In September 2021, the Texas legislature made major changes to the construction lien statutes in Chapter 53 of the Texas Property Code. All of the key players in the construction industry (owners, contractors, subcontractors, suppliers, architects, engineers, landscapers, and sureties) are affected.
This article highlights the most significant changes to the Texas lien laws affecting all non-residential, private Texas construction projects where the original contracts (the contract between the owner and original contractor) are entered into on or after January 1, 2022.
- Revised Lingo. There are several changes to the statutory definitions under Chapter 53 of the Texas Property Code that should be reviewed. However, the biggest change is the elimination of the phrase “statutory retainage”—the prior term used to describe the money an owner must withhold (10%) from its payments to the original contractor throughout the project. The legislature now utilizes the phrase “reserved fund” to refer to the “statutory retainage” or the 10% fund an owner is obligated to withhold. The term “retainage” is now used to refer to amounts withheld pursuant to contractual agreements between the contractor and subcontractor or subcontractor and sub-subcontractor.
- Statutory Notice Forms. The legislature now requires two forms of statutory notice for lien claimants other than an original contractor. Section 53.056 sets forth the statutory notice to perfect a claim for unpaid labor or materials, whereas the notice set forth under Section 53.057 is used to perfect a claim for unpaid contractual retainage.
- Streamlined Notice Requirements for Unpaid Materials or Labor. Second-tier subcontractors (and lower) no longer have a shortened notice obligation. Second month notices have been eliminated.
- Old Law: Prior to the 2021 legislative changes enacted under House Bill 2237, second-tier subcontractors (and lower tiers) were required to send notice to the original contractor no later than the 15th day of the second month after providing labor or materials for which they have not been paid.
- New Law: The new lien laws no longer make a distinction between first-tier subcontractors and second-tier subcontractors (or lower). All subcontractors of any tier now have the same notice requirements under Section 53.056. They must send the statutory notice to the owner and original contractor no later than the 15th day of the third month after providing labor or materials for which they have not been paid.
- Calculating Statutory Deadlines—Weekends and Holidays No Longer a Problem. If the statutory deadline under Chapter 53 falls on a Saturday, Sunday, or legal holiday, the deadline is extended to the following day that is NOT a Saturday, Sunday, or legal holiday. Section 53.003(e). However, best practice is never to wait. If you have a payment issue, act fast and act early—you can always release your lien claim once it has been satisfied.
- Expanded Mailing Options for Notices. The lien changes expand the acceptable forms of mailing lien notices to include private delivery options such as FedEx and UPS or other private delivery services with tracking capabilities. Section 53.003(b). However, certified mail through the United States Postal Service, return receipt requested, continues to be the preferred method of mailing statutory notices because it eliminates the sender’s burden to ensure receipt under most circumstances. Section 53.003(c).
- Added Lien Protections for Architects, Engineers, Surveyors, Landscapers, and Demolition Contractors. The lien law amendments have eliminated the requirement that these five categories of claimants must be under contract with the owner. The statute now extends the ability to lien to architects, engineers, landscapers and demolition contractors who performed work under a contract with an original contractor or a subcontractor of any tier. Section 53.021. If not under a contract with the owner, these claimants will need to comply with the subcontractor notice requirements.
- Streamlined Lien Recording Deadlines for Unpaid Contractual Retainage. To perfect a lien for unpaid contractual retainage only, a claimant must (1) send the required notice and (2) record its lien by the 15th day of the 3rd month after the original contract was completed, terminated, or abandoned.
- Old Law: Section 53.057 used to provide for four different deadlines for recording a lien for unpaid contractual retainage, the earliest of which ultimately governed.
- New Law: Now, so long as a claimant sends its § 53.057 notice, and records its lien by the 15th day of the 3rd month after the original contract was completed, terminated or abandoned (see §§ 53.057(f) and 53.052(d)), the claimant will have a perfected lien for unpaid contractual retainage. Note: this new deadline is only applicable to claims exclusively for unpaid contractual retainage. If your claim also includes unpaid materials and/or labor, different deadlines apply.
- Shortened Limitations to File Suit for Lien Foreclosure: One Year.
- Old Law: Previously, claimants had at least two years to file suit to foreclose on a perfected lien.
- New Law: Generally, claimants are now required to file a lawsuit for lien foreclosure one year from the last date the claimant was permitted to file its lien affidavit under § 53.052. However, the one year limitations period may be extended up to two years if the claimant enters into a written agreement with the then-current property owner for the extension and the agreement is recorded in the real property records in the county where the property is located.
- Lien Waivers Need Not be Notarized. A valid statutory lien waiver is no longer required to be notarized to comply with the statutory requirements. However, owners and contractors may continue to require notarization per contract and county clerks may require notarization for recording purposes.
There are numerous other changes to Chapter 53 of the Texas Property Code resulting from House Bill 2237 that may also affect you. Consult an attorney for how these changes may affect how you conduct business going forward. For a more comprehensive evaluation of how to properly perfect a lien claim on non-residential, private projects in Texas, taking into consideration all statutory amendments, click here.
For a link to our desktop summary of lien deadlines for private projects, click here.
For a copy of Chapter 53 of the Texas Property Code that incorporates the changes implemented by House Bill 2237 effective as of January 1, 2022, click here.