In 2022, late payments cost businesses in the construction industry $208 billion. When contractors don't receive the funds they're due for supplies and labor, this jeopardizes cash flow and the ability to start or finish work on other jobs. To help manage this, contractors have some legal avenues for getting payment.
Along with communicating with clients and the general contractors in charge of projects by sending reminders and invoices, you can either file a lien against the property where your work took place or pursue your claim in civil court. Court proceedings can be very expensive, but filing a mechanic's lien is a standard practice that most construction firms must consider at one point or another.
While filing a lien can also be expensive, the process can be more accessible to contractors and construction professionals. With online tools for sending and filing paperwork — and staying on top of all the legal requirements — it's easier than ever to maintain your lien rights, file a lien, and get paid. But before you encounter your next missed payment from a client, make sure you understand your legal obligations in the process.
Why Every Contractor and Supplier Needs to Understand the Legal Requirements for Filing a Lien
The Texas Property Code establishes the processes every contractor and similar professional must follow to place a lien on a property to receive payment for labor or materials provided. While the code outlines the rights professionals can rely on, it also establishes requirements that contractors must follow to notify all involved parties of late payments and the contractor's intent to place a lien on the property.
You and your team need to fully understand the details of these legal requirements so you can meet them without making any mistakes or jeopardizing your lien rights. If you do fail to follow these legal requirements, your lien rights may be forfeited, which means your only legal course for payment will be civil court. Understanding your requirements will also help you navigate pre-lien notices with your clients, allowing you to maintain a good business relationship while protecting your rights.
Legal Requirements Your Business Needs to Know
A full understanding of every step for filing a mechanic's lien in Texas is the best way to protect your business. Once you understand all the steps and the timeline, you can create standardized business operations that comply with each one.
Start by making sure you and your team understand these four legal requirements.
1. Some contractors have pre-lien notice requirements, and failing to file these correctly can mean you waive your lien rights.
Before you can even file a lien on a property, you need to send pre-lien notices to the client and the general contractor, as well as any other relevant parties. For commercial projects, you must send notices regarding any unpaid labor or materials by the 15th day of the third month following when those services or materials were provided. For residential projects, that notice deadline changes to the 15th day of the second month. You must continue to provide these notices each month.
Along with sending the notices on time, you must also send them through certified mail. This process establishes a clear chain of communication, ensures recipients receive the notice and acts as proof that you complied with notice requirements.
2. Liens must follow specific documentation requirements and deadlines.
If you still haven't received payment, you must file a lien notice no later than the 15th day of the fourth month after you provided unpaid services and/or materials. The lien documentation itself requires some specific details, including a legal address, evidence of compliance with notice requirements, and details about the work or materials provided.
3. You have additional notice requirements once you file the lien.
After you've filed the lien with the proper county office, you must continue to reach out to the client and general contractor. You need to send a Notice of Filed Affidavit to the owner and other relevant parties by the fifth day after filing with the county clerk. This notice informs the other parties that you have placed a lien on the property and that they need to pay before you have no choice but to foreclose on it.
4. You have different notice obligations depending on the type of project and your role in the project.
Commercial and residential projects have different pre-lien notice requirements. Your obligations also change based on whether you are the general, or original, contractor on a project or you are a subcontractor.
- For residential properties: The deadline for pre-lien notices is by the 15th day of the second month.
- For commercial properties: The deadline for pre-lien notices is by the 15th day of the third month.
- If you are the general contractor: Notices must be sent by certified mail to the owner.
- If you are a subcontractor: Notices must be sent by certified mail to the owner and original contractor.
Make Complying With Lien Legal Requirements Simpler With Online Signing and Filing
The different requirements and processes can quickly become confusing, especially if you're coordinating multiple projects at once. But failing to meet these requirements will result in the loss of your lien rights and make it much harder to get paid for the work and materials you've provided.
At Texas Easy Lien, we provide online services that make it easy to send notices, complete forms, and file your mechanic's lien against a property. You can handle all these tasks online, and we also provide friendly form notices that satisfy pre-lien notice requirements without souring relationships. Contact us to see how we can help you maintain your lien rights with easier filing and workflows.
