How to File a Texas Mechanics lien. For a General Contractor.
Texas is considered one of the hardest states in the nation as to the rules for filing a mechanic’s lien. Subcontractors and suppliers have to remember filing second month notices, third month notices, and notices of contractural retention. Only then can they file a mechanics lien in Texas. Fortunately, general contractors can dispense with these nuances and can simply march to the recorder’s office and record the Texas mechanic’s lien without these pre lien requirements. But there are still three notices that give general contractors pause, and we will discuss them in this brief article.
Notice of Intent to File a Texas Mechanics Lien. Technically, a general contractor can simply file mechanic’s lien in Texas at the end of the project after non-payment. But many like to give a warning shot to the owner with a document called Notice of Intent to Lien. It must be emphasized that this is not a required form under the Texas mechanic’s lien statutes. It is purely optional. On the other hand is quite popular. It shows your seriousness and gives the owner one last chance to pay up before taking the step of actually recording a mechanic’s lien in Texas.
There is no requirement of recording. Simply serve the owner by certified mail. To show proof, keep the green return card from the post office and also fill out a proof of mailing indicating the date of service.
Notice of Contractural retention. Texas mechanic’s liens statutes (Property Code Section 53.101) require an owner to retain 10% of the contract price or 10% of the value of the work from the prime contractor for at least 30 days after completion. Section 53.102 decrees this must be for the benefit of a general contractor, as well as subcontractors and suppliers under their contracts.
Further, it is considered industry standard to have a 10% retention.
Some consider this to be harsh. In many states, the owner cannot withhold more than 10% but has the option of withholding less. And in most states, there is no requirement of holding it for 30 days–it could be dispersed earlier. All these requirements are significant to follow, if necessary, because everyone wants to make sure they can make a full claim in their mechanic’s lien in Texas.
So what notices are required to perfect the right to that 10%? It is called a Notice of Contractual Retention. That Notice must be served on the owner and general by the 15th day of the second month after the month in which the unpaid services were performed. If not, no retention can be included in a Texas mechanic’s lien.
Fortunately the law has changed. Effective for contracts entered into on or after September 1, 2011, under section 53.057(b), the Notice can now be served within 30 days of the claimant’s completion. You can then include the retention amount in the regular Texas mechanic’s lien.
This is all well and good, but the real question is does a general contractor have to serve this Notice? By examination of the Texas mechanic’s lien statutes, the answer is no. Fortunately, only subcontractors and suppliers are required to serve this Notice. For a general contractor, he or she can file a mechanic’s lien in Texas without serving this Notice.
Notice of Specially Fabricated Items. Assume you specially-fabricate material for a one-of-a-kind project. This might include unique cabinetry, a wrought iron stairway, a home entertainment center, or on commercial property, a special industrial pump.
A dispute arises between you and the project manager and before you know it, you are directed not to install this material as a substitute is being called for. Now you have an item that cannot be used on other projects and it is collecting dust in your warehouse.
Under most rules, a mechanic’s lien in Texas is allowed only for material that is actually incorporated into the project. But Texas helps you out and says that if the items are specifically fabricated for one job, you can still file mechanic’s lien in Texas for its value, even if it is not delivered or installed.
To get this protection, you serve by certified mail the owner and general contractor, notifying them of the possibility of filing a Texas mechanic’s lien if the specially-fabricated material is not paid.
It is well established that subcontractors must serve this notice. But many people believe a general contractor is not required to do so. Unfortunately, an examination of the statute does not limit it to subcontractors. It speaks in general terms, which could very well apply to a prime contractor as well. It is therefor the opinion of National Lien Law, especially as to expensive items, that general contractors also service notice so they can ultimately perfect the Texas mechanic’s lien for this unique material.