merchandise and therefore irretrievable. Okay. So assimilated, irretrievable, you’re starting to figure out that if you did something or supplied something that became part of the end, either product or property, you’re looking good, but let’s go over kind of my sub points that I pulled from this case.

Ben House: (14:39)

I thought these were important supplied goods and have constructed all or part of a building or article, uh, supplied goods. And that’s kind of easy one supplied goods and repaired a building or article also kind of easy supplied, unique goods to the project, ah, unique, just supplied to the project because they’re unique. Maybe they care, maybe this court cares a little bit less about whether they were actually put into the project, a furnished off the shelf goods that were intended to be incorporated into specific buildings or articles. So I kind of psyched this line because off the shelf goods intended to be incorporated. Well, the T a lot of the Texas Supreme court, or rather the constitutional jurisprudence for lanes says that you better have done something in or on the property. Well, this a and M operating co court says furnished off the shelf goods that were intended to be incorporated.

Ben House: (15:40)

Maybe they weren’t I’m of the opinion after reviewing the cases that I have that I think I wouldn’t feel safe, feel really confident in telling my client, Hey, we got a really good shot at a constitutional lien, unless they’re off the shelf goods were in fact incorporated into the article a and M takes a little bit of a looser stance. If you want to read the ANM opinion, it also hammers on some prior opinions. So they were trying to, at the time of this case in 1995, it’s my opinion. This court was trying to liberalize, uh, some of the requirements of the constitutional lane, because prior to this case, uh, the requirements had the Texas Supreme court had read the requirements of constitutional lanes to be, you know, fairly strict, fairly adherent to the language of what the constitution required. So, okay. My last bullet point is, seem unclear. I think you’re right. Yeah. You can’t be sure. So it’s always an argument, but, uh, these are, these are some good rules of thumb from this, from this case, and some good weapons to site. If you’re looking for a liberal case to support a constitutional lean on for maybe an equipment or material supplier

Ben House: (16:54)

All right. Creativity. This is kind of fun. Okay. So we’re still talking about constitutional Lane’s course here. That’s, that’s mostly what I’m talking about in this presentation. Privity alright. What, what do I mean by that? This is really, uh, about sham contracts. Okay. A lot of us in regular litigation have heard of, you know, sham businesses, sham usually hear the word sham in conjunction with like an alter ego type argument. Hey, this, this company, isn’t a, this company isn’t real, or, or what have you. And in this context, it’s a little bit different. So we have section 53 Oh two, six that’s in the Texas property code chapter 53, used to alter statutory lien rights where owner and general contractor are inextricably intertwined. How does this come up? All right, this, this is, uh, I’ve had a couple of cases dealing with this exact issue, and this is how it comes up.

Ben House: (17:54)

Usually two circumstances. Alright. The first circumstance is you either have an individual kind of well-to-do person who’s developing multiple properties at once. And that person has either filed an LLC, or is just himself acting as a general contractor. The other situation you have is a kind of larger companies say, um, like a, I hate to use examples specifically, but the 24 hour fitness, my case had nothing to do with 24 hour fitness, but a company that builds a fitness facilities all over the place. Well, oftentimes large companies like that will, will be their own or attempt to be their own general contractor. They’ll use an LLC or something to separate it, but really, and fundamentally it’s the same group of people making the decisions as the general contractor. Alright. Why does any of this matter privity is why this matters if you’re not, and this is kind of one of those things that a lot of lawyers who take taking a parting shot at this area of law.

Ben House: (18:55)

No, if you don’t have a direct contractual relationship with the owner, you’re out for constitutional lane. Okay. Well, so if the same owner is now the general contractor, that’s just downshifted you. Oh, I’m not a general contractor in purview with an owner. I’m in purview with the owners, pseudo agent sham, general contractor. And I’m now a subcontractor and I don’t have technically, and I don’t have a constitutional lien anymore. Well, Texas legislature kind of saw, we saw this one coming. Uh, so they said, okay, well, look, here’s the deal. If, if you can prove that the owner and the GC are inextricably intertwined, remember that language from attorney’s fees in Texas, that’s how most of us are gonna know that language. So just use here kind of coincidentally, I guess, um, if you’re inextricably entwined, uh, then you have an argument that to Upshift yourself, back from a subcontractor to general contractor, you’re back in the game with a constitutional lane.

Ben House: (20:03)

You don’t have to rely on statutory lane that you probably blew the deadlines on, sorry, general contractors. They do it all the time. Uh, and what’s really important why I cite a Trinity dry wall systems. Here is 53 Oh two six. That’s the Texas property code. That’s not in the constitution. Well, Trinity drywall says that this analysis might also save constitutional lane rights. Now that’s a, that’s a court of appeals out of El Paso, right? But Hey, look, it’s got the magic words petition denied. That means you’re looking pretty good. If you want to make a sham contract argument for the sake of a recovering, your constitutional lame rights. So this is a very useful tool. You can have a lot of money, uh, uh, in, in, uh, between your party. Your contractor can have a lot of money depending on whether, and to what extent this argument can be used.

Ben House: (21:00)

A lot of lawyers don’t even know this argument exists because it’s kind of obscure. Uh, so I want to make sure that anybody watching does, alright, here’s the title, check out the title, look at this constitutional lanes. Self-executing this is the other kind of thing that your client always comes into the office and tells you well, that’s, self-executing that and file anything. I don’t need to file anything. Yeah. Well, there’s a lot of reasons you want to get something on file. I say yes, but only effective against innocent third parties. If something is filed, think notice, okay, this line I’m gonna, I’m gonna be honest with everybody. Uh, I, I’m not really happy with that line. I think it should read. Yes, but might only be effective against innocent third parties because there’s a lot of law on the books that says that whenever you get a lien on file, it can come in and, uh, it can come in and beat out other lanes, uh, even D deeds of trust, even mortgage lanes on the property.

Ben House: (22:06)

Okay. Well, you don’t even want them to have the argument about saying I didn’t have any notice. I didn’t know this thing existed. So get something on file. That’s it, it’s pretty hard to, I’ll get into this a little bit late. It’s pretty hard to mess up the filing of lien of lien. You don’t even have to file. Okay. There are. So just stick with your forms, uh, for, uh, that are that available on practice guides or straight out of the property code, uh, that are used for, um, statutory liens put in the information you think is relevant to provide notice, go from there. There were even some constitutional lien forms of course available. Okay. Prudent practitioners should get a lien affidavit on file. Sure. Let’s talk about that. Uh, okay. Yeah. We’re going to talk all about homesteads. Don’t you worry.

Ben House: (23:00)

Alright. Chinks in the armor, chinks in the armor, preferential lien status questionable as compared to statutory lanes. So we’re gonna, there’s a whole slide dedicated to this. It’s the McConnell case from 1957. Um, and, uh, I’ll get to that in detail, but just know in the back of your head as practitioner. Alright. Uh, when, uh, I have a constitutional lien, I’m not as Bulletproof as I would be with a statutory lien because there’s some ugly case law that a smart lawyer on the other side could file against me. And in a, you know, case worth several hundred thousand, a couple million dollars, maybe even more, uh, they could get creative, um, to, to knock Elaine out it exist. And we’ll talk about it, uh, moving forward, um, split of authority as to removables. Okay.

Ben House:(23:55)

Removables versus articles versus buildings. Are articles a good or channel, right. All right. Well then why are we talking about removables? Well, if it’s a removal, if you’re arguing, it’s part of a building, but it’s actually a removable, you run into a split of authority between Dallas and Amarillo, uh, as to whether your constitutional lane applies to the removable product. Um, generally speaking and improvement that can be removed without material damage to the Realty. Okay. Those of us who, uh, had property in law school, which has every one of us, those of us had taken it recently. And, and, and might remember some of the cases we talked about, talked about an improvement that can be removed without material damage to the Realty. That’s that’s sounds like a fixture, doesn’t it? It does. Um, it’s kind of the same type of analysis. So Dallas says that if it’s a fixture, uh, if it’s removable, so basically if it’s not a fixture, well, your, your lane issue, uh, your lane went out the window, the constitutional lien went out the window.

Ben House: (25:03)

That’s FEIC versus Bowden down there. Uh, how, and then Amarillo says the opposite and Amarillo goes so far as to say in harass, I’m Coby, a dominion that goes so far to say, not only is constitutional work statutory works to on removables. Cause I don’t care if it’s removable. Um, they, they say you get a constitutional lien now. All right. And here’s the fun part of these cases. I think Dallas don’t quote me on this. I think Dallas was 93 and Amarillo was the newer case in 95. Both of those look at the end of the site are written denied. All right. So the Supreme court was happening with both of those at the time they were made the Amarillo case being newer. It makes you wonder. Okay. Did the, did the tech Supreme court obviously didn’t issue an opinion on this? Are they happy with Amarillo’s

Ben House: (25:54)

Maybe, maybe not, but I don’t know of any case law that has been determinative on that point. Ben, we have a, we have a question that was asked by Richard, uh, an improvement to Realty or an improvement to a preexisting improvement.

Seth Bloom: (26:10)

Let me think about that

Ben House: (26:14)

Improvement to Realty or an improvement to a preexisting improvement, depending that would depend on. Okay. I think you’re getting hung up on improvement.

Speaker 4: (26:22)

Um, so

Ben House: (26:25)

A re an improvement to a preexisting improvement is totally okay. Uh, that’s a repair repairs are authorized under the constitution to provide you a lien. So a repair of a existing article or an existing building. That’s fine. That works for you. It really on, well, according to Dallas court of appeals, it turns on whether the article is removable or not. They, so there’s a, there’s a point break, uh, not to, not to talk about the great eighties movie, but there’s a point break where, uh, you’ve got to figure out if this thing is basically a fixture, is it, if it is a removable, if it is removable, Dallas says, well, there goes, your constitutional unit walked out the door with your removable property. If it’s not removable. And Amarillo says, no, you, you installed it in the building. It was part of the building at one point, basically.

Ben House: (27:20)

You’re good to go. Um, I hope that answered your question, sir. Uh huh. Okay. More chinks in the armor. Gonna talk a little bit about the relation back doctrine, alright. To have in the back of your head, as a practitioner, liens relate back to a invisible or too visible construction or delivery, which is for material men who deliver stuff like your wood or your screws, or what have you to the property. So there’s visible construction on the property, which if that sounds like the fact question to any litigators in the room, you are correct. A tough, tough thing to establish, but it’s early. That is the earliest point in which your, uh, lean, uh, takes hold. Okay. So now we gotta look at that case. I talked about it a little earlier. Now we gotta look at McConnell. Uh, I’m running a little bit behind timewise, so I’m going to kind of shoot through McConnell, but I want everybody to be aware of it.

Ben House: (28:18)

Um, McConnell while subsequently questioned and distinguished by at least there’s way too many words on this. Just trust me. I’ll walk you through this one. Um, McConnell has been distinguished by three courts and actually directly refuted by a subsequent appellate report, but McConnell’s a Texas Supreme court decision from 57. It has not been expressly overruled. Uh, this language down here will tell you why that is the case. But what’s critical is that McConnell said that a deed of trust at mortgage lane was superior to a constitutional lane. And most lawyers would bet their bottom dollar that that could not happen. But McConnell says, yes, it can because the mortgage lien, and this is how bad the facts of this case were, the mortgage lien was actually, or the mortgage, uh, wow. Was actually taken out to pay for the construction work. And the mortgage company knew that at the time, but the Texas Supreme court said that.

Ben House: (29:15)

Yeah, but at the time they took out the mortgage, no visible construction on the property or no delivery on the property, such that a constitutional lien could attach. And they gave the superior, they made the, uh, mortgage lien superior to the constitutional lane and, and a lot of lawyers going, how could that be? And a lot of subsequent courts have said are free. At least subsequent courts have said, how could that be? Uh, the Supreme court’s reasoning is there. It would broaden the constitutional and statutory provisions of the constitutional lane, uh, so far as to create many complications in this class of business. All right, well, let’s see. What’s happened since I went too far back, ended up alright, we’re live note. Cause I thought it was worthy first federal savings and loan association versus title, certain title company, Texas appeals, Beaumont 87, the nine writ denied.

Ben House: (30:14)

You would think that would be more important than it turns out. It is. They say the proposition that a priority position of a mechanics and materials link cannot be related back to pre mortgage work for which full payment has been made is not sound. They are telling you McConnell’s wrong, but deep down in that case. And if anybody ends up briefing this, you’re really gonna want to know this. However, the appellants conceded this point in their briefing with the Beaumont court of appeals statement, the relation back doctrine is not free from doubt. Okay. So this wasn’t actually a point of argument to put a point of contest between these parties in this appeal. So as I read this case, the finding of the Beaumont court of appeals is a kind of dicta. Uh, but they wanted to come out and say that, Hey, this is where we think the law is. Obviously the Supreme court said written denied. So the Supreme court might think that’s where the law is on this issue. Uh, but these cases, these, these three or four cases kind of sum up the last word on this. And I wouldn’t be a bit surprised if, uh, the, the, easoning is that of a, this first federal savings and loan association case in 87, which is not, if it, they can relate back to pre mortgage work.

Ben House: (31:40)

All right, here we are. Here’s where you get in trouble up to this point. We’ve been talking about constitutional lanes. All right. If you’ve gotten to this point with an analyzing, lot of you will make, may even have clients are thinking about right now. That’s what I always do, uh, and kind of run through the numbers if you’ve made it to this point and you’re okay. And it’s a commercial project, I think you’re going to be all right. You’re probably going to have a constitutional lean. It’s going to be pretty Bulletproof. Make sure to look, get something on file. Make sure to look at the timing of the pre mortgage work or when the mortgages are any superior, potentially superior creditor, uh, did their work or entered their deals. But generally constitutional protection is pretty broad and, uh, should be, should be okay. Here’s when you’re not homestead determination.

Ben House: (32:33)

First note, before you get this protection, you got to prove it. And the burden of proof, at least initially is on the home owner. I am trusting. I’m not really going to go through what homestead is. This is one heck of an educated audience. We’re all, uh, we’re all legal practitioners. We’re all lawyers, um, homestead protections. Uh, if, if, uh, we’re talking about homeowners in a residential construction context, basically. So that’s the only situation in which, uh, any of this now is going to apply any of these protections. None of these protections are gonna apply to your commercial projects. Okay? I want our must prove a property as homestead before entitlement to homestead protections. That is true burdens on the owner owner as a burden of proof. Okay? The two things that the question turns on overt, acts of homestead, usage over acts, what you’ve actually done, where you actually live, where you actually work, where you actually commute to how much time you spend in a certain house.

Ben House:(33:40)

All of those things are over acts of homestead usage that you prove, right? The intention to claim property is homestead. This is a lot of lawyers know this one. This is the one where it’s where you intend. It’s where you intend to maintain your domicile. We hear about that in the personal jurisdiction context a lot. Well, this is not in that context, but they use the same language, the intention to claim property as a homestead. Alright, now societaly, uh, a lot of our practitioners in my audience will know, Texas is a big property rights state, and it’s a bigger property rights state. When they’re talking about your home, uh, any lawyer that has done any foreclosure work, what do you know? You know that the court is going to hold you over. If not above the requirements of the law for foreclosures, this is a homestead leans are kind of the same thing.

Ben House: (34:38)

Traditionally in law, mechanics lanes are very favored right up until you bought up against the other, even greater favored, right in Texas, a person’s home and a person’s right. Not to lose their home, uh, because of some monetary dispute. So with the intention to claim properties, homestead, you’re gonna find a lot of cookie cases out there. You’re gonna find a lot of stretch arguments for this intention that worked. Uh, I read through them, you know, occasionally when I’m doing research for my clients and I just, I kind of, I kind of laughed at myself and go, wow, I might not have even bet that as my loss old law school professor said that doesn’t even pass the, pass the giggle test on making that argument, but they work. So make the best argument you can and stick to it, make it, uh, cause the courts from typically going to be on your side in this, uh, it’s not even a political issue.

Ben House: (35:31)

It’s it’s, I’ve never seen a judge, uh, uh, kind of, not in favor, at least generally speaking of protecting somebody’s home, that kind of goes without saying, so use that in your favor. All right. We talked about the initial burden. The initial burden must be met by the owner, but the burden shifts to the challenger. Ha okay, so you got an initial burden. You say I lived there, my kids lived there. I’ve lived there for 10 years. Judge goes, yep. Sounds right. Uh, then burden shifts to the challenger. Here’s the three ways you get to knock it off. Abandonment, alienation, death, abandonment. Self-explanatory kind of alienation. You get that comes up. When you got two properties, you got two homes and you summer in New York and you winter in Los Angeles, I don’t have that issue. But for those of you who do, uh, then there’s a fact issue as to whether, uh, which is your homestead.

Ben House: (36:27)

Okay. You get one under Texas law. So, and he might have designated, you know, for various tax reasons, you see folks accidentally completely legitimately, you know, designating in both, both situations, but that doesn’t really matter what it comes down to is the facts. So alienation is what you are. You say, no, he really lives here. Here’s the, uh, here’s the testimony of his gardener who says he’s there all the time. Okay. Death, uh, for anybody in my audience, that’s dealt with probate. Uh, what happens when your, your client passes away? Well, first of all, they’re usually already have a, if you’re a probate lawyer, second of all, uh, their property is usually not, uh, subject to the, uh, state tax homestead. Uh, at least in many counties, if not all, I’m not an expert in that area, but that that’s what happens. All right. And when that happens, uh, you lose, you also lose the homestead protection, um, or you can, if it’s a single property owner, individual property owner use the homestead protection.

Ben House: (37:30)

If there are other people there who can claim homestead, Oh, you’re in a much more complicated situation. Um, and that’s actually probably true the majority of the time. So status determined as of date. Okay. This is important status determined as a date of construction agreement. That’s the status as a homestead, determined as date of construction agreement. Alright, we’re going to talk about the McKee case here a little bit. Uh, this is not a Waco 2005, no petition. So not super duper binding. I guess I’m still good law. Want to jeopardize it? Uh, McKee says basically the, the facts of the key are a homeowner was living in his home contracted to build a new home on an empty lot, a date of the, and they wanted to use their homestead defenses for the new lot. The court said, no, you don’t get homestead defenses on the new lot because at the time of entering the construction agreement, which was oral, by the way, in this case, uh, at the time of entering that agreement, nothing was built.

Ben House: (38:37)

And your homestead was where you already were living. That would have been a fact determinative analysis because of course you get to argue in tent, but it’s a kind of tough road to hoe if, uh, if you’re living in the house that is currently your homestead, um, there’s legal arguments to be made on either side, but Waco said, uh, Nope. Um, you don’t get your homestead defenses. This was just like building, uh, a nonresidential commercial property for the purposes of this lane. And, uh, he gets his constitutional lane. So if you do have a new construction case, even on a homestead, no McKee, no McKean, because it is a loophole that could be critical for you. Okay. Section 58 protections. This is section 58 of article 16 of the constitution. So this is constitutional protections, uh, dealing with homestead lanes. There are additional protections. There are additional hoops. You have to jump for homestead lanes against, or for liens against homestead residences. Uh, we’re getting into the real meat and potatoes of this presentation. This is the critical stuff.

Speaker 4: (39:53)

Alright,

Ben House: (39:59)

Here are I call them potholes. They’re worse than that. They’re like bear traps really?

Speaker 4: (40:04)

Okay. All right.

Ben House: (40:06)

All right, everybody take a screenshot, uh, print this one out, um, red line at highlighted, uh, stick it on your wall. This is the, if you watched up until now, this is why you did it. Section 58 protections. This apply. This is in the constitution, applies to constitutional lanes. 100%. All right, here we go. I, this is the one that everybody knows. You got to have a written contract. Okay. A significant, small, significantly smaller percentage of folks know that both spouses have to sign the written contract that has knocked out more, uh, constitute per purported constitutional lanes in my practice than almost any other issue. They just didn’t get the spouse to sign the written contract and all they were going for was the constitutional lane. Alright. That’s how like a contract can not be executed before the fifth day after owner applies for credit to fund the work materials.

Ben House: (41:03)

Many of you who are familiar with DTP law, that kind of thing. You’ll see this type of language. Fifth day, third day, 10 days, they come back out. Right? Well the constitution, man, it’s got it built in now. Uh, Oh no, I’m reading the wrong line. Okay. That everything I just said was, uh, in relation truly to a free little lie down there, contract must be rescinded up to three days after execution. Um, the little tomb, the lie. That’s never come up with me. Maybe it’s come up with others in practice. Um, it’s, I’ve just never dealt with that particular issue before never had to raise that particular defense. Yeah. Three little lie contract must be resectable. Must be descendable up to three days after execution. Uh, here’s a question I haven’t researched this, but here’s a question to ask yourself and maybe a resource on this issue.

Ben House: (41:55)

If it comes up for you, contract must be rescinded up to three days. Does that mean the contract has to state it’s for sendable up to three days or does that mean the contract as a matter of law, based on the constitution is reasonable up to three days after execution. I think it’s the first one. I think it has to say it in there. Otherwise you got a pretty good defense. Uh, uh, but, uh, that’s, I don’t know if there’s a case on that or not. I really don’t. Um, all right here, here’s the doozy you’ve waited 43 minutes to hear it here. It is. Contract must be executed by the owner and spouse, or only at the office of a third party lender, an attorney or a title company. Third-party lender, an attorney or title company, man. This is never the case. Uh, the only time I’ve seen this, the most common I’ve seen this occur is actually lender the bank.

Ben House: (42:50)

I’ve seen contracts executed at the bank. Just everybody sat down there and did it there mostly because, uh, the general contractor used the offices of the bank because in residential contracting, a lot of times the general contractor doesn’t have a formal office or doesn’t have an office that is nicer than a bank. Cause of course the banks got the money and their offices are nice. Uh, an attorney, man, you never see that, uh, uh, title company. Um, that’s probably the second most common, but man, a contract must be executed by the owner and spouse only, only that is straight out of the constitution at the office of these three folks. Rare. It’s just rare. Uh, it’s a lot of I dotting and T crossing that doesn’t usually occur with residential stuff. Alright, there you go. That’s the critical part. Hope y’all enjoyed it. Now I’m going to tell you a bunch of other stuff, but no that please. Alright. Expedited lane removal procedure. Uh, Ben,

Speaker 1: (43:50)

Before you jump, uh, Cynthia has a question. So we want to make sure to get to all our questions and we’ll save an extra few minutes at the end, if there’s any questions. Um, Cynthia says, thanks for the presentation. I had a constitutional lien filed on a homestead and I filed a motion to remove the lien. The judge did not believe that the contract had to be executed in those offices. The judge refused to remove the lien and then we were awarded attorney’s fees at the end of trial.

Ben House: (44:22)

Let me see if I understand that correctly. The judge said you, I read that these rewarded against you, I guess that would make sense, but at the end of the day, well, so I don’t know any legal basis, why the judge ruled that way. I do know that this stuff, these types of defense, I mean, it’s in the constitution. I do. If there’s, if there’s some law out there or some case out there that says that these, these don’t apply, um, uh, maybe in one’s dad, a little more detail, we can circle back on that. And maybe this was an appellate issue that was overturned. It’s odd, Cynthia, follow your appeal. You’re gonna make some great law here, uh, because this is, um, you know, I’ve, I’ve uh, this, these are constitutionally protection. If your guy had a or gal had a statutory lane, uh, they might have a better argument for these not to apply, um, because these are in the constitution and we’re going to, I actually have a slide moving forward.

Ben House: (45:26)

That’s going to talk about statutory protections. Actually. I think it might be this slide or the next one. And so the Texas constitution has the 58 protections. The, uh, uh, Texas property code by the legislature has ones that apply to statutory claims. Um, I don’t, I don’t don’t no the facts of your case, but I am, uh, suspicious of that, that ruling by the judge. So I think you at least have a very, very, very solid basis for appeal. I would thing. Uh, but let’s, let’s hop into that, uh, that issue since we’re on it. All right, how much did, how am I doing on time? Ooh, 13 minutes. I’m going to have to run screaming with my hair on fire. Alright. Uh, section. So this is the expedited lane removal procedure. I’m going to fly through this. Uh, many of you might know it.

Ben House:: (46:13)

You can read the rules straight out of the Texas property code, 50 41 60. Uh, it allows for removal of lane. Uh, but it’s not a final judgment on the lien. This is the procedure you use. It’s like a summary judgment. You file it. First thing you, you raise your homestead defense. You prove your homestead defense that allows you to try to knock out the lane, but it doesn’t knock out the lane permanently. It just knocks out the lane four. It’s like getting a TRO on the lane. It knocks out the lane until at the end of the trial, uh, you, you, uh, you get a final determination by the judge on the lane. So for that period, there is no lien on your property. You can do whatever you want with your property. Now there’s LIS pendens there’s litigation about the property. So it’s still, you know, his title clear if I’m, uh, if I’m a title insurance company, of course I’d say it’s not.

Ben House: (47:04)

Uh, so that’s, you’ll probably still, you might even still want to bond around the lane, which, uh, if you’re capable of doing it in my legal opinion is a probably preferred to this, or at least should be and can be done in conjunction with this, uh, to bond around the lane. Just to, just to clear title in case you want to sell the property, which is still an option, uh, grounds for removal. Okay. So here’s the deal with this? A 53, one 60, it only applies to this. This kind of goes to a Cynthia’s issue. 53, one 60. I don’t know Cynthia, if you use this, this procedure, this procedure is way more limited than your usual homestead defenses. Um, so let me share my screen here

Speaker 4: (47:51)

And show you what I’m talking to.

Ben House: (47:54)

All right. 53, one 60. Here’s the deal it’s limited to these as far as homestead, property defenses, no contract executer to file this requirement by 53 to 54, this is not 58. This is Texas property code 53 to 54. This is the section that w puts, uh, where the statute puts its own requirements on statutory liens, uh, affidavit claiming lien filed to contain 53 to 54 notice.

Speaker 4: (48:25)

Mmm.

Ben House: (48:27)

So there’s specific language that’s supposed to be in these affidavits that has to be in there. A notice of claim has to have very similar language. So these are the issues that let you bring up first thing. So the court basically wants to know if you didn’t get the warnings you were supposed to get as a homeowner, or there was no written contract. If those three issues come up, man, fire sec, section 53, one 60 motion, and just nail them with it. Um, and you should, I don’t, I’m sorry, Cynthia. I don’t, if you got one of these going for you, um, now I could say, so the 58 protections aren’t listed here, right? So if you file a 53, one 60, you might be denied on that basis. You might need to file a traditional summary judgment, uh, to bring up your other homestead defenses, like the ones that are under the constitution under under 58.

Seth Bloom: (49:17)

But man, they’re real. You bet a bitch. It, uh, okay. I’ve told you about that night. Um, no interlocutory appeal on this, um,

Ben House: (49:31)

Motion can be heard at 21 days, notice we’re climate. So this is stuff you can kind of read procedural stuff. Um, live T here’s the critical part. Here’s the whole reason for this, this, uh, slide live testimony is allowed. Okay. It’s not like a summary judgment where you can’t have live testimony, you can bring your homeowner and he, or she can talk about where both, uh, can talk about why they get, why it’s their homestead. And I think, you know, I always prefer live testimony over anything written. So do it, if you can, it’s kind of, it makes it a little bit like a mini trial in that regard. Um, remember your homestead burden because you gotta meet your homestead burden before you get to homestead protections. Uh, why not file a traditional MSJ? Um, this, this procedure provides an opportunity to clear your title immediately. Um, and then on this next,

Seth Bloom: (50:20)

Uh, to one too far.

Ben House: (50:25)

So that’s really the, the only the benefit that I can discern is regardless of continuing litigation, uh, you know, this isn’t subject to an appeal. You can get the lien knocked off. It would prevent you from needing to have the time or expense or, or tie up your collateral and a bond around bond, um, or surety situation to clear title to your, to your home, uh, momentarily or for the time being all right. Removal of Elaine may be staid. Okay. So just as irritating to me. So you go through all that process, 53, one 60, and yet the judge agrees with you. The judge has all right lanes off the property for the time being well, if, if the contractor files a bond, the Lane’s back, but they gotta be really sure because the B the lien has to the bond has to cover attorney’s fees and costs as well.

Ben House: (51:20)

So why bother if the lien is removed, the property is then sold. The lien is then reinstated. So, alright, I’m slow down a little bit, cause this, this gets a timeline wise, little confusing. If the lien is removed, the property is then sold. The lien is then reinstated. Lien does not relate back to the original date of attachment filing. So for the purposes of creditors, the situation where we talk about mortgage holders, it doesn’t relate back like a usual construction lien would anyway. And in other words, you can, you can cut through the ability of the lien to relate back, uh, which, which might, you know, a smart practitioner on the other end. If he gets his lean cut, he knows, Oh, now my Lean’s behind however many other lanes, uh, this became, this fell from a very powerful lane to maybe not so great of a lane and maybe, you know, not worth all of our time and effort and expenditure on the case. It’s a, it can be for a smart practitioner on the other side, it can be really demotivating, I would think. Alright, uh, fraudulently filed lanes. Um, I think this is pretty important. Um,

Ben House: (52:34)

Surely incur, okay. Whenever I see a lien, that’s filed a lot of the times, I think to myself and my lawyer brain, this lane should not have been filed by a lawyer. The lawyer should know this is not a, this is not an enforcement link either under the statute or under the constitution for homestead purposes, this lane, as it was filed when it was filed, loses. Uh, so I always think, okay, well then, well, early on, um, before I had, had really done some homework and done some litigation very early in my practice out of law school, maybe, uh, I had thought, okay, well, Hey, I got a really good argument for fraudulent lane in that instance, not so much this, there is a distinction, and here’s the case. I’ve given you the site, uh, between an affidavit that is factually inaccurate in some respect, and one that attempting to perpetrate a fraud, you can be wrong.

Ben House: (53:30)

You can make a mistake in filing a late. The key with fraud is this case will tell you. And any case about fraud will tell you his intent, all fours, right from law school in intent is what’s critical. So, you know, in a lot of situations, if, if you get somebody up on the stand and you say, Hey, did you, do you think you had a valid lien when you filed this? And the contractor goes, yes, of course I did. Oh, well, you’re pretty much done in the fraudulent lien department. Uh, I have seen, uh, email correspondence going back where, uh, office managers will say, Hey, you know, I, I don’t, I think we’re late on this, or I don’t, I don’t think we have a valid lien for this, that, and the other reason, and whoever is in charge will say, I don’t care file it.

Ben House: (54:13)

Okay. That’s good stuff. That’s good stuff. For intent to file a fraudulent lane. I’ve seen liens filed after the project was completely abandoned. Even before any nonpayment issues, they literally walked off the site and then filed a lien for not being paid for the work. They didn’t do, like stuff like that brings up this, this fraudulent lien issue. And then they went around and follow him. So there you go. Like, I always tell my clients, anybody can file a lien. I gotta do sign your name and swear to it, but it’s kind of an extra judicial process. You just take it to the property office and file it. So, uh, so if I prove knowledge and intent as to the fraudulent lane, what do I win? Uh, you want a minimum of 10,000 and economic damages court costs pretty Steve’s exemplary damages. My favorite two words, uh, and an amount to be determined by the court.

Ben House: (55:06)

So this is great language for letters saying, get rid of your lane before I come after you with a Pitchfork, uh, because you’re going to lose. And when you lose, you’re gonna lose bad. Um, and that’s, that’s the purpose of this, um, and uncertain circumstances. Like I talk when they abandoned the project, you just know the lane is fraudulent, uh, and you know, the facts are gonna bear that out, man. Um, it’s, it’s great ammunition to tell. It’s great to tell your client to say, look, we, if, if you have a, of course, a defendant that that is, um, you know, has any money liquid at all, a worthy target. Uh, this is really good. This PR this rural provides you a Texas civil practice and remedies code 12 provides you a great weapon.

Ben House: (55:53)

Okay. Risk of attorney’s fees award. Most of us know this one, so sorry. Section 53, one 56 provides for recover attorney’s fees. Alright. Uh, declare that any lien is invalid or unenforceable in whole or in part. All right. So you get your attorney’s fees. It’s a mandatory statute. All right. But here’s the really great part if you’re a homeowner and the not so great part, if you’re trying to enforce a homestead lane, here’s here’s magic, the court has discretion to spare a residential owner from attorney’s fees under this otherwise mandatory section. This goes back to Cynthia’s question. So the court ordered a attorney’s fees. I would be arguing from the top of my Hill, you know, lion King up there holding Simba saying, man, if there’s any situation in which, you know, don’t, I get to defend my property. And now you’re telling me because I tried to use the language of the Texas constitution to protect myself my home from this claim, not myself, my home from this claim, uh, can I get some help in attorney’s fees?

Ben House: (56:57)

And the law actually allows the court discretion to deal with that. So Cynthia man, that’s two re that’s two knocks on that decision that I just, I kind of be humanly disagree with Franklin. I’m sorry. That was the result. Uh, take away. There was less risk and combating a potentially improperly in his homeowner than there is a, uh, commercial property owner. That is, that is the truth. There is less risk because of this discretionary language. Um, and because of the, just slew of defenses that, uh, homesteads have, uh, two minutes left to go, I ran long. I’m sorry. That is the end of my presentation. Thank you very much for your kind attention. Uh, I’m Dan house. Thank you,

Seth Bloom: (57:39)

Ben. Thank you so much. And Cynthia came back and cleared it up a little bit. She said, uh, at the, at the end hope screen’s moving on me. Uh, at the end of trial, the judge made a final determination to remove the lane and he awarded our client’s attorney fees as, as per section 53 to five for the contractor filed the contract in the lien property records. After he filed a lien,

Ben House: (58:05)

There you go.

Seth Bloom: (58:07)

What a damages by the jury, but the judge did not award attorney’s fees and the final judgment we were awarded, then we were awarded

Ben House: (58:14)

Attorney fees. Okay. So 53 to 54. So the judge saw, so the judge used the statutory rules, the statutory homestead protection rules instead of the constitutional rules and came to the right conclusion, which is great. So the system works. Yay. They don’t always do that. I ain’t say nothing.

Seth Bloom: (58:32)

Well, Ben, I just wanted to thank you. And again, uh, Ben house, uh, in the Houston area, uh, focuses his practice on construction. Um, it’s a great, I have a lawyer audience today. So if you need to reach Ben and you’re in a different part of the state or different parts of the country, uh, it’s a great, this is a great way to facilitate business between, uh, other lawyers and network. Um, again, I’m Seth bloom, uh, senior director of attorney services at a Levelset and check out Levelset uh, if you’re not a claimed, uh, if you don’t have a claim profile, please email us, please contact us and we’ll get you on. We’d love to see your participation. Uh, this is our first CLE in Texas and, uh, we hope to do more. We’ve done one in Florida and I think the next, uh, we’re going West to California, um, for October.

Seth Bloom: (59:24)

So we’d love to get everyone involved in here to participate in webinars, CLS, post blogs, and become part of our team. I know most of you that are participating today are already in that. And Ben, I just want to thank you again. Um, any other questions, um, we’ll address directly to you, um, and thank you for enjoying this and we’re going to help provide, we’re going to hope to provide more learning and free Sally’s in the future. Thank you, Ben. It’s all right. Thank you. Thank you, everybody who I help. Some of these, uh, some of these slides were pretty useful that, uh, those, those defenses can make a huge difference. Thank you everyone.