85R5274 BEE-F
By: Wray H.B. No. 2668
A BILL TO BE ENTITLED
AN ACT
relating to a mechanic's or materialman's lien for retained funds
under certain construction contracts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter F, Chapter 53, Property Code, is
amended by adding Section 53.125 to read as follows:
Sec. 53.125. PRIORITY OF LIEN FOR CERTAIN RETAINED FUNDS.
(a) This section does not apply to funds retained under a contract
for construction or repair of a single-family house or a duplex used
for residential purposes.
(b) A lien for retained funds withheld from the original
contractor that is perfected under this chapter has equal priority
with a lien of a person with whom the owner has entered into a loan
or financing agreement to fund the construction of an improvement
of real property that is secured by a lien on the property or
improvement, unless a preference for the retained funds is provided
by other law.
(c) The priority provided under Subsection (b) does not
apply to retained funds that have been paid to the original
contractor.
(d) A waiver or release of the priority provided by this
section is unenforceable unless the waiver or release is contained
in:
(1) an accord and satisfaction of an identified
dispute;
(2) an agreement concerning an action pending in a
court or arbitration proceeding; or
(3) an agreement that is executed after an affidavit
claiming a lien for retained funds has been filed.
SECTION 2. The heading to Subchapter I, Chapter 53,
Property Code, is amended to read as follows:
SUBCHAPTER I. CONTRACTOR'S BOND TO PAY LIENS OR CLAIMS
SECTION 3. Chapter 53, Property Code, is amended by adding
Subchapter I-1 to read as follows:
SUBCHAPTER I-1. OWNER'S BOND IN LIEU OF LIEN FOR RETAINED FUNDS
Sec. 53.221. BOND IN LIEU OF LIEN FOR RETAINED FUNDS. The
lien for retained funds under this chapter does not attach to the
owner's property if, before withholding retained funds from the
original contractor, the owner furnishes and files a bond under
this subchapter.
Sec. 53.222. BOND REQUIREMENTS. A bond under this
subchapter must:
(1) be in a penal sum at least equal to the total of:
(A) 10 percent of the original contract amount;
and
(B) the lesser of:
(i) 10 percent of the normal and usual
extras; or
(ii) 1.5 percent of the original contract
amount;
(2) be in favor of each claimant who is due prompt
payment under Subdivision (4);
(3) be executed by:
(A) the owner as principal; and
(B) a corporate surety authorized to execute
surety bonds in this state under Subchapter A, Chapter 3503,
Insurance Code;
(4) be conditioned on prompt payment of retained funds
owed for all labor, subcontracts, materials, and specially
fabricated materials furnished by any person to accomplish work
required under an original contract; and
(5) clearly and prominently display on the bond or on
an attachment to the bond:
(A) the name, mailing address, physical address,
and telephone number, including the area code, of the surety
company to which any notice of claim should be sent; or
(B) the toll-free telephone number maintained by
the Texas Department of Insurance under Subchapter B, Chapter 521,
Insurance Code, and a statement that the address of the surety
company to which any notice of claim should be sent may be obtained
from the Texas Department of Insurance by calling the toll-free
telephone number.
Sec. 53.223. RECORDING OF BOND AND CONTRACT. The
requirements for recording a bond and contract under Section 53.203
apply to a bond issued under this subchapter and to the related
contract.
Sec. 53.224. RELIANCE ON RECORD. A purchaser, lender, or
other person acquiring an interest in the owner's property or an
insurer of title is entitled to rely on the record of the bond and
contract as constituting payment of all claims and liens for
retained funds owed for labor, subcontracts, materials, or
specially fabricated materials incurred by the owner as if each
person furnishing labor or materials for the work performed under
the original contract had filed a complete release and
relinquishment of a lien for retained funds of record.
Sec. 53.225. ENFORCEABLE CLAIMS. The bond protects all
persons with a claim for retained funds. A claimant is not required
to give any notice to the surety to bring a claim under this
subchapter.
Sec. 53.226. ACTION ON BOND. (a) The claimant must sue on
the bond within two years following the date on which the claim on
retained funds becomes due.
(b) The suit must be brought in the county in which the
property being improved is located in whole or in part.
Sec. 53.227. CLAIMS IN EXCESS OF BOND AMOUNT. If 10 percent
of the total of the original contract amount and any modifications
is an amount that exceeds the penal sum of the bond under Section
53.222, each person who has perfected a lien claim under this
chapter is entitled to the priority of the lien under Section 53.125
for the difference between the total original contract amount, as
modified, and the penal sum.
Sec. 53.228. ATTEMPTED COMPLIANCE. Any provision in any
payment bond furnished or filed in attempted compliance with this
subchapter that expands or restricts the rights or liabilities
provided under this chapter shall be disregarded and the provisions
of this subchapter shall be read into that bond.
Sec. 53.229. WAIVER AND RELEASE OF PAYMENT BOND CLAIM. Any
waiver or release of a payment bond claim under this subchapter is
unenforceable unless the waiver or release is executed under
Subchapter L or is contained in:
(1) an accord and satisfaction of an identified
dispute;
(2) an agreement concerning an action pending in any
court or arbitration proceeding; or
(3) an agreement that is executed after a bond claim
has been made.
SECTION 4. Section 53.156, Property Code, is amended to
read as follows:
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, I-1, 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.
SECTION 5. The changes in law made by this Act apply only to
a lien relating to a contract entered into on or after the effective
date of this Act. A lien relating to a contract entered into before
the effective date of this Act is governed by the law applicable to
the lien immediately before the effective date of this Act, and that
law is continued in effect for that purpose.
SECTION 6. This Act takes effect September 1, 2017.