Historically, subcontractors and suppliers were compelled to sign onerous and overreaching lien waivers and releases in order to receive payment. In addition, many subcontracts contain lien waivers lurking in the boiler plate. Consequently, subcontractors often do not realize they have agreed to these clauses until it is too late.
Texas law was recently changed to require universal statutory forms to waive or release liens and private payment bond claims. These mandatory forms help subcontractors because they prevent general contractors from slipping broad releases, indemnity clauses and other risk shifting provisions into a lien waiver that subs have to sign in exchange for progress and final payments. Further, the new law will void many contract clauses that waive and release liens before a project has commenced.
As with most laws, there are exceptions. If these exceptions apply, the forms are not required and a non-conforming waiver or release, including a lien waiver clause in a contract, may be enforceable.
Some Residential Contracts – The new statutory lien waiver forms are generally not required in order to waive a lien in a contract for residential construction if the contract was made before labor or materials are provided. Therefore, a residential or residential development contract may still contain a blanket waiver if signed before the work starts. However, such a waiver is not effective against a subcontractor supplying only materials. Thus, a supplier who supplies no labor cannot be required to sign a lien waiver that deviates from the statutory form, unless, of course, one of the other exceptions described below applies.
Post-Agreement Payments - Agreements arising after the lien claimant has been paid in full are exempt from the statute.
Settlement and Accord and Satisfaction – The new statute also exempts the use of the new waiver forms when there is an accord and satisfaction agreement, settlement of a pending court or arbitration proceeding, or an agreement made after a lien affidavit claim has been filed or after a bond claim has been made.
Public Payment Bonds – The forms are inapplicable to public projects and nonstatutory bonds. Therefore, in these circumstances, a customized lien waiver and release form may still be used.
Mineral Liens - The new statute is limited to statutory mechanic’s and materialmen’s lien claims. It does not apply to the waiver and release of mineral lien claims.
Subcontractors and suppliers should remain vigilant for these exceptions and exclusions. To be safe, subcontractors and suppliers should always negotiate out lien waiver clauses in all construction contracts and master service agreements, rather than assume such clauses will not be enforceable.