Tag Archives: Mechanics and Materialmans Lien

Do Not Pay Invalid Liens To Save Time

“Yea… some guy up and filed a lien out of nowhere. We’re probably just going to pay them and be done with it so that we can move on.”

Unfortunately, I hear this on a weekly basis. In construction, liens are a regular part of doing business. Sometimes, subcontractors file invalid liens on projects and general contractors must try to quickly resolve the lien in order to keep the project moving. Another scenario where a lien can be a headache is when it is preventing the sale of a property. These reasons and countless others result in contractors over paying for liens or paying to resolve invalid liens.

For the most part, the contractors’ reasons for paying invalid liens can be reduced to two things: time and money. General contractors figure that it costs too much and takes too long to contest a lien. This belief is based on their understanding of a typical litigation process. Undoubtedly, some of them have been through long, drawn-out litigation and believe that a lien contest situation will be the same. Others may not have personally experienced litigation, but have familiarized themselves with the process based on the media.

Of course, these beliefs are not completely false. Sometimes litigation can be a long and expensive process. However, what most contractors may not know is that it doesn’t always have to be. This is especially true when contesting an invalid lien. The Texas Property Code as well as flexible attorneys’ fees structures have greatly reduced the costs associated with lien removal.

Section 53.160 of the Texas Property Code is titled Summary Motion to Remove a Lien. Under this chapter, a contractor can contest  a lien by having their attorney file a verified motion attacking the lien’s validity. The motion can attack the lien on the following grounds:

(1) notice of claim was not furnished to the owner or original contractor as required by Section 53.056, 53.057, 53.058, 53.252, or 53.253;

(2) an affidavit claiming a lien failed to comply with Section 53.054 or was not filed as required by Section 53.052;

(3) notice of the filed affidavit was not furnished to the owner or original contractor as required by Section 53.055;

(4) the deadlines for perfecting a lien claim for retainage under this chapter have expired and the owner complied with the requirements of Section 53.101 and paid the retainage and all other funds owed to the original contractor before:

(A) the claimant perfected the lien claim; and

(B) the owner received a notice of the claim as required by this chapter;

(5) all funds subject to the notice of a claim to the owner and a notice regarding the retainage have been deposited in the registry of the court and the owner has no additional liability to the claimant;

(6) when the lien affidavit was filed on homestead property:

(A) no contract was executed or filed as required by Section 53.254;

(B) the affidavit claiming a lien failed to contain the notice as required by Section 53.254; or

(C) the notice of the claim failed to include the statement required by Section 53.254; and

(7) the claimant executed a valid and enforceable waiver or release of the claim or lien claimed in the affidavit.

Using this procedure, your attorney can set the motion for hearing after 21 days. Once the motion is set for hearing the burden is on the person claiming the lien to prove that the required notice and lien affidavit were furnished to the general contractor as is required by the Texas Property Code. The attorney can then argue that the lien is invalid for one of the seven reasons listed above. The statute then states that the court shall make a timely ruling and there is no ability to file an interlocutory appeal.

Essentially, by following this proceeding an attorney may be able to get an invalid lien removed as quickly as 21 – 30 days. Also, because the proceeding is not an actual trial and there is no need for the discovery process, the procedure can be done at a fraction of the cost of regular litigation.  No discovery means there are no depositions, no shuffling documents back and forth, and no hearings forcing the production of critical documents.  These things save contractors money.

In short, this procedure may be less expensive than simply paying for the lien and may not take as long as you think. In the future, when a lien is filed on one of your projects, weigh all the options and if you believe the lien is invalid, talk to your lawyer about this procedure. The more general contractors contest invalid liens, the less likely people are to continue to file them with the belief that they’ll immediately be paid so that the project can move along.

Nothing in this article is to be considered legal advice. If you have questions or need representation concerning a construction matter , please call 832-930-0529 or email us at info@stephensbell.com

M&M Liens: Pesky Perfection Problems

Any subcontractor who has been in business for quite some time has probably attempted to perfect an M&M lien. However the M&M perfection process is simply not subcontractor friendly and often times, subs miss perfection due to non-compliance with the statutes.

There are many of examples of difficult situations where a subcontractor will have to comply with statutory requirements in order to protect its interest but compliance with those requirements are sometimes nearly impossible. For example, let’s say a subcontractor begins a project in January that is expected to take eight months to complete and payment in full is due upon completion. Now let’s say that upon completion in September, the subcontractor is not paid. If the subcontractor is contracted directly with the primary contractor, the subcontractor has likely missed its opportunity to secure payment through perfection. How can this be?

Well, according to the Texas Property Code, the subcontractor must send a letter by certified mail, return receipt requested, to the owner and the primary contractor informing them of the unpaid claim not later than the 15th day of third calendar month following each month in which labor was performed or material delivered. Tex. Prop. Code § 53.056(b). This means that in order to protect it’s interest, the subcontractor would have had to predict that it would not be paid and sent notice to the primary contractor and the owner no later than April 15 to protect its interest for the labor done in January. The same would have to be done for the remaining months.

So why not simply send notice on every project? That’s a good question. The short answer is that a subcontractor will likely run a foul with the primary contractor and make the owner nervous. No construction professional or owner wants unnecessary payment concerns during their project and any sub that raises these concerns without a reason to raise them could find themselves in hot water. Think about it, would you want the holder of your car note to send you repossession notices every month even though you pay on time?

Our firm understands the frustration of subs in these situations and are familiar with strategies and statutory remedies that allow subs to feel secure about collecting payment. We’d love to sit down and discuss them with any subcontractor having problems.

Give us a call at 832-930-0529 today!