With changes to the Texas mechanic's lien statute taking effect Jan. 1, Katy Baird, senior associate at Andrews Myers PC (Houston, TX), provides an in depth look at how subcontractors and suppliers should protect themselves.
During a recent NACM STS webinar, Texas Lien Statute: Preparing for the Changes in 2022, Baird provided a summary of the changes that will take effect for contracts signed next year:
- Elimination of the second-month notice requirement to general contractors (remains optional).
- Extension of lien notice and filing deadlines to the next business day (if deadline date falls on a weekend or holiday).
- Non-GC retainage liens due by 15th day of the third month from original contract completion.
- Statute of limitations for foreclosure on a lien shortened to one year from when the lien could be filed.
- Expedited discovery for information relating to the validity and removal of the lien.
- Design services, surveyors, landscapers, demo work and equipment rental will be subject to liens.
- Certified mail will be optional and no longer required. (However, Baird recommends doing it because a postal stamp is the easiest way to prove service.)
- Standardized form for third-month (fund trapping*) notice.
- Elimination of specially fabricated materials notice.
- No change to public-owned projects.
In addition to these revisions, this bill will slightly alter the requirements pertaining to Texas lien waivers. Section 53.281(b)(2) states: Although the basic template for Texas lien waivers remains the same, the waiver will not need to be notarized.
"The removal of the notary requirement simply makes it easier for subcontractors [and suppliers] to sign these documents and provide them to an owner without a notary present," Baird said. "Keep in mind that owners or general contractors may still require you to notarize payment waivers so they don't run into issues authenticating a subcontractor's or supplier's signature at a later date. You will need to read your contract to determine if the notary is still required by the parties upstream."
One of the most impactful changes for subcontractors and suppliers is the removal of the second-month notice requirement to perfect your lien. However, subcontractors and suppliers still have the option to send it without penalty.
"The original contract is between the owner and the general contractor on the project," Baird said. "As such, I would say that most subcontractors and suppliers should largely leave their current lien procedures intact and continue to send second-month notices in addition to third-month notices, as applicable, until the projects they are working on are predominately new projects, beginning after Jan. 1, 2022. If a lien claimant is too far down the chain of construction and is not sure when the project began, it makes sense to send a second month notice to protect your lien rights just in case you don't have all of the relevant project information."
When it comes time to send the third-month "fund trapping" notice, subcontractors and suppliers should ensure they meet the requirements that must be included within those documents. These requirements include:
- Key language heading/warning.
- Date of notice.
- Project description.
- Lien claimant's name, contact person and address.
- Description of labor/materials provided.
- General contractor's name and address.
- Party with whom lien claimant contracted (if different than general contractor).
- Claim amount.
Baird also recommends including invoices and billing.
*A fund trapping notice is a preliminary notice that parties not directly contracted with the owner send to preserve their right to file a mechanic's lien in the event of nonpayment in Texas. Its purpose is to inform the party making payment so that sufficient funds are retained for their services or materials.
-Bryan Mason, editorial associate