Texas Claim of Lien–First the Preliminary Notices
As with most states, Texas requires a preliminary notice prior to recording a mechanic’s lien. According to the legislature, there are specific reasons for this requirement.
Essentially, this prevents the owner paying twice. A classic dilemma is when the owner pays the general but the money does not filter down to the subs and suppliers. A sub then files a Texas mechanic’s lien and demands the owner pay, which in this case would be paying double, by making the funds payable to the subcontractor. In Texas, unless a second or third month preliminary notice is sent, the owner has a complete offense and does not have to pay twice. The lesson is clear. Send out your notices so you can eliminate this owner defense.
It is therefore highly recommended that you serve your Texas pre-lien notices early.How early should that be? The best practice is to serve on the 30th day after non-payment. For example, as a contractor you work in February and send a standard billing on March 1st. It is now April 1 with no payment. Send out a second copy of your invoice, marked unpaid, and in the same envelope send the prelien notice (whether a third month or second month notice). Don’t wait any longer.
Remember, these notices have to be served no later than the 15th of the second or third month, but they can be served earlier. In other words, you are to serve the notice is no longer than those time restraints area. For example, take the second month notice. It is not a notice that is served on the second month—it is served no later than the second month.
These notices are sent only after non-payment. Some people are under the misapprehension the notices have to go out every month, regardless of whether you have been paid. In some states, such as California, you serve prelien notices at the beginning of the job (within 20 days of the start of the work) whether not you have been paid. In Texas these are like collection notices and only go out during periods of nonpayment.
What about sending the second and third month notice at the beginning of the job—in other words, serving them early and getting them out of the way so you do not forget? As stated above, this would not be required. It would also cause a political or customer relations nightmare because the owner and general would be asked to trap funds before they have the obligation to pay.
Does an owner typically abide by the demand to withhold funds? In many cases they do. The language in these notices is strong and states that if money is not withheld to a sub or supplier, there can be both a mechanic’s lien and holding the owner personally liable.
These notices are also serve as a prerequisite for you eventually filing a Texas mechanic’s lien. As you know, this allows a lien to be placed on the owner’s property and if it remains unpaid, to bringing a lawsuit to foreclose.