Texas Real Estate Liens - Texas Mechanic's Lienstheconstructionreport.org/Presentations/Texas Real...

Texas Real Estate LiensTexas Real Estate Liens

HalfMoonHalfMoonFebruary 18, 2009February 18, 2009

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Brian W. Erikson, Esq.Brian W. Erikson, Esq.Quilling, Selander, Cummiskey & Lownds, P.C.Quilling, Selander, Cummiskey & Lownds, P.C.

2001 Bryan Street, Suite 18002001 Bryan Street, Suite 1800DALLAS, TEXAS 75201DALLAS, TEXAS 75201

(214) 880(214) [email protected]@qsclpc.com

February 18, 2009February 18, 2009

LIEN LAWS IN TEXASLIEN LAWS IN TEXAS

Overview of Mechanics’ Liens

• Property Code– Chapter 53

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• Government Code Chapter 2253

– Formerly known as the McGregor Act

• Miller Act– 40 USC Section 270b

Thou ShaltObey the

Law

Overview of Mechanics’ LiensOverview of Mechanics’ Liens

Basic Claim Steps• Determine the Applicable Law

– Private work -- Property Code

– Public work – Government Code

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– Public work – Government Code

– Federal work -- Miller Act

PRIVATE WORK PUBLIC WORK FEDERAL WORK

PROPERTY CODE

Gov’t CodeChapter 2253

MILLERACT

PROJECTTYPE

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COVERSORIGINAL

CONTRACTORAND ALL

SUBCONTRACTORSAND SUPPLIERSFOR PROJECT

COVERSPRIME

CONTRACTORAND ALL

SUBCONTRACTORSAND SUPPLIERSFOR PROJECT

COVERSSUBCONTRACTORS

TO PRIME CONTRACTOR

FOR FIRSTTWO TIERS

AND SUPPLIERSTO FIRST TIER

SUBCONTRACTOR

Overview of Mechanics’ LiensOverview of Mechanics’ LiensOverview of Mechanics’ LiensOverview of Mechanics’ Liens

Basic Claim StepsBasic Claim Steps•• Take appropriate actions to perfect claim rightsTake appropriate actions to perfect claim rights

–– Send proper notices on timeSend proper notices on time

–– File proper papers on timeFile proper papers on time

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–– File proper papers on timeFile proper papers on time

•• File suit within proper time File suit within proper time


History• Non-existent at

Common Law

• 1791 Maryland creation for Washington, D.C.

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for Washington, D.C.

• 1839 First Texas Mechanics’ Lien


Common Provisions for Texas Laws• Notices of nonpayment

• Retainage

• Undelivered specially manufactured materials

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• Undelivered specially manufactured materials

Steps toEnsurePayment


Original Contractor• Constitutional Lien

– No deadline

– Filing puts third parties on notice

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parties on notice

• Property Code lien

– 15th day of 4th monthPayMe!


Subcontractor RightsSubcontractor Rights

•• Unbonded projectsUnbonded projects

–– Trapping funds due Trapping funds due under original contractunder original contract

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under original contractunder original contract

–– 10 % statutory 10 % statutory retainage fundretainage fund

•• Held for 30 daysHeld for 30 days


Subcontractor RightsSubcontractor Rights•• Optional retainage noticeOptional retainage notice

–– Notice to owner by Notice to owner by 15th day of 2d month 15th day of 2d month after first month of after first month of

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after first month of after first month of workwork

–– Otherwise, retainage Otherwise, retainage notice due with each notice due with each notice of nonpaymentnotice of nonpayment


Subcontractor RightsSubcontractor Rights•• Undelivered specially Undelivered specially

fabricated materialfabricated material

–– Notice to Owner by Notice to Owner by 15th day of 2d month 15th day of 2d month

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15th day of 2d month 15th day of 2d month after month order after month order was received and was received and acceptedaccepted

–– Notice to Owner after Notice to Owner after material is delivered material is delivered by 15th day of 3d by 15th day of 3d month month


Subcontractor RightsSubcontractor Rights•• Funds trapping trapFunds trapping trap

–– No money if no moneyNo money if no money

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Subcontractor RightsSubcontractor Rights•• Filing lien affidavitFiling lien affidavit

–– Due by 15th day of 4th Due by 15th day of 4th month after last month month after last month of work orof work or

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of work orof work or

–– Due by 15th day of 4th Due by 15th day of 4th month after breach or month after breach or termination of original termination of original contract or subcontractcontract or subcontract

–– Notice to Owner and Notice to Owner and original contractor original contractor within 5 dayswithin 5 days


SubSub--subcontractor Rightssubcontractor Rights•• Optional retainage noticeOptional retainage notice

–– Notice to owner and original contractor by 15th day Notice to owner and original contractor by 15th day of 2d month after 1st month of workof 2d month after 1st month of work

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–– Otherwise, notice of retainage required with notice of Otherwise, notice of retainage required with notice of nonpaymentnonpayment


SubSub--subcontractor Rightssubcontractor Rights•• Undelivered specially fabricated materialsUndelivered specially fabricated materials

–– Notice to owner by 15th day of 2d Notice to owner by 15th day of 2d month after month order was received month after month order was received and acceptedand accepted

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and acceptedand accepted

–– Notice again after material is delivered Notice again after material is delivered and not paidand not paid


SubSub--subcontractor Rightssubcontractor Rights•• Nonpayment for labor or Nonpayment for labor or

materialsmaterials

–– Notice to original Notice to original contractor by 15th day of contractor by 15th day of

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contractor by 15th day of contractor by 15th day of 2d month after month of 2d month after month of workwork

–– Notice to owner and Notice to owner and original contractor by 15th original contractor by 15th day of 3d month after day of 3d month after month of workmonth of work


SubSub--subcontractor Rightssubcontractor Rights•• Filing lien affidavitsFiling lien affidavits

–– File by 15th day of 4th month File by 15th day of 4th month after last month of work or after last month of work or after breach of termination of after breach of termination of

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after breach of termination of after breach of termination of original contract or suboriginal contract or sub--subcontractsubcontract

–– For retainage, file within 30 For retainage, file within 30 days after completion of days after completion of original contractoriginal contract

–– Notice of filing of lien to Notice of filing of lien to owner and original owner and original contractor within 5 dayscontractor within 5 days


Enforcement of Lien ClaimEnforcement of Lien Claim•• File suit within 2 years after filing of File suit within 2 years after filing of

lien orlien or

•• File suit within 1 year after File suit within 1 year after completion of original contract, completion of original contract,

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completion of original contract, completion of original contract, whichever is laterwhichever is later

Overview of Mechanic’s LiensOverview of Mechanic’s Liens

Summary Motion to Remove Invalid Lien-§53.160

• Verified motion based on one or more of 7 grounds

• No notice of claim

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• No notice of claim

• Affidavit of lien not properly filed

• No notice of lien filing

• Owner properly has no funds

• Owner deposited funds in court registry

• Improper homestead lien

• Claimant released lien


Other ProvisionsOther Provisions•• Obtaining informationObtaining information

–– Owner must provide legal Owner must provide legal description of property, copy description of property, copy of bond, & information on of bond, & information on

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of bond, & information on of bond, & information on prior liens on propertyprior liens on property


Payment Bond ClaimPayment Bond Claim•• Perfected by following lien requirementsPerfected by following lien requirements

•• Alternate methodAlternate method

–– Provide all notices required for a lien, with owner’s Provide all notices required for a lien, with owner’s

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–– Provide all notices required for a lien, with owner’s Provide all notices required for a lien, with owner’s notices sent to bonding company notices sent to bonding company


Enforcement of Property Code Bond ClaimEnforcement of Property Code Bond Claim•• File suit after 60 days but before 1 year from bond claimFile suit after 60 days but before 1 year from bond claim

Enforcement of NonEnforcement of Non--Property Code Bond ClaimProperty Code Bond Claim•• Follow terms of bondFollow terms of bond

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•• Follow terms of bondFollow terms of bond


Liens on Residential and Homestead Property

• Special protection under Texas Property

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under Texas Property Code

• Single family, duplex, triplex & 4-plex


Liens on Residential Property

• Notice from claimant other than Original Contractor by 15th day

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Contractor by 15th day of 2d month after work done

• Notice for specially fabricated material by 15th day of 2d month after month of order


Liens on Residential Property

• File lien affidavit by 15th day of 3d month after debt accrued

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after debt accrued

• Debt accrues at different times for different claimants

• Retainage accrues on last day of all work by original contractor

Overview of Mechanic’s LiensOverview of Mechanic’s Liens

Residential Liens• Suit required within

one year– Of last day claimant

may file lien

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may file lien

– Or of completion, termination, or abandonment of original contract work

• Whichever is later


Liens on Homestead Liens on Homestead PropertyProperty

•• Written contract with Written contract with “Homestead Warning” signed “Homestead Warning” signed by contractor and owner(s) by contractor and owner(s)

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by contractor and owner(s) by contractor and owner(s) before work startsbefore work starts

•• File contract with county clerk File contract with county clerk before work startsbefore work starts

•• No compliance by original No compliance by original contractor, no lien rights for contractor, no lien rights for any subcontractor or supplierany subcontractor or supplier


Liens on Leasehold ImprovementsLiens on Leasehold Improvements•• No lien rights against ownerNo lien rights against owner

•• Lien attaches against leasehold improvementsLien attaches against leasehold improvements

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TEXAS PROPERTY CODE DEADLINESTEXAS PROPERTY CODE DEADLINESMONTH LABOR MONTH LABOR PERFORMEDPERFORMED

OR MATERIALS OR MATERIALS DELIVEREDDELIVERED

LAST DATE FOR EARLY LAST DATE FOR EARLY NOTICE TO ORIGINAL NOTICE TO ORIGINAL

CONTRACTORCONTRACTOR

LAST DATE FOR FUND LAST DATE FOR FUND TRAPPING NOTICE TO TRAPPING NOTICE TO

OWNER ANDOWNER ANDORIGINAL CONTRACTORORIGINAL CONTRACTOR

LAST DATE FOR FILING LAST DATE FOR FILING LIEN AFFIDAVIT AFTER LIEN AFFIDAVIT AFTER LAST MONTH OF WORKLAST MONTH OF WORK

JANUARYJANUARY

FEBRUARYFEBRUARY

MARCHMARCH

APRILAPRIL

APRIL 15APRIL 15

MAY 15MAY 15

JUNE 15JUNE 15

JULY 15JULY 15

MAY 15MAY 15

JUNE 15JUNE 15

JULY 15JULY 15

AUGUST 15AUGUST 15

MARCH 15MARCH 15

APRIL 15APRIL 15

MAY 15MAY 15

JUNE 15JUNE 15

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MAYMAY

JUNEJUNE

JULYJULY

AUGUSTAUGUST

SEPTEMBERSEPTEMBER

OCTOBEROCTOBER

NOVEMBERNOVEMBER

DECEMBERDECEMBER

AUGUST 15AUGUST 15

SEPTEMBER 15SEPTEMBER 15

OCTOBER 15OCTOBER 15

NOVEMBER 15NOVEMBER 15

DECEMBER 15DECEMBER 15

JANUARY 15JANUARY 15

FEBRUARY 15FEBRUARY 15

MARCH 15MARCH 15







MARCH 15MARCH 15

APRIL 15APRIL 15

JULY 15JULY 15

AUGUST 15AUGUST 15








Trust Fund Trust Fund ClaimClaim

•• Personal liabilityPersonal liability

•• Criminal liabilityCriminal liability

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•• No lien requiredNo lien required

•• Exemptions for Exemptions for lender, surety & lender, surety & title companytitle company

•• Defense for Defense for backchargesbackcharges


What is a Mechanics’ Lien?

• A legal attachment to real property

• Follows ownership of

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• Follows ownership of the property


Schools of Thought• New York

– Value limited to $ in owner’s hands

– Texas subscribes

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– Texas subscribes

• Pennsylvania– More subcontractor

friendly

– Direct lien on owner’s property for full value of claim


Who is Entitled to a Lien?

• Original Contractor– Beware Sham

Contracts

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Contracts

• Subcontractors

• Suppliers

• Others


Types of Labor, Materials, and Services that are Lienable

• Debt a must

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• Debt a must

• Labor or material

• Specially fabricated material

• Architectural, Engineering or Surveying services


Types of Labor, Materials, and Services that are Lienable

• Cost plus contracts

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• Cost plus contracts

• Sales tax

• Profit

• Attorney’s fees


Application of Payments

• Claimant may apply as chooses without direction from debtor

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direction from debtor

Construction Contracts and Mechanics’ Liens


No Lien Contract• Legal under Texas law

• Waiver must be clear

• Waiver strictly

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• Waiver strictly construed

LienWaiver



Pay When Paid Contracts

• Compare to pay if paid contracts

• Legal under Texas law

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• Legal under Texas law

• Trap for the unwary



Other Drafting Considerations

• Blanket lien waiver from Original Contractor is not full

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Contractor is not full protection

• Payment and performance bonds

Property Code UpdatesProperty Code Updates

Page v. Structural Wood Companies, 102 S.W.3d 720 (Tex. 2003)

• Lien affidavit filed more than 30 days after

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more than 30 days after termination of general contractor

– Ineffective

– Even though construction continued with a different general contractor


House Bill 629• Owner must provide

notice of termination or abandonment to:

– Persons requesting notice

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– Persons requesting notice

– Persons furnishing notice of unpaid account, retainage or specially fabricated materials

• No notice, no complaint about late lien

– Provided lien otherwise complies


Fraudulent liens• 1997 Passage of Texas

Civil Practice & Remedies Code §12.001

– Enacted for Republic

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– Enacted for Republic of Texas liens

– Liability for greater of $10,000 or actual damages

• Now being used against lienors for misstating or overstating lien amounts

Property Code UpdateProperty Code Update

Fraudulent liens• Centurion Planning

Corp. v. Seabrook Venture II, 176 S.W.3d 498 (Tex.App. –

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498 (Tex.App. –Houston [1st Dist.] 2004)

– Developer obtained statutory and attorney’s fees from engineering firm for improper lien


Fraudulent liens• Taylor Electrical Services,

Inc. v. Armstrong Electrical Supply Co., 167 S.W.3d 522 (Tex.App. – Fort Worth 2005)

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(Tex.App. – Fort Worth 2005)– General contractor obtained

statutory damages from supplier who had received but not cashed partial payment check

– Even though general contractor was not the owner


Substantial compliance• Redland v. Southwest Stainless,

2005 WL 3244323 (Tex.App. –Fort Worth 2005)

– Notice by certified mail to payment bond surety, but by

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payment bond surety, but by only regular mail to general contractor

• = substantial compliance

• Especially where notice was received

• And general contractor went bankrupt


Substantial Compliance

• Wesco Distributing, Inc. v. Westport Group, Inc., 150 S.W.3d 553 (Tex.App. –

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S.W.3d 553 (Tex.App. –Austin 2004)

– No substantial compliance where notice returned for insufficient postage


Construction Trust Fund Act• C & G, Inc. v. Jones, 165 S.W.3d 450

(Tex.App. – Dallas 2005)

– Officers of general contractor defend Trust Fund Act claim

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defend Trust Fund Act claim based on lack of control or direction over trust funds

• Court: Officers liable since had signatory authority over account where trust funds were deposited and wrote checks on such account

Mechanic’s LiensMechanic’s LiensMade EasyMade Easy

For For BarsonBarson UtilitiesUtilities

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For For BarsonBarson UtilitiesUtilitiesMay 20, 2008May 20, 2008

Texas Government Code Chapter 2253f/n/a the McGREGOR ACT


Notice RequirementsNotice Requirements•• Notice by 15th day of 3d month after month of workNotice by 15th day of 3d month after month of work

•• Notice to prime contractor and suretyNotice to prime contractor and surety

•• Notice of nonpayment and sworn statement of accountNotice of nonpayment and sworn statement of account

•• Send by certified or registered mailSend by certified or registered mail

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•• Send by certified or registered mailSend by certified or registered mail



Notice RequirementsNotice Requirements•• Provide copy of contractProvide copy of contract

•• If no contract, provide name of contracting party, dates of If no contract, provide name of contracting party, dates of work, description of work, itemization of claim, and work, description of work, itemization of claim, and identification of projectidentification of project

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identification of projectidentification of project



Retainage NoticeRetainage Notice•• Provide notice to prime contractor and surety within 90 Provide notice to prime contractor and surety within 90

days of completion of prime contractdays of completion of prime contract

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Additional Notice to Prime Contractor for 2d Tier Additional Notice to Prime Contractor for 2d Tier ClaimantsClaimants

•• Notice of unpaid balance by 15th day of 2d month after Notice of unpaid balance by 15th day of 2d month after month of workmonth of work

•• Notice of retainage due by 15th day of 2d month after Notice of retainage due by 15th day of 2d month after

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•• Notice of retainage due by 15th day of 2d month after Notice of retainage due by 15th day of 2d month after start of workstart of work

•• Notice of undelivered specially fabricated materials due Notice of undelivered specially fabricated materials due by 15th day of 2d month after order received and by 15th day of 2d month after order received and accepted accepted



Notice RequirementsNotice Requirements•• Must be sent by certified or registered mailMust be sent by certified or registered mail

•• Date of mailing is date of noticeDate of mailing is date of notice

•• One day late, many dollars shortOne day late, many dollars short

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•• One day late, many dollars shortOne day late, many dollars short



Enforcement of ClaimEnforcement of Claim•• File suit after 60 days but before 1 year from date claim File suit after 60 days but before 1 year from date claim

filedfiled

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Other ProvisionsOther Provisions•• Obtaining copy of bondObtaining copy of bond

•• Notice to public owner not necessaryNotice to public owner not necessary

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Liens for Prime Contract Under $25,000Liens for Prime Contract Under $25,000•• Lien attaches to money owed by public owner to prime Lien attaches to money owed by public owner to prime

contractorcontractor

•• No lien on public improvementsNo lien on public improvements

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•• Notice by 15th day of 2d month after month of workNotice by 15th day of 2d month after month of work

JANUARY

FEBRUARY

MARCH

APRIL

MARCH 15

APRIL 15

MAY 15

JUNE 15

APRIL 15

MAY 15

JUNE 15

JULY 15

MONTH LABOR WAS PERFORMED OR

MATERIALS WERE DELIVERED

LAST DATE FOR EARLY NOTICE TO PRIME CONTRACTOR BY INDIRECT

CLAIMANT

LAST DATE FOR NOTICE TO SURETY WITH SWORN

STATEMENT OF ACCOUNT

Gov’t Code Chapter 2253 TIME DEADLINESGov’t Code Chapter 2253 TIME DEADLINES

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MAY

JUNE

JULY

AUGUST

SEPTEMBER

OCTOBER

NOVEMBER

DECEMBER

JULY 15

AUGUST 15

SEPTEMBER 15

OCTOBER 15

NOVEMBER 15

DECEMBER 15

JANUARY 15

FEBRUARY 15

AUGUST 15

SEPTEMBER 15

OCTOBER 15

NOVEMBER 15

DECEMBER 15

JANUARY 15

FEBRUARY 15

MARCH 1553

MILLER ACTMILLER ACT

ProtectsProtects•• Subcontractors or suppliers directly to prime contractorSubcontractors or suppliers directly to prime contractor

•• SubSub--subcontractors or suppliers directly to subcontractor subcontractors or suppliers directly to subcontractor (not supplier) to prime contractor(not supplier) to prime contractor

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Notice RequirementsNotice Requirements•• None required for subcontractors or suppliers directly to None required for subcontractors or suppliers directly to

prime contractorprime contractor

•• Notice to prime contractor by subNotice to prime contractor by sub--subcontractors or subcontractors or suppliers to subcontractors within 90 days of last date of suppliers to subcontractors within 90 days of last date of

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suppliers to subcontractors within 90 days of last date of suppliers to subcontractors within 90 days of last date of contract workcontract work

•• Punchlist or warranty work does not extend deadlinePunchlist or warranty work does not extend deadline


Notice by Second Tier ClaimantsNotice by Second Tier Claimants•• Must state claim “with substantial accuracy”Must state claim “with substantial accuracy”

•• Must be sent by certified or registered mailMust be sent by certified or registered mail

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Enforcement of ClaimEnforcement of Claim•• Sue prime contractor and surety after 90 days but before Sue prime contractor and surety after 90 days but before

1 year after last date of contract work1 year after last date of contract work

•• Federal entity’s contracting officer will provide names of Federal entity’s contracting officer will provide names of prime contractor and bonding companyprime contractor and bonding company

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prime contractor and bonding companyprime contractor and bonding company

Texas Real Estate LiensTexas Real Estate Liens

HalfMoonHalfMoonFebruary 18, 2009February 18, 2009

62




February 18, 2009February 18, 2009

Mechanic’s LiensMechanic’s LiensMade EasyMade Easy

For For BarsonBarson UtilitiesUtilities

63




For For BarsonBarson UtilitiesUtilitiesMay 20, 2008May 20, 2008

Using A Mechanic’s Lien to Get Using A Mechanic’s Lien to Get Your Money in TexasYour Money in Texas

National Business InstituteNational Business Institute

64


ATTORNEYS AND COUNSELORSATTORNEYS AND COUNSELORS


(214) 880(214) 880--18441844

National Business InstituteNational Business InstituteApril 9, 2007April 9, 2007

Using A Mechanic’s Lien to Get Using A Mechanic’s Lien to Get Your Money in TexasYour Money in Texas


65




(214) 880(214) 880--18441844

National Business InstituteNational Business InstituteApril 26, 2006April 26, 2006

Mechanics’ Lien Law and Mechanics’ Lien Law and Strategies in TexasStrategies in Texas


66

Brian W. Erikson, Esq.Brian W. Erikson, Esq.Quilling, Selander, Cummiskey, Clutts & Lownds, P.C.Quilling, Selander, Cummiskey, Clutts & Lownds, P.C.


350 N. St. Paul, Suite 2800350 N. St. Paul, Suite 2800DALLAS, TEXAS 75201DALLAS, TEXAS 75201

(214) 880(214) 880--18441844

National Business InstituteNational Business InstituteJuly 29, 1998July 29, 1998

Texas Real Estate Liens - Texas Mechanic's Lienstheconstructionreport.org/Presentations/Texas Real...

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