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Mechanic’s Liens Can Get You Paid But Don’t Delay

The mechanic’s lien law in Texas is intended to protect unpaid individuals or companies that have contributed to an improvement of real property. In Texas, the law allows such unpaid parties to act directly against the owner of the improved property. Mechanic’s liens are governed by specific statutory provisions that address who may file such a lien and the deadline for filing, among other things. In order for a claim to be viable, an unpaid party must strictly comply with the provisions of the law. This blog post will present a brief synopsis of one basis for a mechanic’s lien—statutorily required retainage—and the deadlines to initiate such a claim.

In Texas, owners of real property are required by law to retain either 10% of the contract price or 10% of the value of the work done to improve their property during the progress of the work and for 30 days after the work is completed. The retained money secures the payment of workers who perform labor or service and the payment of others who furnish material or labor for any contractor, subcontractor, agent, or receiver in the performance of the work. In order to obtain a lien on the retained funds, a claimant must send the notices required by the Texas Property Code within the time required and in the manner prescribed, and file an affidavit claiming a lien before the 30th day after the work is completed.

The first implication to take heed of is that there is a very short deadline for filing a mechanic’s lien against the statutorily required retainage funds. Consequently, an unpaid subcontractor or other unpaid person or entity must act very quickly to preserve the right to place a lien that will help recover unpaid amounts. Savvy property owners or general contractors are typically well aware of this limited time horizon; subcontractors need to be equally aware.

For certain subcontractors, the time pressure is magnified. Contractors that perform work near the end of the project, such as painters, often find that they are quickly at risk of losing their claim against the statutory retainage money held by the owner if they do not rush to file their lien claim by the 30th day after the general contractor has completed the project. And because the majority of the money in dispute between a general contractor and a sub is typically covered by the retainage, a failure to timely perfect the lien may be substantially detrimental.

A related challenge complicating the timeline to perfect such a lien is the issue of when “completion” actually occurs. There are many potential methods for determining what constitutes completion of a project, but no fixed rule. Frequently, work slowly tapers on a project as punch list items are approved by the owner. Punch list work will extend the point of completion for purposes of perfecting a mechanic’s lien. However, the safest and most cautious approach is to assume completion on the day the Certificate of Occupancy was granted and extend the 30 day deadline from that date.

Contractors, subcontractors, material suppliers, equipment renters, workers, architects, engineers, surveyors and others who contribute services or materials to a construction project are typically entitled to enforce mechanic’s lien claims for the value of their work. But do not delay, you must act promptly to preserve your right to collect.

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