Tag Archives: M&M Lien

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!

 

Advertisements

The Statutory Mechanic’s Lien: Perfection Is Key

This article will be the first of a series of articles on the Statutory Mechanic’s Lien. We will discuss the process of filing and perfecting the lien under The Texas Property Code. We will also discuss some common errors that occur when filing and how those errors could result in major problems for your company.

Today we will start with the Affidavit. With regard to the affidavit, The Texas Property code reads as follows:

53.052. Filing of Affidavit

(a)  Except as provided by Subsection (b), the person claiming the lien must file an affidavit with the county clerk of the county in which the property is located or into which the railroad extends not later than the 15th day of the fourth calendar month after the day on which the indebtedness accrues.

(b)  A person claiming a lien arising from a residential construction project must file an affidavit with the county clerk of the county in which the property is located not later than the 15th day of the third calendar month after the day on which the indebtedness accrues.

(c)  The county clerk shall record the affidavit in records kept for that purpose and shall index and cross-index the affidavit in the names of the claimant, the original contractor, and the owner. Failure of the county clerk to properly record or index a filed affidavit does not invalidate the lien.

It is important to understand that Chapter 53 of the Property code is very specific and requires knowledge of the statutory definitions of the phrases used in the code. For example, in the portion above, “the day on which the indebtedness accrues” is important. It actually helps to mark the filing deadline. However, “indebtedness accrues” is not a general term. Texas Property Code § 53.053 explains when indebtedness accrues.

53.053. Accrual of Indebtedness

(a)  For purposes of Section 53.052, indebtedness accrues on a contract under which a plan or plat is prepared, labor was performed, materials furnished, or specially fabricated materials are to be furnished in accordance with this section.

(b)  Indebtedness to an original contractor accrues:

(1)  on the last day of the month in which a written declaration by the original contractor or the owner is received by the other party to the original contract stating that the original contract has been terminated; or

(2)  on the last day of the month in which the original contract has been completed, finally settled, or abandoned.

(c)  Indebtedness to a subcontractor, or to any person not covered by Subsection (b) or (d), who has furnished labor or material to an original contractor or to another subcontractor accrues on the last day of the last month in which the labor was performed or the material furnished.

(d)  Indebtedness for specially fabricated material accrues:

(1)  on the last day of the last month in which materials were delivered;

(2)  on the last day of the last month in which delivery of the last of the material would normally have been required at the job site; or

(3)  on the last day of the month of any material breach or termination of the original contract by the owner or contractor or of the subcontract under which the specially fabricated material was furnished.

(e)  A claim for retainage accrues on the earliest of the last day of the month in which all work called for by the contract between the owner and the original contractor has been completed, finally settled, terminated, or abandoned.

As you can see, a lack of understanding could cause you to miss your deadline. Please check back next week as we continue the series and outline the specific requirements of the affidavit.

Nothing here is intended to be legal advice and should not be interpreted as such. Please consult a lawyer for any and all of your legal questions. Please feel free to call us at 832-930-0529 with any issues your company may be having. You can also visit our website www.StephensBell.com

FUNDAMENTAL CONTRACTOR PROTECTION UNDER THE TEXAS CONSTITUTION

FUNDAMENTAL CONTRACTOR PROTECTION UNDER THE TEXAS CONSTITUTION

In Texas, Article XVI, Section 37 of the Texas Constitution reads as follows:

“Mechanics, artisans and material men, of every class, shall have a lien upon the buildings and articles made or repaired by them for the value of their labor done thereon, or material furnished therefore…”

WHAT DOES THIS MEAN?

The Texas Constitution may protect you from nonpayment for your labor and materials. Texas’ Constitution grants certain qualifying contractors an automatic lien if they are not paid on a project. The beautiful thing about this type of lien is that it does not require the contractor to serve any specific kind of notice nor does the contractor have to file an affidavit. It is also important to mention that the Texas Practice & Remedies Code allows contractors to recover attorneys’ fees in a claim for rendered services, performed labor or furnished material.

WHO QUALIFIES?

In order to qualify for the Constitutional lien:

  1. Contractors/ subcontractors must be in privity of contract with the owner.
  2. The project cannot be a public works project or building.
  3. The project cannot consist of landscaping and other similar work.

BE CAREFUL!

Despite the protections under the Texas Constitution, it would be prudent for every contractor to follow the Texas Property Code and perfect a statutory lien. This is because if a third-party purchases property without knowledge of the contractor’s constitutional lien and the third-party does not have actual or constructive notice of the lien, the Constitutional lien will be unenforceable. This is in contrast to statutory liens filed pursuant to the Property Code.

IN A NUTSHELL

The constitutional lien is a basic form of protection for qualifying contractors. However, to cover all bases and afford yourself maximum protection, comply with the Texas Property Code and perfect all liens.

Should you have any questions regarding your business, please feel free to reach out to our office at 832-930-0529 or info@kestephenslaw.com.

None of the information given here is intended to be legal advice and it should not be construed as such.