Understanding How Mechanic’s Liens Work &

How They Impact Your Property

 You may be considering adding on to your home, building a pool or some other form of home improvement.  Before you embark on your next home improvement project be sure you understand the rules regarding Mechanic’s Liens (also known as Materialmen’s Liens) that a contractor you have hired to perform improvements can place on your home.

WHO CAN FILE A MECHANIC’S LIEN:

  • The Original/General Contractor:  An original contractor is entitled to a lien for work done or material furnished.  An original contractor who furnished materials and labor for a construction project is entitled to a lien for labor, notwithstanding that the actual performance of the work was done by his or her employees.  An original contractor, however, is not entitled to a lien for material and labor that he or she should have furnished under the contract where such materials and labor were actually furnished by others. 
  • The Subcontractor/Derivative Claimant:  A subcontractor is also entitled to a lien if the subcontractor furnishes labor or materials for construction or repair of a building in Texas under or by virtue of a contract with the owner or the owner's contractor.  Often, homeowners will pay the original contractor in full and are surprised to learn the original contractor did not pay the subcontractors.  The homeowner may not learn about the original contractor’s failure to pay subcontractors until they receive a lien notice from the subcontractor.  However there is some good news, generally the amount of a lien claimed by a subcontractor may not exceed:

          1)

an amount equal to the proportion of the total subcontract price that the sum of the labor performed, materials furnished, materials specially fabricated, reasonable overhead costs incurred, and proportionate profit margin bears to the total subcontract price, minus 

          2)

 the sum of previous payments received by the subcontractor under the subcontract

 

 

 CHOOSING A REPUTABLE ORIGINAL/GENERAL CONTRACTOR:

Remember there are many general contractors that do not pay their subcontractors even after being paid in full by the homeowner.  Before entering into a contract for home improvement or commencing any work with a contractor, you should check with the Texas Residential Construction Commission www.trcc.state.tx.us to see if the contractor you are considering is registered and if any complaints have been filed against the contractor.  Also, request a list of references from the contractor and check with your local Better Business Bureau to see if any complaints have been filed against the contractor.

EXPIRATION OF MECHANIC’S LIENS ON RESIDENTIAL PROPERTY:

The good news is that even after the mechanic’s lien is filed, if a properly perfected mechanic’s lien is not finalized in a foreclosure action before the LATER of the following two events the claimant/contractor may waive their right to enforce the lien against you: 

1) One (1) year after the last day a claimant/contractor may a lien affidavit; or
2) One (1) year from the date of the project's completion, abandonment or termination.

ALWAYS REMEMBER:

An original contractor may not require an owner of real property to convey the real property to the original contractor or to an entity controlled by the original contractor as a condition to the performance of the residential construction contract for improvements to the real property. 

We welcome you to drop in, say hello and tour our office.  We firmly believe that good legal advice should be accessible to everyone.

By:  Nancy J. Carroll, J.D., LL.M.
Fee Title Attorney for Ticor Title

 
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