By: Amanda D. Wright
Good work is hard to come by. The State of Texas has granted mechanics, artisans, and materialmen commonly known as “contractors”) a means to place a lien on buildings and articles made, furnished, or repaired by them for value. The State of Texas provides for two different types of liens: a constitutional lien and a statutory lien.
The State of Texas is unique to all other states in that it provides contractors a self-executing constitutional lien. Article XIV, Section 37 of the Texas Constitution provides that all “mechanics, artisans and materialman of every class, shall have a lien upon the building and articles made or repaired by them for the value of their labor done thereon, or material furnished therefore; and the Legislature shall provide by law for the speedy and efficient enforcement of said liens.”
In order to establish a constitutional lien, a contractor must have “privity” of contract with the owner of the building or article. Because of the privity requirement, constitutional liens are often of little use to subcontractors who rarely have a contractual relationship with the property owner. Work done on a property, but not on a building or something affixed to the building is usually not eligible for a constitutional lien.
Because the constitutional lien is self-executing or automatic, the contractor is not required to file a notice of lien or comply with any other statutory lien provisions before filing a lawsuit to enforce its lien. However, filing a statutory lien is highly recommended because constitutional liens may not be enforced against a subsequent, innocent, bonafide purchaser of the property. Statutory liens may also receive preferential status over constitutional liens so the prudent contractor will seek to perfect his statutory lien rights in order to secure priority status over other liens.
In order to enforce their lien against subsequent purchasers of the property and secure their place in line before liens of other contractors, contractors must “perfect” their mechanic’s liens by meeting a series of legal requirements. Chapter 53 of the Texas Property Code sets forth the requirements for a statutory lien. Depending on the contractor’s status on the project, different set of requirements apply.
Statutory Liens by the Original Contractor
A contractor with a direct contractual relationship with the property owner may perfect his statutory lien on a residential property by filing an affidavit with the County Clerk in the county where the property is located. The sworn affidavit is required to be filed no later than the 15th day of the third month after the day the indebtedness accrues, and served upon the owner, by certified mail, no later than the 5th date after the affidavit is filed with the County. In order to be valid, the affidavit must substantially comply with the requirements of the statute. Due to the strict requirements of the statute, and the importance of properly securing your lien, the assistance of an attorney is highly recommended when perfecting a statutory lien.
The indebtedness to the contractor is said to accrue on the last day of the month in which the contractor provides notice that the contract has been completed, or the last day of the month in which the work has been completed, finally settled, or abandoned. The date of accrual can be easily tracked through this handy chart:
|Work Last Performed in||Lien Affidavit Due By|
Statutory Liens by a Subcontractor
Subcontractors (also referred to as “derivative claimants”) who do not have a contract directly with the property owner must meet the same requirements as contractors. In addition to meeting these requirements, subcontractors must also send the property owner and the contractor notice of the subcontractor’s claim on or before the 15th day of the second month in which all or part of the labor or materials were provided. The notice must contain special language and meet the requirements of the Property Code so the assistance of an attorney in drafting the notice is highly recommended.
Enforcing a Mechanic’s Lien
A mechanic’s lien is enforced by judicial foreclosure on the property. Lawsuits to foreclose based upon a lien must be filed within one year of the last day to file the lien affidavit, or within one year of completion of the project, termination of the work, or abandonment of the project.
Homestead Exemption to Mechanic’s Liens
The Texas Constitution and Property Code carve out an exception to foreclosure of mechanic’s liens for homesteaded properties. However, Article XVI, Section 50(a) (5) of the Texas Constitution allows for a forced sale of a homestead property in order to pay a contractor who has provided work and/or materials for improvements or repairs of the homestead. In order to foreclose upon the homesteaded property; the contractor must have executed a written contract with all of the owners of the homestead property before work commenced.
Challenging a Mechanic’s Lien
A property owner may challenge a mechanic’s lien on their property by filing a lawsuit to declare the claim or lien invalid or unenforceable under the Texas Property Code.
Filing a False Mechanic’s Lien
Contractors seeking to file a mechanic’s lien on a property must be cautious to properly represent the indebtedness and their right to a lien. The Texas Property Code provides that it is a misdemeanor for a contractor to intentionally, knowingly, or recklessly make a false or misleading statement in a lien affidavit. A contractor that is found guilty of filing a false or misleading affidavit may be punished by a fine of up to $4,000.00, confinement in jail for up to one year, or both.
Additionally, there are civil ramifications for filing false or misleading lien documents. The Texas Civil Practice and Remedies Code generally provides that the filing of false documents with the court (in the case of mechanic’s liens with the County Clerk) may subject the violator to liability for actual damages of $10,000.00 or greater, court costs and fees, and exemplary damages to be determined by the court.
The filing of a mechanic’s lien is an essential step in legally securing your ability to collect for your hard work and materials. Due to the strict requirements of the statute, and the importance of properly perfecting your lien, the assistance of an attorney is highly recommended.
This article has been prepared for educational and informational purposes only and does not constitute legal advice. The laws of other states and nations may be entirely different from what is described in this article. Because of these differences, you should not act or rely on any information on this article without seeking the advice of a competent attorney licensed to practice law in your jurisdiction for your particular problem. The author has endeavored to comply with all legal and ethical requirements in writing this article and does not desire to solicit or represent clients based upon their review of any portions of this article which do not comply with the legal or ethical requirements of the jurisdiction in which the client is located. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship.