Proposed Changes to Texas Lien Law: Notices

We have previously written about how changes to Texas lien law may be on the horizon and how construction groups have lobbied for changes to Texas lien law. Well, it looks like some of those changes may be might be in the works. Earlier this month, House Bill 3065 and Senate Bill 1506 were introduced in the Lone Star State. The bills are identical, and would go into effect in May of 2018 if passed. This week, we will discuss the litany of changes that would occur under these proposed changes to Texas lien law. Because there are so many proposed changes to Texas lien law, we had to break them up into sections: The BasicsLien Website and Filing a Lien; Notices; Liability and PriorityWaiver, Foreclosure, and Bonding Off a Lien; and finally Repealed Revisions and Recap.

This series will largely discuss the ways in which lien law will change. For more background on the current state of Texas lien laws, check out our Texas Construction Payment Resources.

Notices

The current Texas lien notice requirements stand as the most burdensome in the country. The proposed legislation actually creates more types of notices that need to be sent. However, as mentioned in the last installation of this series, (there would be) no more monthly notices! Here’s a look at the different notices that would be required throughout the life of a project. Warning: there are quite a few.

Notice of Commencement (53.125)

Under the new section 53.125(a), an owner must file a notice of commencement with the county where the project is located and post the notice on the lien website. There is a required form that can be found in the proposed bill, and it will require:

  • Legal description and street address of the property
  • Brief description of work to be performed/ materials to be furnished
  • Work or materials not included in the notice of commencement
  • Owner information (or lessee information if the lessee contracted for work)
  • The general contractor’s contact information
  • Surety information (if applicable, a copy of the bond must be attached)
  • Lender information (if applicable)
  • Lien website address

Information that is incorrect in the notice of commencement will not adversely affect the rights of a lien claimant who reasonably relies on that information. Also, if a sub, supplier, or other down the chain party performs labor/ furnishes material described in the notice of commencement but is hired by a party other than the general contractor listed on the notice, they (the sub, supplier, or other down the chain party) may preserve lien rights by filing a notice of furnishing. 53.125(b). Unless the subcontractor has a physical copy, an owner shall send a copy of the notice to each sub no later than the 5th day after it is requested from a subcontractor. 53.125(c).

If the notice has not been filed and posted as required, a sub, supplier, or other party may also request this information from the party who hired them. The hiring party then has until the 5th day after the receipt of the written request to provide the notice. If the notice does not reach the subcontractor and is not posted to the lien website, the party who failed to send a copy of the notice will be liable for costs of obtaining the information. 53.125(d).

A notice of commencement posted on the lien website may be amended by the owner. The amendment is effective on the date that it is updated on the lien website. Upon amending the notice of commencement, an owner shall send notice of the amendment to anyone who has previously sent a notice of furnishing to the owner. This must be sent before the amended notice goes into affect. 53.125(e).

Notice of Furnishing (53.0561)

In order to have lien rights, parties other than the general contract must give a notice of furnishing to the owner and the original contractor. 53.0561(a).

According to 53.0561(b), this document must include:

  1. General description of labor/ material furnished (if any material is specially fabricated, this material must be described separately
  2. Name, address, and phone number of claimant
  3. Claimant’s email address (only if a claimant wants to receive notices of filings on the lien website)
  4. Name, address, and phone number of the party who hired claimant
  5. Legal description, street address, or other description identifying the property
  6. A required statement in bold type- form is included in the statute

A party will not have lien rights for any work done more than 45 days before filing a notice of furnishing. 53.0561(c).

The time frame in 53.0561(c) is reduced to 15 days if an owner has previously filed and posted a notice of commencement. 53.0561(d).

Only one notice of furnishing to an owner is required for work/material provided by each sub. If a subcontractor’s work on a project is done pursuant to more than one contract, the sub must identify each original contract in their notice of furnishing or must furnish separate notices of furnishing for each original contract. 53.0561(e).

Performing work outside the scope of work described in the notice will not invalidate the notice. 53.0561(f). Nor will failing to provide an email address. 53.0561(g).

Notice of Demand (53.0521)

If work under the original contract has been completed or terminated, an owner may send a notice of demand to any potential claimant requesting that they file a lien claim affidavit. An owner may not send the notice before the original contract has been terminated. 53.0521(a). A contract is terminated when the owner posts a notice of termination to the lien website. If no notice of commencement was filed at the outset of the project, the owner must send a notice of termination to every party that filed a notice of furnishing via certified mail. 53.0521(b) and (c). Once a notice of demand has been properly sent, potential claimants would have to file a lien claim no later than the 30th day after the notice is sent. 53.0521(d). If a potential claimant has not completed their work on the date that an owner sends a notice of demand, their lien rights are unaffected by the notice of demand. 53.0521(e). A potential claimant who does not comply with the requirements of the notice of demand waives any statutory lien rights that have not been perfected. 53.0521(f).

The notice of demand must be conspicuously printed in bold type and all-caps in letters no smaller than 10-point font. Required language for the notice is included in the statute. 53.021(g).

Notice of Filed Lien Claim Affidavit (53.055)

This notice already exists outside of these proposed changes to Texas lien law, but the new bills would alter it a bit. Under 53.055(a), the time frame to file a notice of filed lien claim is “not later than the 10th day” after the lien claim affidavit is filed with the county. Also, this notice would now be able to be filed via the lien website. If the claimant is a party other than the general contractor, and the claimant has not filed a copy of the affidavit with the lien website, they must also send a copy to the general contractor. 53.055(b).

Notice of Completion (53.059)

Under 53.059(a), if an owner has filed a notice of commencement or has posted a notice of commencement on the lien website, and if the project it complete or the general contract has been terminated, an owner may file a notice of completion with the county where the property is situated. The owner may then post the notice to the lien website.

Such a notice must contain:

  1. The name and address of the owner;
  2. The name and address of each original contractor covered by the notice;
  3. A description that is legally sufficient for identification of the real property where the improvements are located
  4. A description of the work furnished under the general contract covered by the notice
  5. A statement that the work under the original contract covered by the notice has been completed or terminated
  6. The date of completion or termination

According to 53.059(b), the owner must send a copy of the notice (1) to each original contractor identified in the notice; and (2) by email to each claimant that has sent a notice of furnishing to the owner and has provided an email address. This must be sent no later than the 10th day after the notice is posted to the lien website.

The notice of completion is effective on the latter of the date it is filed or the date when it is posted to the lien website. This date is considered the date work is complete. However, for those parties who are not sent a notice of completion under this section, this date does not serve as the final date of work. 53.059(c). There is a required form that must be included in the notice of completion which must appear bolded and in all-caps which can be found in 53.059(d). There is a different required form that must be included for residential projects found in 53.059(e).

Demand for Notice of Dispute; Payment Claim (53.0831)

If a lien claim affidavit is filed by a claimant, the owner may demand, in writing, that the original contractor notify the owner whether or not the general contractor intends to dispute the claim. The owner shall send a copy of the demand and a copy of the lien claim affidavit to the general contractor. 53.0831(a). The general contractor then has until the 30th day after the receipt of the demand to notify the owner and the claimant whether the general contractor will dispute the claim. If the general contractor does not respond, it is assumed that they agree to the demand and the owner may pay the demand when it becomes due. 53.0831(b).

Takeaway

These are some of the more notice-able proposed changes to Texas lien law (pun very much intended). As with all of the other proposed changes to Texas lien law that we discussed, these alterations, if adopted, would not go into affect until May of 2018. Considering they have just entered the legislative process, there is a good chance that the bills would look very different even if passed. Still, it’s important to understand what legislators are proposing in order to stay ahead of the game.Be on the lookout for the next post in this series regarding liability and priority. After that, we’ll wrap up the series with Waiver and Foreclosure.

We regularly put out content regarding Texas lien law, so head over to the Texas tag on the blog for more on the Lone Star State.

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