A new construction, large or small, is a very exciting process to be a part of, but it comes with it’s share of hassles. Managing contractors, subcontractors and suppliers and all of the laws associated with it can be a headache. Are you educated before embarking on your project?
In Texas, liens for labor and materials incorporated into a construction project must strictly comply with the statutory notices and time frames to be enforceable. On the other hand, if the contractor has a direct contract with the owner, the contractor can rely on the self-enacting constitutional lien. However, the contractor should still file a notice of its constitutional lien so that third parties will have constructive notice of it. Of course, in addition to creating a lien, the contractor’s main goal is to get paid.
Subcontractors or suppliers who provide labor and/or services toward the end of a construction project face two additional challenges. First, the 10% statutory retainage may have been released to a large extent pursuant to the owner’s contract with the general contractor or because early finishing subcontractors have already received 100% of their funds. Even if the retainage funds are still available, the owner is entitled to release them 30 days after final completion of the construction project. Unless a subcontractor or supplier checks the real estate records frequently, such person may not even be aware that the retainage holding period has expired, often before such person’s statutory lien notice and filing dates have occurred.
To protect their lien rights, subcontractors and suppliers should proactively file their liens and notices promptly and not wait for the statutory deadlines, which are outside limits similar to a statute of limitations. Sending a retainage notice to both the owner and the general contractor as soon as such subcontractor or supplier starts work on the construction project provides further evidence of its rights.
Despite taking all these steps, if a contractor is not paid in full, such contractor should consider either pursuing a judicial foreclosure that allows removal of its materials (if possible) or if the contractor is relying on a constitutional lien, filing a lawsuit and a lis pendens notice against the property.