The Non-Residential Mechanic’s Lien

Chapter 53 of the Texas Property Code provides contractors, subcontractors, and suppliers of all tiers lien rights on non-residential projects in Texas. Claiming and perfecting the lien itself to protect the right to payment is a complex process that requires a contractor, subcontractor, or supplier to take certain steps before filing the lien itself. This series will focus on what a contractor, subcontractor, or supplier must do perfect a lien on a non-residential project and protect its right to payment.

Part 1: Gathering Information

Part 1 of this series focuses on obtaining the information necessary to be able to properly provide a notice of the unpaid amount and, if necessary, file the lien itself. Without this information, you may be in a position where you are running up a deadline and you do not have the information you need to protect your right to payment

Certain information is required to file a mechanic’s lien, such as who the property owner is, the legal description real property the project sits on, whether there is a surety bond (especially if a public non-residential project), or whether there are other persons having liens or security interests in the property (so you know where you are in terms of priority). Unfortunately, this information is not always contained in a request for proposal or in a contract and must therefore be sought out by a contractor, subcontractor, or supplier themselves. The failure to obtain this information early on can create significant problems when it comes time to timely send a notice or file a lien. Accordingly, it is advisable to obtain such information early to prevent missing a deadline later in the process and forfeiting lien rights.

It is therefore incumbent upon a contractor, subcontractor, or supplier to ask the owner or general contractor (or a general contractor to a subcontractor) for this information. Fortunately, the Property Code provides contractors, subcontractors, and suppliers are a vehicle to get this information.

Section 53.159 of the Property Code specifically obligates owners, general contractors, and subcontractors to furnish information when requested in writing. The requesting party should take care to ask for all the information it is entitled to. Once requested, the information must be furnished to the requesting party within 10 days of the receipt of the request. If the information is not timely furnished, the party who fails to furnish information is liable to the requesting party for its reasonable and necessary costs incurred in procuring the requested information. There is no deadline to request this information, however, the best practice would be to send the request to the upstream party as soon as a contract is in place. If you are the receiving end of such a request, the deadline to respond is within 10 days of receipt.

Owners must provide:

  • a description of the real property being improved legally sufficient to identify it;
  • whether there is a surety bond, and if there is, the name and last known address of the surety and a copy of the bond;
  • whether there are any other recorded liens or security interests, and if so, the name and address of the person having the lien or security interest; and,
  • the date on which the original contract for the project was executed.

General/Original Contractors must provide:

  • the name and last known address of the person to whom the original contractor furnished labor or materials for the construction project (i.e., who they are working for);
  • whether the original contractor has furnished or has been furnished a payment bond for any of the work on the project, and if so, the name and last known address of the surety and a copy of the bond; and,
  • the date on which the original contract for the project was executed.

 Subcontractors must provide:

  • the name and last known address of the person from whom the subcontractor purchased labor or materials for the project, other than those materials that were furnished from the subcontractor’s inventory;
  • the name and last known address of each person to whom the subcontractor furnished labor or materials for the project; and,
  • whether the subcontractor has furnished or has been furnished a payment bond for any of the work on the construction project and if so, the name and last known address of the surety and a copy of the bond.

Note that for parties without a direct contract with the general/original contractor must reimburse it for actual costs of complying with the request, up to a maximum of $25.00.

Lien Claimants must provide:

Separate from the initial information gathering by a potential, future lien claimant, an owner, contractor, or surety can rely on the same section of the Property Code to request information from a lien claimant once the lien affidavit has been filed.

Depending on who the claim is made upon (i.e., if a lien affidavit is filed upon a project because the general contractor failed to pay the subcontractor, the claim is made upon the general contractor), that party can ask for copies of any applicable written agreements, purchase orders, or contracts and any billings, statements, or payment requests from the claimant that reflect the amount claimed and the work performed by the claimant. A claimant should provide this information within 30 days after the written request is received. Critically, the information a claimant provides should clearly back-up the amount sought by the lien.

 

*Rishabh Agny is a civil and commercial litigator, focusing on construction law, at the Chapman Firm, PLLC, in Austin, Texas.