How Do I Protect My Property Against Claims of Subcontractors in Texas?
Full Question:
Answer:
In Texas, any person who furnishes labor or materials for the construction of improvements on real property shall, if requested and as a condition of payment for such labor or materials, provide to the requesting party, or the party's agent, an affidavit stating that the person has paid each of the person's subcontractors, laborers, or materialmen in full for all labor and materials provided to the person for the construction. In the event, however, that the person has not paid each of the person's subcontractors, laborers, or materialmen in full, the person shall state in the affidavit the amount owed and the name and, if known, the address and telephone number of each subcontractor, laborer, or materialman to whom the payment is owed.
One way for an owner to protect against liens in to file an affidavit of completion. This will start the clock running on the timeline for liens to be filed. An owner may file with the county clerk of the county in which the property is located an affidavit of completion. The affidavit must contain:
(1) the name and address of the owner;
(2) the name and address of the original contractor;
(3) a description, legally sufficient for identification, of the real property on which the improvements are located;
(4) a description of the improvements furnished under the original contract;
(5) a statement that the improvements under the original contract have been completed and the date of completion; and
(6) a conspicuous statement that a claimant may not have a lien on retained funds unless the claimant files the affidavit claiming a lien not later than the 30th day after the date of completion.
It is recommended to have the terms of the contract in writing to avoid future disputes. A lien waiver may also be requested as a condition of partial or full payment. A lien waiver protects against mechanics' liens being filed against the property.
A lien is a claim to property for the payment of a debt, typically one connected to the property. It is the right to retain the lawful possession of the property of another until the owner fulfills a legal duty to the person holding the property, such as the payment of lawful charges for work done on the property. The right of lien generally arises by operation of law, but in some cases it is created by express contract. There are two kinds of liens; particular and general. When a person claims a right to retain property, due to money or labor invested in that property, it is a particular lien.
Liens may arise by express contract; from implied contract, as from general or particular usage of trade; or by legal relation between the parties, such as created with common carriers and inn keepers. To create a valid lien, it is essential that the party claiming a lien should have the absolute property or ownership of the thing or, at least, a right to vest it; that the party claiming the lien should have an actual or constructive, possession, with the assent of the party against whom the claim is made; that the lien should arise upon an agreement, express or implied and not be for a limited or specific purpose that contradicts the express terms or the clear, intent of the contract. In certain circumstances, the lien holder may foreclose on the property if the debt is not paid in full. Liens can generally be removed by the payment of the amount owed. This payment can occur at any time up to and including the stage at which the closing documents for the sale of the property are signed.
Although the terms lien waiver and lien release seem to be interchangeable, a release demonstrates completion and payment, so as to prove any claim has been satisfied, while a waiver demonstrates a relinquishment of a known right. Waivers are typically obtained prior to commencement of any work, whereas releases are subsequently obtained. Waivers of lien must be in writing, give a sufficient description of the real estate, and be signed by the one with authority to file or claim a lien. No payment needs to be made in advance if the subcontractor agrees to release the land from the lien and rely only on the credit of the owner or general contractor for payment of the debt.
A lien waiver is not a general release of claims; it only waives lien rights. A person signing a lien waiver may still have a claim (or multiple claims) against the person with whom it contracted. Therefore, owners may want their contractor to execute a waiver and release of all claims through the date of each pay application in addition to executing a lien waiver.
You are giving up the right to later file a lien only for the amount of the payment. The lien waiver will not necessarily prevent claims for contested change orders, retention, or breach of contract damages (for example — delay damages, impeded productivity, and other consequential damages).
-Interim Lien Waiver. This is used for progress draws or a partial payment. It waives lien rights through a certain date (and not future unpaid bills) and only to the extent of the payment. Many general contractors and owners require these forms to be signed by the person receiving payment before a check is issued.
-An Unconditional Lien Waiver is used after final payment and means just that: fully and finally releases all future lien rights with no later recourse to file a mechanic's lien. It should be signed only if you are assured you have been paid and are satisfied with the amount received.
-A conditional lien waiver is one that you use when submitting a progress invoice on a project, whether it's the first progress payment or the last. It is conditioned upon receipt of payment, and therefore will typically use the words "upon receipt". An unconditional lien waiver is used when payment has been received and cleared the account. Such a lien waiver will typically state that payment has been received.
When a lien waiver takes effect, the right to file a mechanic lien is given up. However, the lien waiver doesn't prevent a contractor from other remedies, such as a claim for breach of contract, etc.
We can assist you with searching to locate forms or we can draft add forms you may need to our database. However, we cannot advise you to use one particular form over another that address the same matter. We can show you what is available. You can take a look at the forms below and see if they fit your need. If they do not, let me know and we may be able to add a form for your need. You may order a form or package by phone by calling Toll Free: 1-(877) 389-0141 - 8:30-5:00 Central Time Zone Monday – Friday.
Please see the following TX statutes:
§ 53.085 PROP. Affidavit Required
(a) Any person who furnishes labor or materials for the construction of
improvements on real property shall, if requested and as a condition of
payment for such labor or materials, provide to the requesting party, or
the party's agent, an affidavit stating that the person has paid each of
the person's subcontractors, laborers, or materialmen in full for all
labor and materials provided to the person for the construction. In the
event, however, that the person has not paid each of the person's
subcontractors, laborers, or materialmen in full, the person shall state
in the affidavit the amount owed and the name and, if known, the address
and telephone number of each subcontractor, laborer, or materialman to
whom the payment is owed.
(b) The seller of any real property shall, upon request by the
purchaser or the purchaser's agent prior to closing of the purchase of the
real property, provide to the purchaser or the purchaser's agent, a
written affidavit stating that the seller has paid each of the seller's
contractors, laborers, or materialmen in full for all labor and materials
provided to the seller through the date specified in the affidavit for any
construction of improvements on the real property and that the seller is
not indebted to any person, firm, or corporation by reason of any such
construction through the date specified in the affidavit. In the event
that the seller has not paid each of the seller's contractors, laborers,
or materialmen in full for labor and material provided through the date
specified in the affidavit, the seller shall state in the affidavit the
amount owed and the name and, if known, the address and telephone number
of each contractor, laborer, or materialman to whom the payment is owed.
(c) The affidavit may include:
(1) a waiver or release of lien rights by the affiant that is
conditioned on the receipt of actual payment or collection of funds when
payment is made by check or draft;
(2) a warranty or representation that certain bills or classes of bills
will be paid by the affiant from funds paid in reliance on the
affidavit; and
(3) an indemnification by the affiant for any loss or expense resulting
from false or incorrect information in the affidavit.
(d) A person, including a seller, commits an offense if the person
intentionally, knowingly, or recklessly makes a false or misleading
statement in an affidavit under this section. An offense under this
section is a misdemeanor. A person adjudged guilty of an offense under
this section shall be punished by a fine not to exceed $4,000 or
confinement in jail for a term not to exceed one year or both a fine and
confinement. A person may not receive community supervision for the
offense.
(e) A person signing an affidavit under this section is personally
liable for any loss or damage resulting from any false or incorrect
information in the affidavit.
§ 53.082 PROP. Time for Which Funds are Withheld
Unless payment is made under Section 53.083 or the claim is otherwise
settled, discharged, indemnified against under Subchapter H or I, or
determined to be invalid by a final judgment of a court, the owner shall
retain the funds withheld until:
(1) the time for filing the affidavit of mechanic's lien has passed; or
(2) if a lien affidavit has been filed, until the lien claim has been
satisfied or released.
§ 53.024 PROP. Limitation on Subcontractor's Lien
The amount of a lien claimed by a subcontractor may not exceed:
(1) an amount equal to the proportion of the total subcontract price
that the sum of the labor performed, materials furnished, materials
specially fabricated, reasonable overhead costs incurred, and
proportionate profit margin bears to the total subcontract price; minus
(2) the sum of previous payments received by the claimant on the
subcontract.
§ 53.171 PROP. Bond
(a) If a lien, other than a lien granted by the owner in a written
contract, is fixed or is attempted to be fixed by a recorded instrument
under this chapter, any person may file a bond to indemnify against the
lien.
(b) The bond shall be filed with the county clerk of the county in
which the property subject to the lien is located.
(c) A mechanic's lien claim against an owner's property is discharged
after:
(1) a bond that complies with Section 53.172 is filed;
(2) the notice of the bond is issued as provided by Section 53.173; and
(3) the bond and notice are recorded as provided by Section 53.174.
§ 53.172 PROP. Bond Requirements
The bond must:
(1) describe the property on which the liens are claimed;
(2) refer to each lien claimed in a manner sufficient to identify it;
(3) be in an amount that is double the amount of the liens referred to
in the bond unless the total amount claimed in the liens exceeds
$40,000, in which case the bond must be in an amount that is the greater
of 1½ times the amount of the liens or the sum of $40,000 and the amount
of the liens;
(4) be payable to the parties claiming the liens;
(5) be executed by:
(A) the party filing the bond as principal; and
(B) a corporate surety authorized and admitted to do business under the
law in this state and licensed by this state to execute the bond as
surety, subject to Section 1, Chapter 87, Acts of the 56th Legislature,
Regular Session, 1959 (Article 7.19-1, Vernon's Texas Insurance Code);
and
(6) be conditioned substantially that the principal and sureties will
pay to the named obligees or to their assignees the amount that the named
obligees would have been entitled to recover if their claims had been
proved to be valid and enforceable liens on the property.
§ 53.083 PROP. Payment to Claimant on Demand
(a) The claimant may make written demand for payment of the claim to an
owner authorized to withhold funds under this subchapter. The demand must
give notice to the owner that all or part of the claim has accrued under
Section 53.053 or is past due according to the agreement between the
parties.
(b) The claimant must send a copy of the demand to the original
contractor. The original contractor may give the owner written notice
that the contractor intends to dispute the claim. The original contractor
must give the notice not later than the 30th day after the day he
receives the copy of the demand. If the original contractor does not give
the owner timely notice, he is considered to have assented to the demand
and the owner shall pay the claim.
(c) The claimant's demand may accompany the original notice of
nonpayment or of a past-due claim and may be stamped or written in
legible form on the face of the notice.
(d) Unless the lien has been secured, the demand may not be made after
expiration of the time within which the claimant may secure the lien for
the claim.
§ 53.084 PROP. Owner's Liability
(a) Except for the amount required to be retained under Subchapter E,
the owner is not liable for any amount paid to the original contractor
before the owner is authorized to withhold funds under this subchapter.
(b) If the owner has received the notices required by Subchapter C or
K, if the lien has been secured, and if the claim has been reduced to
final judgment, the owner is liable and the owner's property is subject
to a claim for any money paid to the original contractor after the owner
was authorized to withhold funds under this subchapter. The owner is
liable for that amount in addition to any amount for which he is liable
under Subchapter E.
