Are you a construction subcontractor that spends too much time chasing down payments? Sadly, you’re not alone. Project nonpayment practices are far too common in the private commercial construction industry. However, the Texas construction laws are on your side, and you can protect your contractor’s and subcontractor’s income with a mechanics lien.
Payment Protection for Subcontractors
A mechanics lien is an official document stating that either the contractor or the property owner owes you money for work completed on the property. The lien is filed in the official public property records, and it prevents the owner from doing anything with the property until you get paid. In other words, a mechanics lien is effective in motivating payment because it prevents the owner from selling or refinancing the project, or it signals the owner to hold payment from the contractor until you get paid.
Construction lien laws are complicated, and subcontractors can easily lose their lien rights if filing steps or deadlines are missed – even by a single day. In other words, it pays to prepare when you begin new projects. In this post, we will outline what subcontractors need to know to file a mechanics lien.
Step One: Gather Information
The first step in the lien filing process is to gather the necessary project information which is required to prepare a mechanics lien. We recommend doing this at the very start of any commercial construction project, so it is readily available should the subcontractor have to exercise lien rights to collect payment.
Here is the information needed:
- Project owner’s name (or company name) and last known mailing address.
- Project name and address, including the county name.
- A legal description of the property (not always needed, but helpful if available).
- The amounts owed for each month you performed the work.
- The description of the work itself (this can be general).
- The original contractor’s (this is the general contractor) name and last known mailing address (if you are a subcontractor or sub-subcontractor)
Sub-subcontractors will also need the names and mailing addresses of every subcontractor involved above them on the project.
Step Two: Send a Pre-lien Notice
A subcontractor is required by law to serve the owner and general contractor with a pre-lien notice to file a mechanics lien. The pre-lien notice alerts the general contractor and owner that the subcontractor has not been paid. After the pre-lien notice, a publicly filed mechanics lien against the property may be filed in the property records office. By law, the subcontractor must send the pre-lien notice via certified mail with return receipt requested (always keep the receipt as proof of mailing). It is important to note that lien deadlines are calculated on a monthly basis, and your pre-lien notice deadlines are based on the month of nonpayment.
Step Three: Submit a Mechanics Lien Affidavit
If the pre-lien notice does not get you paid, it’s time to move forward with filing a mechanics lien affidavit. When a subcontractor files a lien on a property, the lien affidavit must be signed, notarized, and filed in person at the county records office where the project is located. Next, you must mail a copy of your lien affidavit to the property owner and general contractor by the 5th business day after filing the lien with the county. If you do not send a copy of the lien to the property owner and general contractor, your lien may be invalid and have no force or effect.
Step Four: Subcontractor Lien Release Form
Once you receive payment, the owner, general contractor, or any other person making payment will request a release of lien. This lien release must be signed by the subcontractor, notarized, and filed in the same county records office of the mechanics lien affidavit.
Don’t Miss the Deadlines
Every step of a subcontractor’s lien filing process has a deadline and missing a single one can forfeit your right to file a lien. We provide a very detailed schedule of deadlines for the pre-lien notice letter and the lien affidavit documents.
Although the steps to executing these lien documents may seem daunting, a subcontractor or sub-subcontractor can easily handle it all without the expense of an attorney. All of the legally mandated forms mentioned in this article are available on our website, www.texaseasylien.com, as well as other subcontractor lien filing information, such as deadlines.