By: Rodriguez S.B. No. 1281
A BILL TO BE ENTITLED
AN ACT
relating to mechanic's, contractor's, or materialman's liens.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter A, Chapter 53, Property Code, is
amended by adding Section 53.0001 to read as follows:
Sec. 53.0001. LEGISLATIVE INTENT; LIBERAL CONSTRUCTION.
(a) It is the intent of the legislature to provide assurance of
payment to laborers, contractors, subcontractors, and certain
service providers who make improvements to real property.
(b) This chapter shall be liberally construed in favor of a
claimant for payment under a contract for labor or material for an
improvement to real property.
SECTION 2. Subdivision (15), Section 53.001, Property Code,
is amended to read as follows:
(15) "Completion" [of an original contract] means the
later of:
(A) the 30th day after the date of the final
inspection and written final acceptance by the governmental body
that issued the building permit for the house, building, or
improvement; or
(B) the date of actual completion of the work,
including any extras or change orders reasonably required or
contemplated under the original contract, other than warranty work
[or replacement or repair of the work] performed under the
contract.
SECTION 3. Subsections (a), (c), (d), and (e), Section
53.021, Property Code, are amended to read as follows:
(a) A person has a lien if:
(1) the person [labors, specially fabricates
material, or] furnishes labor or materials:
(A) for construction or repair [in this state]
of[:
[(A)] a house, building, [or] improvement,
fixture,[;
[(B) a levee or embankment to be erected for the
reclamation of overflow land along a river or creek;] or
[(C) a] railroad; or
(B) that enhance the value, use, productivity,
enjoyment, or aesthetics of real property; and
(2) the person [labors, specially fabricates the
material, or] furnishes the labor or materials under or by virtue of
a contract with the owner or the owner's agent, [trustee,
receiver,] contractor, or subcontractor.
(c) An architect, engineer, or surveyor who prepares a plan
or plat under or by virtue of a written contract with the owner or
the owner's agent[, trustee, or receiver] in connection with the
actual or proposed design, construction, or repair of improvements
on real property or the location of the boundaries of real property
has a lien on the property.
(d) A person who provides labor, plant material, or other
supplies for the installation of landscaping for a house, building,
or improvement, including the construction of a retention pond,
retaining wall, berm, irrigation system, fountain, or other similar
installation, under or by virtue of a written contract with the
owner or the owner's agent, contractor, or subcontractor[, trustee,
or receiver] has a lien on the property.
(e) A person who performs labor as part of, or who furnishes
labor or materials for, the demolition of a structure on real
property under or by virtue of a written contract with the owner of
the property or the owner's agent, [trustee, receiver,] contractor,
or subcontractor has a lien on the property.
SECTION 4. Subchapter B, Chapter 53, Property Code, is
amended by adding Section 53.0211 to read as follows:
Sec. 53.0211. OWNER'S REPRESENTATIVE; NOTICES. (a) An
owner of real property who enters into an original contract
creating a lien under this chapter may designate a person in this
state as the owner's representative to whom a notice or other
documents may be sent under this chapter.
(b) Any notices required by this chapter to be sent to the
owner may be sent to the owner or to the owner's representative.
SECTION 5. Section 53.022, Property Code, is amended to
read as follows:
Sec. 53.022. PROPERTY TO WHICH LIEN EXTENDS. (a) The lien
extends to the real property on which the labor was performed or
materials furnished and to any house, building, fixtures, or
improvements on the property[, the land reclaimed from overflow, or
the railroad and all of its properties, and to each lot of land
necessarily connected or reclaimed].
(b) If the real property is located [The lien does not
extend to abutting sidewalks, streets, and utilities that are
public property.
[(c) A lien against land] in a city, town, or village, the
lien extends to each lot on which the house, building, fixture, or
improvement is located.
(c) If the real property is [situated or on which the labor
was performed.
[(d) A lien against land] not in a city, town, or village,
the lien extends to not more than 50 acres of the real property on
which the house, building, fixture, or improvement is located
[situated] or [on which] the labor and materials were furnished
[was performed].
SECTION 6. Subsection (a), Section 53.026, Property Code,
is amended to read as follows:
(a) A person who labors[, specially fabricates materials,]
or furnishes labor or materials under a direct contractual
relationship with another person is considered to be in direct
contractual relationship with the owner and has a lien as an
original contractor, if:
(1) [the owner contracted with the other person for
the construction or repair of a house, building, or improvements
and the owner can effectively control that person] through
ownership of voting stock, interlocking directorships, or
otherwise,[;
[(2)] the owner [contracted with the other person for
the construction or repair of a house, building, or improvements
and that other person] can effectively control that other person or
that other person can effectively control the owner [through
ownership of voting stock, interlocking directorships, or
otherwise]; or
(2) the contract between [(3)] the owner and that
[contracted with the] other person [for the construction or repair
of a house, building, or improvements and the contract] was made
without good faith intention of the parties that the other person
was to perform the contract.
SECTION 7. Chapter 53, Property Code, is amended by adding
Subchapter B-1 to read as follows:
SUBCHAPTER B-1. NOTICE OF COMMENCEMENT
Sec. 53.031. NOTICE OF COMMENCEMENT. (a) If an owner
enters into an original contract that creates a lien under Section
53.021(a) on the owner's property, the owner shall, before the
contractor furnishes any labor or materials to the property:
(1) file a notice of commencement that complies with
this subchapter with the county clerk of each county in which the
property is located;
(2) post the notice of commencement in a conspicuous
place on the property; and
(3) furnish the notice of commencement to the original
contractor.
(b) The owner shall ensure that the notice of commencement
remains posted on the property until completion of the work.
Sec. 53.032. PAYMENT BOND. A copy of the payment bond, if
any, must be filed with the notice of commencement filed with the
county clerk and attached to the back of the notice of commencement
at the time the notice is posted on the property.
Sec. 53.033. CONTENTS OF NOTICE. The notice of
commencement must be in the form of an affidavit sworn to by the
owner and must contain:
(1) a description of the property, legally sufficient
for identification, and the street address of the property, if the
street address is available;
(2) a general description of the work to be performed
on the property;
(3) the name and address of all persons who own all or
part of the property, and a description of the type of interest of
each owner of the property;
(4) the name and address of each person who owns all or
part of the fee simple title to the property, if different than the
owner;
(5) the name and address of the original contractor;
(6) the name and address of the surety on a payment
bond applicable to the construction or repair, if any, and the
amount of the bond;
(7) the name and address of any person making a loan
for the work; and
(8) the name and address of the owner's
representative, if any.
Sec. 53.034. SUBCONTRACTOR REQUEST FOR NOTICE. (a) A
subcontractor may make a written request for a copy of the notice of
commencement from the owner or reputed owner.
(b) The owner shall provide a copy of the notice of
commencement to the subcontractor not later than the 10th day after
receipt of the subcontractor's request.
(c) If the owner fails to give the notice to the
subcontractor as required by Subsection (b), the subcontractor may
delay sending the notice required under Section 53.056(c) until not
later than the 20th day after the date the notice of commencement is
provided to the subcontractor.
Sec. 53.035. LIEN NOTICE BY SUBCONTRACTOR NOT REQUIRED. A
subcontractor is not required to send the notice required by
Section 53.056(c) if, at the time the subcontractor furnishes the
first labor or material to an owner's property, the owner has not
complied with Sections 53.031 and 53.032.
Sec. 53.036. AMENDED NOTICE OF COMMENCEMENT. (a) The
owner shall file with the county clerk of each county in which the
owner's property is located and post on the owner's property an
amended notice of commencement if any information contained in an
existing notice of commencement changes or is determined to be
incorrect.
(b) The owner shall provide a copy of the amended notice to
each subcontractor who sent a notice to the owner under Section
53.056(c) or made a request for a notice under Section 53.034.
(c) If the owner fails to provide the copy of the amended
notice to the subcontractor, any new or changed information in the
amended notice of commencement may not be used as a basis to
invalidate a notice provided or a lien claim filed by the
subcontractor under this chapter.
Sec. 53.037. RELIANCE ON NOTICE. (a) An original
contractor or subcontractor required to send or file a notice or
file a lien claim under this chapter may rely on the validity of the
information contained in a notice of commencement and any amended
notice of commencement.
(b) A deficiency or error in a notice provided or a lien
claim filed under this chapter may not be used to invalidate the
notice or lien claim if the deficiency or error resulted from
reliance on incorrect information provided in the notice of
commencement or applicable amended notice of commencement.
Sec. 53.038. LIABILITY OF OWNER FOR INCORRECT INFORMATION.
If the notice of commencement or amended notice of commencement
contains incorrect information, the owner and an individual signing
the notice on behalf of the owner, if any, are liable to a lien
claimant for all damages, including damages for any loss of lien or
bond rights, attorney's fees, expenses, and costs suffered as a
result of the lien claimant's reliance on the incorrect
information.
SECTION 8. Section 53.052, Property Code, is amended to
read as follows:
Sec. 53.052. FILING OF LIEN CLAIM [AFFIDAVIT]. (a) Except
as provided by Subsection (b), the person claiming the lien must
file a lien claim [an affidavit] with the county clerk of the county
in which the property is located [or into which the railroad
extends] not later than the 140th [15th] day [of the fourth calendar
month] after the date of completion, termination, or abandonment of
the original contract [day on which the indebtedness accrues].
(b) A person claiming a lien arising from a residential
construction project must file a lien claim [an affidavit] with the
county clerk of the county in which the property is located not
later than the 110th [15th] day [of the third calendar month] after
the date of completion, termination, or abandonment of the original
contract [day on which the indebtedness accrues].
(c) Not later than the 10th day after the date a
subcontractor files a lien claim, the subcontractor must send a
copy of the lien claim to the owner or reputed owner and the
original contractor to the owner's and contractor's last known
addresses. Unless the owner was prejudiced by receiving late
notice of a lien claim under this subsection, the receipt of a late
notice of the lien claim [The county clerk shall record the
affidavit in records kept for that purpose and shall index and
cross-index the affidavit in the names of the claimant, the
original contractor, and the owner. Failure of the county clerk to
properly record or index a filed affidavit] does not invalidate the
lien.
SECTION 9. Section 53.054, Property Code, is amended to
read as follows:
Sec. 53.054. CONTENTS OF LIEN CLAIM [AFFIDAVIT]. (a) The
lien claim [affidavit must be signed by the person claiming the lien
or by another person on the claimant's behalf and] must contain
[substantially]:
(1) a sworn statement of the amount of the claim;
(2) the name and last known address of the owner or
reputed owner;
(3) a general statement of the kind of work done and
materials furnished by the claimant [and, for a claimant other than
an original contractor, a statement of each month in which the work
was done and materials furnished for which payment is requested];
(4) the name and last known address of the person by
whom the claimant was employed or to whom the claimant furnished the
materials or labor;
(5) the name and last known address of the original
contractor;
(6) a description, legally sufficient for
identification, of the property sought to be charged with the lien;
and
(7) the claimant's name, mailing address, and, if
different, physical address[; and
[(8) for a claimant other than an original contractor,
a statement identifying the date each notice of the claim was sent
to the owner and the method by which the notice was sent].
(b) The claimant may attach the information required by
Subsection (a) to the lien claim [to the affidavit a copy of any
applicable written agreement or contract and a copy of each notice
sent to the owner].
(c) The lien claim [affidavit] is not required to set forth
individual items of work done or material furnished [or specially
fabricated]. The lien claim [affidavit] may use broad descriptive
terms, [any] abbreviations, or symbols customary in the trade.
SECTION 10. Section 53.056, Property Code, is amended to
read as follows:
Sec. 53.056. SUBCONTRACTOR [DERIVATIVE CLAIMANT]: NOTICE
TO OWNER OR ORIGINAL CONTRACTOR. (a) Except as provided by
Section 53.035 [Subchapter K], a subcontractor [claimant other than
an original contractor] must give the notice prescribed by this
section to the owner, or reputed owner, and the original contractor
for the lien to be valid.
(b) The notice must include:
(1) a general description of the labor and materials
furnished or to be furnished by the subcontractor;
(2) the name, address, and telephone number of the
subcontractor;
(3) the name of the person who contracted with the
subcontractor for the labor or materials; and
(4) a sufficient description of the real property to
which the labor and materials are furnished, or are to be furnished,
including a legal description, subdivision plat, or street address
[If the lien claim arises from a debt incurred by a subcontractor,
the claimant must give to the original contractor written notice of
the unpaid balance. The claimant must give the notice not later
than the 15th day of the second month following each month in which
all or part of the claimant's labor was performed or material
delivered. The claimant must give the same notice to the owner or
reputed owner and the original contractor not later than the 15th
day of the third month following each month in which all or part of
the claimant's labor was performed or material or specially
fabricated material was delivered].
(c) Except as provided by Section 53.034(c), the
subcontractor's notice must be sent not later than the 30th day
after the first date the subcontractor provides the labor or
materials for the improvement of the owner's property. If a
subcontractor fails to send a timely notice under this subsection
or Section 53.034(c), the subcontractor may claim a lien only for
the labor and materials furnished not earlier than the 30th day
before the date the notice was sent and for all labor and materials
furnished after the date the notice was sent [If the lien claim
arises from a debt incurred by the original contractor, the
claimant must give notice to the owner or reputed owner, with a copy
to the original contractor, in accordance with Subsection (b)].
(d) A subcontractor may send only one notice to an owner
under this section with respect to all labor and materials
furnished or to be furnished for the improvement of the owner's
property [To authorize the owner to withhold funds under Subchapter
D, the notice to the owner must state that if the claim remains
unpaid, the owner may be personally liable and the owner's property
may be subjected to a lien unless:
[(1) the owner withholds payments from the contractor
for payment of the claim; or
[(2) the claim is otherwise paid or settled].
(e) If the notice is sent by registered or certified mail,
the effective date of the notice is the date the notice is deposited
for mailing. The effective date of a notice delivered by other
means is the date the notice is received [The notice must be sent by
registered or certified mail and must be addressed to the owner or
reputed owner or the original contractor, as applicable, at his
last known business or residence address].
(f) The notice is not defective if, after the date of the
notice, the subcontractor furnishes labor or materials that are not
within the scope of the notice's general description of the labor
and materials furnished or to be furnished [A copy of the statement
or billing in the usual and customary form is sufficient as notice
under this section].
SECTION 11. The heading to Subchapter D, Chapter 53,
Property Code, is amended to read as follows:
SUBCHAPTER D. BILLS PAID AFFIDAVIT [FUNDS WITHHELD BY OWNER
FOLLOWING NOTICE]
SECTION 12. The heading to Section 53.085, Property Code,
is amended to read as follows:
Sec. 53.085. BILLS PAID AFFIDAVIT REQUIRED.
SECTION 13. The heading to Subchapter E, Chapter 53,
Property Code, is amended to read as follows:
SUBCHAPTER E. TERMINATION OR ABANDONMENT OF WORK [REQUIRED
RETAINAGE FOR BENEFIT OF LIEN CLAIMANTS]
SECTION 14. Subsections (a) and (b), Section 53.107,
Property Code, are amended to read as follows:
(a) Not later than the 10th day after the date an original
contract is terminated or the original contractor abandons
performance under the original contract, the owner shall give
notice to each subcontractor who[, before the date of termination
or abandonment, has]:
(1) before the date of termination or abandonment,
sent [given] notice to the owner as provided by Section 53.056[,
53.057, or 53.058]; [or]
(2) before the date of termination or abandonment,
sent to the owner [by certified or registered mail] a written
request for notice of termination or abandonment; or
(3) did not send a written request for notice of
termination or abandonment or a notice required under Section
53.056, but provided to the owner written notice that the
subcontractor provided labor, material, or services to the owner's
property.
(b) The notice must contain:
(1) the name and address of the owner;
(2) the name and address of the original contractor;
(3) a description, legally sufficient for
identification, of the real property on which the improvements are
located;
(4) a general description of the improvements agreed
to be furnished under the original contract;
(5) a statement that the original contract has been
terminated or that performance under the contract has been
abandoned; and
(6) the date of the termination or abandonment[; and
[(7) a conspicuous statement that a claimant may not
have a lien on the retained funds unless the claimant files an
affidavit claiming a lien not later than the 40th day after the date
of the termination or abandonment].
SECTION 15. Subsection (a), Section 53.122, Property Code,
is amended to read as follows:
(a) Except as provided by [Subchapter E and] Section
53.124(e), perfected mechanic's liens that have the same inception
date are on equal footing without reference to the date of filing
the [affidavit claiming the] lien claim.
SECTION 16. The heading to Section 53.124, Property Code,
is amended to read as follows:
Sec. 53.124. INCEPTION OF [MECHANIC'S] LIEN.
SECTION 17. Subsections (a) and (e), Section 53.124,
Property Code, are amended to read as follows:
(a) Except as provided by Subsection (e), [for purposes of
Section 53.123,] the time of inception of a mechanic's lien for an
original contractor and subcontractor is the commencement of
construction of improvements or delivery of materials to the land
on which the improvements are to be located and on which the
materials are to be used.
(e) The time of inception of a lien for an architect,
engineer, surveyor, landscape original contractor or
subcontractor, or demolition original contractor or subcontractor
is the date the person files a lien claim [that is created under
Section 53.021(c), (d), or (e) is the date of recording of an
affidavit of lien under Section 53.052. The priority of a lien
claimed by a person entitled to a lien under Section 53.021(c), (d),
or (e) with respect to other mechanic's liens is determined by the
date of recording. A lien created under Section 53.021(c), (d), or
(e) is not valid or enforceable against a grantee or purchaser who
acquires an interest in the real property before the time of
inception of the lien].
SECTION 18. Sections 53.152, 53.154, 53.156, 53.157,
53.158, and 53.172, Property Code, are amended to read as follows:
Sec. 53.152. RELEASE OF CLAIM OR LIEN. (a) If an owner,
the original contractor, or a person who pays or satisfies any
indebtedness secured by a lien filed under this chapter submits to
the lien holder [When a debt for labor or materials is satisfied or
paid by collected funds, the person who furnished the labor or
materials shall, not later than the 10th day after the date of
receipt of] a written request for a release of the lien, the lien
holder shall[,] furnish to the requesting person a release of the
indebtedness and any lien claimed[,] to the extent of the
indebtedness paid. [An owner, the original contractor, or any
person making the payment may request the release.]
(b) A release of lien must be furnished not later than the
10th day after the date of receipt of a written request and must be
in a form that would permit it to be filed of record.
Sec. 53.154. FORECLOSURE OF LIEN; VENUE. (a) A mechanic's
lien may be foreclosed only on judgment of a court of competent
jurisdiction foreclosing the lien and ordering the sale of the
property subject to the lien.
(b) A suit to foreclose the lien must be brought in a court
of competent jurisdiction in the county in which the real property
that is subject to the lien is located.
Sec. 53.156. COSTS AND ATTORNEY'S FEES. In any proceeding
to foreclose a lien or to enforce a claim against a bond issued
under Subchapter H[, I,] or J or in any proceeding to declare that
any lien or claim is invalid or unenforceable in whole or in part,
the court shall award costs and reasonable attorney's fees as are
equitable and just. With respect to a lien or claim arising out of a
residential construction contract, the court is not required to
order the property owner to pay costs and attorney's fees under this
section.
Sec. 53.157. DISCHARGE OF LIEN. A mechanic's lien claim [or
affidavit claiming a mechanic's lien] filed under Section 53.052
may be discharged of record by:
(1) recording a lien release signed by the claimant
under Section 53.152;
(2) failing to institute suit to foreclose the lien in
the county in which the property is located within the period
prescribed by Section 53.158[, 53.175, or 53.208]; or
(3) recording the original or certified copy of a
final judgment or decree of a court of competent jurisdiction
providing for the discharge[;
[(4) filing the bond and notice in compliance with
Subchapter H;
[(5) filing the bond in compliance with Subchapter I;
or
[(6) recording a certified copy of the order removing
the lien under Section 53.160 and a certificate from the clerk of
the court that states that no bond or deposit as described by
Section 53.161 was filed by the claimant within 30 days after the
date the order was entered].
Sec. 53.158. PERIOD FOR BRINGING SUIT TO FORECLOSE LIEN.
(a) Except as provided by Subsection (b), suit must be brought to
foreclose the lien within two years after the last day a claimant
may file the lien claim [affidavit] under Section 53.052 [or within
one year after completion, termination, or abandonment of the work
under the original contract under which the lien is claimed,
whichever is later].
(b) For a claim arising from a residential construction
project, suit must be brought to foreclose the lien within one year
after the last day a claimant may file a lien claim [affidavit]
under Section 53.052 [or within one year after completion,
termination, or abandonment of the work under the original contract
under which the lien is claimed, whichever is later].
Sec. 53.172. BOND REQUIREMENTS. The bond must:
(1) describe the property on which the liens are
claimed;
(2) refer to each lien claimed in a manner sufficient
to identify it;
(3) be in an amount that is double the amount of the
liens referred to in the bond unless the total amount claimed in the
liens exceeds $60,000 [$40,000], in which case the bond must be in
an amount that is the greater of 1-1/2 times the amount of the liens
or the sum of $60,000 [$40,000] and the amount of the liens;
(4) be payable to the parties claiming the liens;
(5) be executed by:
(A) the party filing the bond as principal; and
(B) a corporate surety authorized and admitted to
do business under the law in this state and licensed by this state
to execute the bond as surety, subject to Sections
3503.001-3503.005, Insurance Code [Section 1, Chapter 87, Acts of
the 56th Legislature, Regular Session, 1959 (Article 7.19-1,
Vernon's Texas Insurance Code)]; and
(6) be conditioned substantially that the principal
and sureties will pay to the named obligees or to their assignees
the amount that the named obligees would have been entitled to
recover if their claims had been proved to be valid and enforceable
liens on the property.
SECTION 19. The heading to Section 53.173, Property Code,
is amended to read as follows:
Sec. 53.173. NOTICE OF BOND TO INDEMNIFY.
SECTION 20. Subsections (c) and (d), Section 53.173,
Property Code, are amended to read as follows:
(c) The notice must be served on each obligee by mailing a
copy of the notice and the bond to the obligee by certified United
States mail, return receipt requested, addressed to the claimant at
the address stated in the lien claim [affidavit] for the obligee.
(d) If the claimant's lien claim [affidavit] does not state
the claimant's address and the address is not available to the
principal in a notice sent by the lien claimant under Section
53.056, the notice is not required to be mailed to the claimant.
SECTION 21. Subsection (f), Section 53.254, Property Code,
is amended to read as follows:
(f) A [An affidavit for] lien claim filed under this
subchapter that relates to a homestead must contain the following
notice conspicuously printed, stamped, or typed in a size equal to
at least 10-point boldface or the computer equivalent, at the top of
the page:
"NOTICE: THIS IS NOT A LIEN. THIS IS ONLY [AN AFFIDAVIT
CLAIMING] A LIEN CLAIM."
SECTION 22. Subsection (b), Section 53.255, Property Code,
is amended to read as follows:
(b) The disclosure statement must read substantially
similar to the following:
"KNOW YOUR RIGHTS AND RESPONSIBILITIES UNDER THE LAW. You
are about to enter into a transaction to build a new home or remodel
existing residential property. Texas law requires your contractor
to provide you with this brief overview of some of your rights,
responsibilities, and risks in this transaction.
"CONVEYANCE TO CONTRACTOR NOT REQUIRED. Your contractor may
not require you to convey your real property to your contractor as a
condition to the agreement for the construction of improvements on
your property.
"KNOW YOUR CONTRACTOR. Before you enter into your agreement
for the construction of improvements to your real property, make
sure that you have investigated your contractor. Obtain and verify
references from other people who have used the contractor for the
type and size of construction project on your property.
"GET IT IN WRITING. Make sure that you have a written
agreement with your contractor that includes: (1) a description of
the work the contractor is to perform; (2) the required or estimated
time for completion of the work; (3) the cost of the work or how the
cost will be determined; and (4) the procedure and method of
payment, including [provisions for statutory retainage and]
conditions for final payment. If your contractor made a promise,
warranty, or representation to you concerning the work the
contractor is to perform, make sure that promise, warranty, or
representation is specified in the written agreement. An oral
promise that is not included in the written agreement may not be
enforceable under Texas law.
"READ BEFORE YOU SIGN. Do not sign any document before you
have read and understood it. NEVER SIGN A DOCUMENT THAT INCLUDES AN
UNTRUE STATEMENT. Take your time in reviewing documents. If you
borrow money from a lender to pay for the improvements, you are
entitled to have the loan closing documents furnished to you for
review at least one business day before the closing. Do not waive
this requirement unless a bona fide emergency or another good cause
exists, and make sure you understand the documents before you sign
them. If you fail to comply with the terms of the documents, you
could lose your property. You are entitled to have your own
attorney review any documents. If you have any question about the
meaning of a document, consult an attorney.
"GET A LIST OF SUBCONTRACTORS AND SUPPLIERS. Before
construction commences, your contractor is required to provide you
with a list of the subcontractors and suppliers the contractor
intends to use on your project. Your contractor is required to
supply updated information on any subcontractors and suppliers
added after the list is provided. Your contractor is not required
to supply this information if you sign a written waiver of your
rights to receive this information.
"MONITOR THE WORK. Lenders and governmental authorities may
inspect the work in progress from time to time for their own
purposes. These inspections are not intended as quality control
inspections. Quality control is a matter for you and your
contractor. To ensure that your home is being constructed in
accordance with your wishes and specifications, you should inspect
the work yourself or have your own independent inspector review the
work in progress.
"MONITOR PAYMENTS. If you use a lender, your lender is
required to provide you with a periodic statement showing the money
disbursed by the lender from the proceeds of your loan. Each time
your contractor requests payment from you or your lender for work
performed, your contractor is also required to furnish you with a
disbursement statement that lists the name and address of each
subcontractor or supplier that the contractor intends to pay from
the requested funds. Review these statements and make sure that the
money is being properly disbursed.
"CLAIMS BY SUBCONTRACTORS AND SUPPLIERS. Under Texas law, if
a subcontractor or supplier who furnishes labor or materials for
the construction of improvements on your property is not paid, you
may become liable and your property may be subject to a lien for the
unpaid amount, even if you have not contracted directly with the
subcontractor or supplier. [To avoid liability, you should take
the following actions:
[(1) If you receive a written notice from a
subcontractor or supplier, you should withhold payment from your
contractor for the amount of the claim stated in the notice until
the dispute between your contractor and the subcontractor or
supplier is resolved. If your lender is disbursing money directly
to your contractor, you should immediately provide a copy of the
notice to your lender and instruct the lender to withhold payment in
the amount of the claim stated in the notice. If you continue to pay
the contractor after receiving the written notice without
withholding the amount of the claim, you may be liable and your
property may be subject to a lien for the amount you failed to
withhold.
[(2) During construction and for 30 days after final
completion, termination, or abandonment of the contract by the
contractor, you should withhold or cause your lender to withhold 10
percent of the amount of payments made for the work performed by
your contractor. This is sometimes referred to as 'statutory
retainage.' If you choose not to withhold the 10 percent for at
least 30 days after final completion, termination, or abandonment
of the contract by the contractor and if a valid claim is timely
made by a claimant and your contractor fails to pay the claim, you
may be personally liable and your property may be subject to a lien
up to the amount that you failed to withhold.]
"If a subcontractor or supplier who furnishes labor or
materials for the construction of improvements on your property is
not paid, the subcontractor or supplier [claim is not paid within a
certain time period, the claimant] is required to file a mechanic's
lien claim [affidavit] in the real property records in the county
where the property is located. A mechanic's lien claim [affidavit]
is not a lien on your property, but the filing of the claim
[affidavit] could result in a court imposing a lien on your property
if the claimant is successful in litigation to enforce the lien
claim.
"SOME CLAIMS MAY NOT BE VALID. When [you receive a written
notice of a claim or when] a mechanic's lien claim [affidavit] is
filed on your property, you should know your legal rights and
responsibilities regarding the claim. Not all claims are valid. A
[notice of a claim by a] subcontractor or supplier is required to
send a notice and file [be sent, and] the mechanic's lien claim
[affidavit is required to be filed,] within strict time periods.
The notice and the lien claim [affidavit] must contain certain
information. All claimants may not fully comply with the legal
requirements to collect on a claim. [If you have paid the
contractor in full before receiving a notice of a claim and have
fully complied with the law regarding statutory retainage, you may
not be liable for that claim.] Accordingly, you should consult your
attorney when you receive a written notice of a claim to determine
the true extent of your liability or potential liability for that
claim.
"OBTAIN A LIEN RELEASE AND A BILLS-PAID AFFIDAVIT. [When you
receive a notice of claim, do not release withheld funds without
obtaining a signed and notarized release of lien and claim from the
claimant.] You can [also] reduce the risk of having a claim filed
by a subcontractor or supplier by requiring as a condition of each
payment made by you or your lender that your contractor furnish you
with an affidavit stating that all bills have been paid. Under
Texas law, on final completion of the work and before final payment,
the contractor is required to furnish you with an affidavit stating
that all bills have been paid. If the contractor discloses any
unpaid bill in the affidavit, you should withhold payment in the
amount of the unpaid bill until you receive a waiver of lien or
release from that subcontractor or supplier.
"OBTAIN TITLE INSURANCE PROTECTION. You may be able to
obtain a title insurance policy to insure that the title to your
property and the existing improvements on your property are free
from liens claimed by subcontractors and suppliers. If your policy
is issued before the improvements are completed and covers the
value of the improvements to be completed, you should obtain, on the
completion of the improvements and as a condition of your final
payment, a 'completion of improvements' policy endorsement. This
endorsement will protect your property from liens claimed by
subcontractors and suppliers that may arise from the date the
original title policy is issued to the date of the endorsement."
SECTION 23. Subsection (d), Section 56.054, Business &
Commerce Code, is amended to read as follows:
(d) A contingent payor is considered to have exercised
diligence for purposes of Subsection (b)(1) under a contract for a
private project governed by Chapter 53, Property Code, if the
contingent payee receives in writing from the contingent payor:
(1) the name, address, and business telephone number
of the primary obligor;
(2) a description, legally sufficient for
identification, of the property on which the improvements are being
constructed;
(3) [the name and address of the surety on any payment
bond provided under Subchapter I, Chapter 53, Property Code, to
which any notice of claim should be sent;
[(4)] if a loan has been obtained for the construction
of improvements:
(A) a statement, furnished by the primary obligor
and supported by reasonable and credible evidence from all
applicable lenders, of the amount of the loan;
(B) a summary of the terms of the loan;
(C) a statement of whether there is foreseeable
default of the primary obligor; and
(D) the name, address, and business telephone
number of the borrowers and lenders; and
(4) [(5)] a statement, furnished by the primary
obligor and supported by reasonable and credible evidence from all
applicable banks or other depository institutions, of the amount,
source, and location of funds available to pay the balance of the
contract amount if there is no loan or the loan is not sufficient to
pay for all of the construction of the improvements.
SECTION 24. Subdivision (3), Section 3503.051, Insurance
Code, is amended to read as follows:
(3) "Notice of claim" means a written notification by
a claimant who makes a claim for payment from the surety company.
The term does not include a routine statutory notice required by
Section 53.056 [53.056(b), 53.057, 53.058], 53.252(b), or 53.253,
Property Code, or Section 2253.047, Government Code.
SECTION 25. The following provisions of the Property Code
are repealed:
(1) Subdivisions (1), (2), (11), and (12), Section
53.001;
(2) Sections 53.002 and 53.003;
(3) Subsection (b), Section 53.021;
(4) Sections 53.023, 53.024, and 53.025;
(5) Sections 53.051, 53.053, 53.055, 53.057, 53.058,
53.081, 53.082, 53.083, and 53.084;
(6) Subsections (b), (c), and (d), Section 53.085;
(7) Sections 53.101, 53.102, 53.103, 53.104, 53.105,
and 53.106;
(8) Subsection (d), Section 53.107, Subsection (c),
Section 53.122, and Subsections (c) and (d), Section 53.124;
(9) Sections 53.153, 53.155, 53.159, 53.160, 53.161,
and 53.162;
(10) Subchapter I, Chapter 53;
(11) Sections 53.252 and 53.253; and
(12) Subsection (g), Section 53.254.
SECTION 26. The changes in law made by this Act apply only
to an original contract entered into on or after the effective date
of this Act. An original contract entered into before the effective
date of this Act is governed by the law as it existed immediately
before the effective date of this Act, and that law is continued in
effect for that purpose.
SECTION 27. This Act takes effect January 1, 2014.