1-1 AN ACT
1-2 relating to mechanics', contractors', and materialmen's liens;
1-3 providing penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 41.001(b), Property Code, is amended to
1-6 read as follows:
1-7 (b) Encumbrances may be properly fixed on homestead property
1-8 for:
1-9 (1) purchase money;
1-10 (2) taxes on the property;
1-11 (3) work and material used in constructing
1-12 improvements on the property if contracted for in writing as
1-13 provided by Sections 53.254 [53.059](a), (b), and (c);
1-14 (4) an owelty of partition imposed against the
1-15 entirety of the property by a court order or by a written agreement
1-16 of the parties to the partition, including a debt of one spouse in
1-17 favor of the other spouse resulting from a division or an award of
1-18 a family homestead in a divorce proceeding; or
1-19 (5) the refinance of a lien against a homestead,
1-20 including a federal tax lien resulting from the tax debt of both
1-21 spouses, if the homestead is a family homestead, or from the tax
1-22 debt of the owner.
1-23 SECTION 2. Section 53.001, Property Code, is amended to read
1-24 as follows:
2-1 Sec. 53.001. DEFINITIONS. In this chapter:
2-2 (1) "Contract price" means the cost to the owner for
2-3 any part of construction or repair performed under an original
2-4 contract.
2-5 (2) "Improvement" includes:
2-6 (A) abutting sidewalks and streets and utilities
2-7 in or on those sidewalks and streets;
2-8 (B) clearing, grubbing, draining, or fencing of
2-9 land;
2-10 (C) wells, cisterns, tanks, reservoirs, or
2-11 artificial lakes or pools made for supplying or storing water;
2-12 (D) pumps, siphons, and windmills or other
2-13 machinery or apparatuses used for raising water for stock, domestic
2-14 use, or irrigation; and
2-15 (E) planting orchard trees, grubbing out
2-16 orchards and replacing trees, and pruning of orchard trees.
2-17 (3) "Labor" means labor used in the direct prosecution
2-18 of the work.
2-19 (4) "Material" means all or part of:
2-20 (A) the material, machinery, fixtures, or tools
2-21 incorporated into the work, consumed in the direct prosecution of
2-22 the work, or ordered and delivered for incorporation or
2-23 consumption;
2-24 (B) rent at a reasonable rate and actual running
2-25 repairs at a reasonable cost for construction equipment used or
2-26 reasonably required and delivered for use in the direct prosecution
2-27 of the work at the site of the construction or repair; or
3-1 (C) power, water, fuel, and lubricants consumed
3-2 or ordered and delivered for consumption in the direct prosecution
3-3 of the work.
3-4 (5) "Mechanic's lien" means the lien provided by this
3-5 chapter.
3-6 (6) "Original contract" means an agreement to which an
3-7 owner is a party either directly or by implication of law.
3-8 (7) "Original contractor" means a person contracting
3-9 with an owner either directly or through the owner's agent.
3-10 (8) "Residence" means a single-family house, duplex,
3-11 triplex, or quadruplex or a unit in a multiunit structure used for
3-12 residential purposes that is:
3-13 (A) owned by one or more adult persons; and
3-14 (B) used or intended to be used as a dwelling by
3-15 one of the owners.
3-16 (9) "Residential construction contract" means a
3-17 contract between an owner and a contractor in which the contractor
3-18 agrees to construct or repair the owner's residence, including
3-19 improvements appurtenant to the residence.
3-20 (10) "Residential construction project" means a
3-21 project for the construction or repair of a new or existing
3-22 residence, including improvements appurtenant to the residence, as
3-23 provided by a residential construction contract.
3-24 (11) "Retainage" means an amount representing part of
3-25 a contract payment that is not required to be paid to the claimant
3-26 within the month following the month in which labor is performed,
3-27 material is furnished, or specially fabricated material is
4-1 delivered. The term does not include retainage under Subchapter E.
4-2 (12) [(9)] "Specially fabricated material" means
4-3 material fabricated for use as a component of the construction or
4-4 repair so as to be reasonably unsuitable for use elsewhere.
4-5 (13) [(10)] "Subcontractor" means a person who has
4-6 furnished labor or materials to fulfill an obligation to an
4-7 original contractor or to a subcontractor to perform all or part of
4-8 the work required by an original contract.
4-9 (14) [(11)] "Work" means any part of construction or
4-10 repair performed under an original contract.
4-11 SECTION 3. Section 53.003(a), Property Code, is amended to
4-12 read as follows:
4-13 (a) This section applies to notices required by Subchapters
4-14 B through G and K.
4-15 SECTION 4. Section 53.026(a), Property Code, is amended to
4-16 read as follows:
4-17 (a) A person who labors, specially fabricates materials, or
4-18 furnishes labor or materials under a direct contractual
4-19 relationship with another person is considered to be in direct
4-20 contractual relationship with the owner and has a lien as an
4-21 original contractor, if:
4-22 (1) the owner contracted with the other person for the
4-23 construction or repair of a house, building, or improvements and
4-24 the owner can effectively control that person through ownership of
4-25 voting stock, interlocking directorships, or otherwise;
4-26 (2) the owner contracted with the other person for the
4-27 construction or repair of a house, building, or improvements and
5-1 that other person can effectively control the owner through
5-2 ownership of voting stock, interlocking directorships, or
5-3 otherwise; or
5-4 (3) [(2)] the owner contracted with the other person
5-5 for the construction or repair of a house, building, or
5-6 improvements and the contract was made without good faith intention
5-7 of the parties that the other person was to perform the contract.
5-8 SECTION 5. Section 53.052, Property Code, is amended to read
5-9 as follows:
5-10 Sec. 53.052. FILING OF AFFIDAVIT. (a) Except as provided
5-11 by Subsection (b), the [The] person claiming the lien must file an
5-12 affidavit with the county clerk of the county in which the property
5-13 is located or into which the railroad extends not later than the
5-14 15th day of the fourth calendar month after the day on which the
5-15 indebtedness accrues.
5-16 (b) A person claiming a lien arising from a residential
5-17 construction project must file an affidavit with the county clerk
5-18 of the county in which the property is located not later than the
5-19 15th day of the third calendar month after the day on which the
5-20 indebtedness accrues.
5-21 (c) The county clerk shall record the affidavit in records
5-22 kept for that purpose and shall index and cross-index the affidavit
5-23 in the names of the claimant, the original contractor, and the
5-24 owner. Failure of the county clerk to properly record or index a
5-25 filed affidavit does not invalidate the lien.
5-26 SECTION 6. Sections 53.054(a) and (b), Property Code, are
5-27 amended to read as follows:
6-1 (a) The affidavit must be signed by the person claiming the
6-2 lien or by another person on the claimant's behalf and must contain
6-3 substantially:
6-4 (1) a sworn statement of the amount of the claim[,
6-5 including the amount];
6-6 (2) the name and last known address of the owner or
6-7 reputed owner;
6-8 (3) a general statement of the kind of work done and
6-9 materials furnished by the claimant and, for a claimant other than
6-10 an original contractor, a statement of each month in which the work
6-11 was done and materials furnished for which payment is requested;
6-12 (4) the name and last known address of the person by
6-13 whom the claimant was employed or to whom the claimant furnished
6-14 the materials or labor;
6-15 (5) the name and last known address of the original
6-16 contractor;
6-17 (6) a description, legally sufficient for
6-18 identification, of the property sought to be charged with the lien;
6-19 [and]
6-20 (7) the claimant's name, mailing address, and, if
6-21 different, physical [business] address; and
6-22 (8) for a claimant other than an original contractor,
6-23 a statement identifying the date each notice of the claim was sent
6-24 to the owner and the method by which the notice was sent.
6-25 (b) The claimant may attach to the affidavit a copy of any
6-26 applicable written agreement or contract and a copy of each notice
6-27 sent to the owner.
7-1 SECTION 7. Section 53.055(a), Property Code, is amended to
7-2 read as follows:
7-3 (a) A person who files an affidavit must send a copy of the
7-4 affidavit by registered or certified mail to the owner or reputed
7-5 owner at the owner's last known business or residence address not
7-6 later than one business day after the date the affidavit is filed
7-7 with the county clerk [the earlier of:]
7-8 [(1) the 10th business day after the date the person
7-9 files the affidavit; or]
7-10 [(2) the date the affidavit is required to be filed].
7-11 SECTION 8. Section 53.056(a), Property Code, is amended to
7-12 read as follows:
7-13 (a) Except as provided by Subchapter K, a [A] claimant other
7-14 than an original contractor must give the notice prescribed by this
7-15 section for the lien to be valid.
7-16 SECTION 9. Section 53.057(a), Property Code, is amended to
7-17 read as follows:
7-18 (a) Except as provided by Subchapter K, a [A] claimant may
7-19 give notice under this section instead of or in addition to notice
7-20 under Section 53.056 if the claimant is to labor, furnish labor or
7-21 materials, or specially fabricate materials under an agreement with
7-22 an original contractor or a subcontractor providing for retainage.
7-23 SECTION 10. Section 53.058(a), Property Code, is amended to
7-24 read as follows:
7-25 (a) Except as provided by Subchapter K, a [A] claimant who
7-26 specially fabricates material must give notice under this section
7-27 for the lien to be valid.
8-1 SECTION 11. Sections 53.081(a), (b), and (d), Property Code,
8-2 are amended to read as follows:
8-3 (a) If an owner receives notice under Section 53.056,
8-4 53.057, [or] 53.058, 53.252, or 53.253, the owner may withhold from
8-5 payments to the original contractor an amount necessary to pay the
8-6 claim for which he receives notice.
8-7 (b) If notice is sent in a form that substantially complies
8-8 with Section 53.056 or 53.252, the owner may withhold the funds
8-9 immediately on receipt of the notice.
8-10 (d) If notice is sent under Section 53.058, the owner may
8-11 withhold funds immediately on receipt of the notices sent under
8-12 Subsection (e) of that section. If notice is sent as provided by
8-13 Section 53.253(b), the owner may withhold funds immediately on
8-14 receipt of the notice sent as required by Section 53.252.
8-15 SECTION 12. Section 53.084(b), Property Code, is amended to
8-16 read as follows:
8-17 (b) If the owner has received the notices required by
8-18 Subchapter C or K, if the lien has been secured, and if the claim
8-19 has been reduced to final judgment, the owner is liable and the
8-20 owner's property is subject to a claim for any money paid to the
8-21 original contractor after the owner was authorized to withhold
8-22 funds under this subchapter. The owner is liable for that amount
8-23 in addition to any amount for which he is liable under Subchapter
8-24 E.
8-25 SECTION 13. Section 53.085, Property Code, is amended to
8-26 read as follows:
8-27 Sec. 53.085. AFFIDAVIT REQUIRED. (a) Any person who
9-1 furnishes labor or materials for the construction of improvements
9-2 on real property shall, if requested and as a condition of payment
9-3 for such labor or materials, provide to the requesting party, or
9-4 the party's [its] agent, an affidavit stating that the [such]
9-5 person has paid each of the person's [his] subcontractors,
9-6 laborers, or materialmen in full for all labor and materials
9-7 provided to the person [him] for the construction. In the event,
9-8 however, that the person has not paid each of the person's [his]
9-9 subcontractors, laborers, or materialmen in full, the person shall
9-10 state in the affidavit the amount owed and the name and, if known,
9-11 the address and telephone number of each subcontractor, laborer, or
9-12 materialman to whom the [such] payment is owed.
9-13 (b) The seller of any real property shall, upon request by
9-14 the purchaser or the purchaser's [its] agent prior to closing of
9-15 the purchase of the [such] real property, provide to the [such]
9-16 purchaser or the purchaser's [its] agent, a written affidavit
9-17 stating that the seller has paid each of the seller's [his]
9-18 contractors, laborers, or materialmen in full for all labor and
9-19 materials provided to the seller through the date specified in the
9-20 affidavit for any construction of improvements on the real property
9-21 and that the seller is not indebted to any person, firm, or
9-22 corporation by reason of any such construction through the date
9-23 specified in the affidavit. In the event that the seller has not
9-24 paid each of the seller's [his] contractors, laborers, or
9-25 materialmen in full for labor and material provided through the
9-26 date specified in the affidavit, the seller shall state in the
9-27 affidavit the amount owed and the name and, if known, the address
10-1 and telephone number of each contractor, laborer, or materialman
10-2 to whom the [such] payment is owed.
10-3 (c) The affidavit may include:
10-4 (1) a waiver or release of lien rights by the affiant
10-5 that is conditioned on the receipt of actual payment or collection
10-6 of funds when payment is made by check or draft;
10-7 (2) a warranty or representation that certain bills or
10-8 classes of bills will be paid by the affiant from funds paid in
10-9 reliance on the affidavit; and
10-10 (3) an indemnification by the affiant for any loss or
10-11 expense resulting from false or incorrect information in the
10-12 affidavit.
10-13 (d) A person, including a seller, commits an offense if the
10-14 person intentionally, knowingly, or recklessly makes a false or
10-15 misleading statement in an affidavit under this section. An
10-16 offense under this section is a [Class A] misdemeanor. A person
10-17 adjudged guilty of an offense under this section shall be punished
10-18 by a fine not to exceed $4,000 or confinement in jail for a term
10-19 not to exceed one year or both a fine and confinement. A person
10-20 may not receive community supervision for the offense.
10-21 (e) A person signing an affidavit under this section is
10-22 personally liable for any loss or damage resulting from any false
10-23 or incorrect information in the affidavit.
10-24 SECTION 14. Sections 53.106(b), (c), and (d), Property Code,
10-25 are amended to read as follows:
10-26 (b) A copy of the affidavit must be sent by certified or
10-27 registered mail to the original contractor not later than the [10th
11-1 day after the] date the affidavit is filed and to each claimant who
11-2 sends a notice of lien liability to the owner under Section 53.056,
11-3 53.057, [or] 53.058, 53.252, or 53.253 not later than the date the
11-4 affidavit is filed or the 10th day after the date the owner
11-5 receives the notice of lien liability [or after the date the
11-6 affidavit is filed], whichever is later.
11-7 (c) A copy of the affidavit must also be sent to each person
11-8 who furnishes labor or materials for the property and who furnishes
11-9 the owner with a written request for the copy. The owner must
11-10 furnish the copy to the person not later than the date the
11-11 affidavit is filed or the 10th day after the date the request is
11-12 received [or after the date the affidavit is filed], whichever is
11-13 later.
11-14 (d) Except as provided by this subsection, an [An] affidavit
11-15 filed under this section on or before the 10th day after the date
11-16 of completion of the improvements is prima facie evidence of the
11-17 date the work under the original contract is completed for purposes
11-18 of this subchapter. If the affidavit is filed after the 10th day
11-19 after the date of completion, the date of completion for purposes
11-20 of this subchapter is the date the affidavit is filed. This
11-21 subsection does not apply to a person to whom the affidavit was not
11-22 sent as required by this section.
11-23 SECTION 15. Section 53.157, Property Code, is amended to
11-24 read as follows:
11-25 Sec. 53.157. DISCHARGE OF LIEN. A mechanic's lien or
11-26 affidavit claiming a mechanic's lien filed under Section 53.052 may
11-27 be discharged of record by:
12-1 (1) recording a lien release signed by the claimant
12-2 under Section 53.152;
12-3 (2) failing to institute suit to foreclose the lien in
12-4 the county in which the property is located within the period
12-5 prescribed by Section 53.158, 53.175, or 53.208;
12-6 (3) recording the original or certified copy of a
12-7 final judgment or decree of a court of competent jurisdiction
12-8 providing for the discharge;
12-9 (4) filing the bond and[,] notice[, and return] in
12-10 compliance with Subchapter H; [or]
12-11 (5) filing the bond in compliance with Subchapter I;
12-12 or
12-13 (6) recording a certified copy of the order removing
12-14 the lien under Section 53.160 and a certificate from the clerk of
12-15 the court that states that no bond or deposit as described by
12-16 Section 53.161 was filed by the claimant within 30 days after the
12-17 date the order was entered.
12-18 SECTION 16. Section 53.158, Property Code, is amended to
12-19 read as follows:
12-20 Sec. 53.158. PERIOD FOR BRINGING SUIT TO FORECLOSE LIEN.
12-21 (a) Except as provided by Subsection (b), suit [Suit] must be
12-22 brought to foreclose the lien within two years after the date of
12-23 filing the lien affidavit under Section 53.052 or within one year
12-24 after completion of the work under the original contract under
12-25 which the lien is claimed, whichever is later.
12-26 (b) For a claim arising from a residential construction
12-27 project, suit must be brought to foreclose the lien not later than
13-1 the first anniversary of the date the lien affidavit is filed under
13-2 Section 53.052.
13-3 SECTION 17. Subchapter G, Chapter 53, Property Code, is
13-4 amended by adding Sections 53.160, 53.161, and 53.162 to read as
13-5 follows:
13-6 Sec. 53.160. SUMMARY MOTION TO REMOVE INVALID OR
13-7 UNENFORCEABLE LIEN. (a) In a suit brought to foreclose a lien or
13-8 to declare a claim or lien invalid or unenforceable, a party
13-9 objecting to the validity or enforceability of the claim or lien
13-10 may file a motion to remove the claim or lien. The motion must be
13-11 verified and state the legal and factual basis for objecting to the
13-12 validity or enforceability of the claim or lien. The motion may be
13-13 accompanied by supporting affidavits.
13-14 (b) The grounds for objecting to the validity or
13-15 enforceability of the claim or lien for purposes of the motion are
13-16 limited to the following:
13-17 (1) notice of claim was not furnished to the owner or
13-18 original contractor as required by Section 53.056, 53.057, 53.058,
13-19 53.252, or 53.253;
13-20 (2) an affidavit claiming a lien failed to comply with
13-21 Section 53.054 or was not filed as required by Section 53.052;
13-22 (3) notice of the filed affidavit was not furnished to
13-23 the owner or original contractor as required by Section 53.055;
13-24 (4) the owner complied with the requirements of
13-25 Section 53.101 and paid the retainage and all other funds owed to
13-26 the original contractor before:
13-27 (A) the claimant perfected the lien claim; and
14-1 (B) the owner received a notice of the claim as
14-2 required by this chapter;
14-3 (5) all funds subject to the notice of a claim to the
14-4 owner and the perfection of a claim against the statutory retainage
14-5 have been deposited in the registry of the court and the owner has
14-6 no additional liability to the claimant;
14-7 (6) when the lien affidavit was filed on homestead
14-8 property:
14-9 (A) no contract was executed or filed as
14-10 required by Section 53.254;
14-11 (B) the affidavit claiming a lien failed to
14-12 contain the notice as required by Section 53.254; or
14-13 (C) the notice of the claim failed to include
14-14 the statement required by Section 53.254; and
14-15 (7) the claimant executed a valid and enforceable
14-16 waiver or release of the claim or lien claimed in the affidavit.
14-17 (c) The claimant is not required to file a response. The
14-18 claimant and any other party that has appeared in the proceeding
14-19 must be notified by at least 21 days before the date of the hearing
14-20 on the motion. A motion may not be heard before the 21st day after
14-21 the date the claimant answers or appears in the proceeding.
14-22 (d) At the hearing on the motion, the burden is on:
14-23 (1) the claimant to prove that the notice of claim and
14-24 affidavit of lien were furnished to the owner and original
14-25 contractor as required by this chapter; and
14-26 (2) the movant to establish that the lien should be
14-27 removed for any other ground authorized by this section.
15-1 (e) The court shall promptly determine a motion to remove a
15-2 claim or lien under this section. If the court determines that the
15-3 movant is not entitled to remove the lien, the court shall enter an
15-4 order denying the motion. If the court determines that the movant
15-5 is entitled to remove the lien, the court shall enter an order
15-6 removing the lien claimed in the lien affidavit. A party to the
15-7 proceeding may not file an interlocutory appeal from the court's
15-8 order.
15-9 (f) Any admissible evidence offered at the hearing may be
15-10 admitted in the trial of the case. The court's order under
15-11 Subsection (e) is not admissible as evidence in determining the
15-12 validity and enforceability of the claim or lien.
15-13 Sec. 53.161. BOND REQUIREMENTS AFTER ORDER TO REMOVE. (a)
15-14 In the order removing a lien, the court shall set the amount of
15-15 security that the claimant may provide in order to stay the removal
15-16 of the claim or lien. The sum must be an amount that the court
15-17 determines is a reasonable estimate of the costs and attorney's
15-18 fees the movant is likely to incur in the proceeding to determine
15-19 the validity or enforceability of the lien. The sum may not exceed
15-20 the amount of the lien claim.
15-21 (b) The court shall stay the order removing the lien if the
15-22 claimant files a bond or a deposit in lieu of a bond in the amount
15-23 set in the order with the clerk of the court not later than the
15-24 30th day after the date the order is entered by the court unless,
15-25 for good cause, the court orders a later date for filing the bond
15-26 or the deposit in lieu of a bond. If the court fails to set the
15-27 amount of the security required, the amount required is the amount
16-1 of the lien claim.
16-2 (c) The bond must be:
16-3 (1) executed by a corporate surety authorized to do
16-4 business in this state and licensed by this state to execute bonds
16-5 as surety; and
16-6 (2) conditioned on the claimant's payment of any final
16-7 judgment rendered against the claimant in the proceeding for
16-8 attorney's fees and costs to the movant under Section 53.156.
16-9 (d) In lieu of filing a bond, the claimant may deposit in
16-10 the amount set by the court for the surety bond:
16-11 (1) cash;
16-12 (2) a negotiable obligation of the federal government
16-13 or a federal agency; or
16-14 (3) a negotiable obligation of a financial institution
16-15 chartered by the federal or state government that is insured by the
16-16 federal government or a federal agency.
16-17 (e) A deposit made under Subsection (d) must be conditioned
16-18 in the same manner as a surety bond. Any interest accrued on the
16-19 deposit amount is a part of the deposit.
16-20 (f) If the claimant fails to file the bond or the deposit in
16-21 lieu of the bond in compliance with this section, the owner may
16-22 file:
16-23 (1) a certified copy of the order; and
16-24 (2) a certificate from the clerk of the court stating
16-25 that:
16-26 (A) no bond or deposit in lieu of the bond was
16-27 filed within 30 days after the date the order was entered by the
17-1 court; and
17-2 (B) no order staying the order to remove the
17-3 lien was entered by the court.
17-4 (g) The claim or lien is removed and extinguished as to a
17-5 creditor or subsequent purchaser for valuable consideration who
17-6 obtains an interest in the property after the certified copy of the
17-7 order and certificate of the clerk of the court are filed with the
17-8 county clerk. The removal of the lien does not constitute a
17-9 release of the liability of the owner, if any, to the claimant.
17-10 Sec. 53.162. REVIVAL OF REMOVED LIEN. (a) If an order
17-11 removing the lien is not stayed as provided by Section 53.161 and
17-12 the claimant later obtains a final judgment in the suit
17-13 establishing the validity and ordering the foreclosure of the lien,
17-14 the claimant may file a certified copy of the final judgment with
17-15 the county clerk.
17-16 (b) The filed judgment revives the lien, and the claimant
17-17 may foreclose the lien.
17-18 (c) A lien revived under this section is void as to a
17-19 creditor or subsequent purchaser for valuable consideration who
17-20 obtained an interest in the property:
17-21 (1) after the order removing the lien and the
17-22 certificate from the clerk of the court was filed with the county
17-23 clerk; and
17-24 (2) before the final judgment reviving the lien was
17-25 filed with the county clerk.
17-26 SECTION 18. Section 53.171, Property Code, is amended by
17-27 adding Subsection (c) to read as follows:
18-1 (c) A mechanic's lien claim against an owner's property is
18-2 discharged after:
18-3 (1) a bond that complies with Section 53.172 is filed;
18-4 (2) the notice of the bond is issued as provided by
18-5 Section 53.173; and
18-6 (3) the bond and notice are recorded as provided by
18-7 Section 53.174.
18-8 SECTION 19. Sections 53.173(c) and (d), Property Code, are
18-9 amended to read as follows:
18-10 (c) The notice must [may] be served on each obligee by
18-11 mailing [having] a copy of the notice and the bond [delivered] to
18-12 the obligee by certified United States mail, return receipt
18-13 requested, addressed to the claimant at the address stated in the
18-14 lien affidavit for the obligee [any means authorized for the
18-15 service of an original petition under the Texas Rules of Civil
18-16 Procedure].
18-17 (d) If the claimant's lien affidavit does not state the
18-18 claimant's address, the notice is not required to be mailed to the
18-19 claimant [The original notice shall be returned to the office of
18-20 the county clerk, and the person making service of copies shall
18-21 make an oath on the back of the copies showing on whom and on what
18-22 date the copies were served].
18-23 SECTION 20. Section 53.174, Property Code, is amended to
18-24 read as follows:
18-25 Sec. 53.174. RECORDING OF BOND AND NOTICE. (a) The county
18-26 clerk shall record the bond, the notice, and a certificate of
18-27 mailing [return] in the real property records.
19-1 (b) In acquiring an interest in or insuring title to real
19-2 property, a purchaser, insurer of title, or lender may rely on and
19-3 is absolutely protected by the record of the bond and the[,]
19-4 notice[, and return] to the same extent as if the lien claimant had
19-5 filed a release of lien in the real property records.
19-6 SECTION 21. Section 53.175(b), Property Code, is amended to
19-7 read as follows:
19-8 (b) The bond is not exhausted by one action against it.
19-9 Each named obligee or assignee of an obligee may maintain a
19-10 separate suit on the bond in any court of jurisdiction in the
19-11 county in which the real property is located.
19-12 SECTION 22. Section 53.201(a), Property Code, is amended to
19-13 read as follows:
19-14 (a) An original contractor who has a written contract with
19-15 the owner may furnish at any time a bond for the benefit of
19-16 claimants.
19-17 SECTION 23. Chapter 53, Property Code, is amended by adding
19-18 Subchapter K to read as follows:
19-19 SUBCHAPTER K. RESIDENTIAL CONSTRUCTION PROJECTS
19-20 Sec. 53.251. PROCEDURES FOR RESIDENTIAL CONSTRUCTION
19-21 PROJECTS. (a) This subchapter applies only to residential
19-22 construction projects.
19-23 (b) A person must comply with this subchapter in addition to
19-24 the other applicable provisions of this chapter to perfect a lien
19-25 that arises from a claim resulting from a residential construction
19-26 project.
19-27 Sec. 53.252. DERIVATIVE CLAIMANT: NOTICE TO OWNER OR
20-1 ORIGINAL CONTRACTOR. (a) A claimant other than an original
20-2 contractor must give the notice prescribed by this section for the
20-3 lien to be valid. If the property that is the subject of the lien
20-4 is a homestead, the notice must also comply with Section 53.254.
20-5 (b) The claimant must give to the owner or reputed owner and
20-6 the original contractor written notice of the unpaid balance. The
20-7 claimant must give the notice not later than the 15th day of the
20-8 second month following each month in which all or part of the
20-9 claimant's labor was performed or material or specially fabricated
20-10 material was delivered.
20-11 (c) To authorize the owner to withhold funds under
20-12 Subchapter D, the notice to the owner must state that if the claim
20-13 remains unpaid, the owner may be personally liable and the owner's
20-14 property may be subjected to a lien unless:
20-15 (1) the owner withholds payments from the contractor
20-16 for payment of the claim; or
20-17 (2) the claim is otherwise paid or settled.
20-18 (d) The notice must be sent by registered or certified mail
20-19 and must be addressed to the owner or reputed owner and the
20-20 original contractor, as applicable, at the person's last known
20-21 business or residence address.
20-22 (e) A copy of the statement or billing in the usual and
20-23 customary form is sufficient as notice under this section.
20-24 Sec. 53.253. DERIVATIVE CLAIMANT: NOTICE FOR SPECIALLY
20-25 FABRICATED ITEMS. (a) If specially fabricated materials have not
20-26 been delivered to the property or incorporated in the residential
20-27 construction project, the claimant who specially fabricates
21-1 material for incorporation in the residential construction project
21-2 must give notice under this section for the lien to be valid.
21-3 (b) Once the specially fabricated materials have been
21-4 delivered, the claimant must give notice under Section 53.252.
21-5 (c) The claimant must give the owner or reputed owner notice
21-6 not later than the 15th day of the second month after the month in
21-7 which the claimant receives and accepts the order for the material.
21-8 If the indebtedness is incurred by a person other than the original
21-9 contractor, the claimant must also give notice within that time to
21-10 the original contractor.
21-11 (d) The notice must contain:
21-12 (1) a statement that the order has been received and
21-13 accepted; and
21-14 (2) the price of the order.
21-15 (e) The notice must be sent by registered or certified mail
21-16 to the last known business or residence address of the owner or the
21-17 reputed owner or the original contractor, as applicable.
21-18 (f) The lien of a claimant who accepts an order but fails to
21-19 give notice under this section is valid as to delivered items if
21-20 the claimant has given notice under Section 53.252.
21-21 Sec. 53.254. HOMESTEAD. (a) To fix a lien on a homestead,
21-22 the person who is to furnish material or perform labor and the
21-23 owner must execute a written contract setting forth the terms of
21-24 the agreement.
21-25 (b) The contract must be executed before the material is
21-26 furnished or the labor is performed.
21-27 (c) If the owner is married, the contract must be signed by
22-1 both spouses.
22-2 (d) If the contract is made by an original contractor, the
22-3 contract inures to the benefit of all persons who labor or furnish
22-4 material for the original contractor.
22-5 (e) The contract must be filed with the county clerk of the
22-6 county in which the homestead is located. The county clerk shall
22-7 record the contract in records kept for that purpose.
22-8 (f) An affidavit for lien filed under this subchapter that
22-9 relates to a homestead must contain the following notice
22-10 conspicuously printed, stamped, or typed in a size equal to at
22-11 least 10-point boldface or the computer equivalent, at the top of
22-12 the page:
22-13 "NOTICE: THIS IS NOT A LIEN. THIS IS ONLY AN AFFIDAVIT
22-14 CLAIMING A LIEN."
22-15 (g) For the lien on a homestead to be valid, the notice
22-16 required to be given to the owner under Section 53.252 must include
22-17 or have attached the following statement:
22-18 "If a subcontractor or supplier who furnishes materials or
22-19 performs labor for construction of improvements on your property is
22-20 not paid, your property may be subject to a lien for the unpaid
22-21 amount if:
22-22 (1) after receiving notice of the unpaid claim from
22-23 the claimant, you fail to withhold payment to your contractor that
22-24 is sufficient to cover the unpaid claim until the dispute is
22-25 resolved; or
22-26 (2) during construction and for 30 days after
22-27 completion of construction, you fail to retain 10 percent of the
23-1 contract price or 10 percent of the value of the work performed by
23-2 your contractor.
23-3 "If you have complied with the law regarding the 10 percent
23-4 retainage and you have withheld payment to the contractor
23-5 sufficient to cover any written notice of claim and have paid that
23-6 amount, if any, to the claimant, any lien claim filed on your
23-7 property by a subcontractor or supplier, other than a person who
23-8 contracted directly with you, will not be a valid lien on your
23-9 property. In addition, except for the required 10 percent
23-10 retainage, you are not liable to a subcontractor or supplier for
23-11 any amount paid to your contractor before you received written
23-12 notice of the claim."
23-13 Sec. 53.255. DISCLOSURE STATEMENT REQUIRED FOR RESIDENTIAL
23-14 CONSTRUCTION CONTRACT. (a) Before a residential construction
23-15 contract is executed by the owner, the original contractor shall
23-16 deliver to the owner a disclosure statement described by this
23-17 section.
23-18 (b) The disclosure statement must read substantially similar
23-19 to the following:
23-20 "KNOW YOUR RIGHTS AND RESPONSIBILITIES UNDER THE LAW. You
23-21 are about to enter into a transaction to build a new home or
23-22 remodel existing residential property. Texas law requires your
23-23 contractor to provide you with this brief overview of some of your
23-24 rights, responsibilities, and risks in this transaction.
23-25 "CONVEYANCE TO CONTRACTOR PROHIBITED. Your contractor may
23-26 not require you to convey your real property to your contractor as
23-27 a condition to the agreement for the construction of improvements
24-1 on your property.
24-2 "KNOW YOUR CONTRACTOR. Before you enter into your agreement
24-3 for the construction of improvements to your real property, make
24-4 sure that you have investigated your contractor. Obtain and verify
24-5 references from other people who have used the contractor for the
24-6 type and size of construction project on your property.
24-7 "GET IT IN WRITING. Make sure that you have a written
24-8 agreement with your contractor that includes: (1) a description of
24-9 the work the contractor is to perform; (2) the required or
24-10 estimated time for completion of the work; (3) the cost of the work
24-11 or how the cost will be determined; and (4) the procedure and
24-12 method of payment, including provisions for statutory retainage and
24-13 conditions for final payment. If your contractor made a promise,
24-14 warranty, or representation to you concerning the work the
24-15 contractor is to perform, make sure that promise, warranty, or
24-16 representation is specified in the written agreement. An oral
24-17 promise that is not included in the written agreement may not be
24-18 enforceable under Texas law.
24-19 "READ BEFORE YOU SIGN. Do not sign any document before you
24-20 have read and understood it. NEVER SIGN A DOCUMENT THAT INCLUDES
24-21 AN UNTRUE STATEMENT. Take your time in reviewing documents. If
24-22 you borrow money from a lender to pay for the improvements, you are
24-23 entitled to have the loan closing documents furnished to you for
24-24 review at least one business day before the closing. Do not waive
24-25 this requirement unless a bona fide emergency or another good cause
24-26 exists, and make sure you understand the documents before you sign
24-27 them. If you fail to comply with the terms of the documents, you
25-1 could lose your property. You are entitled to have your own
25-2 attorney review any documents. If you have any question about the
25-3 meaning of a document, consult an attorney.
25-4 "GET A LIST OF SUBCONTRACTORS AND SUPPLIERS. Before
25-5 construction commences, your contractor is required to provide you
25-6 with a list of the subcontractors and suppliers the contractor
25-7 intends to use on your project. Your contractor is required to
25-8 supply updated information on any subcontractors and suppliers
25-9 added after the list is provided.
25-10 "MONITOR THE WORK. Lenders and governmental authorities may
25-11 inspect the work in progress from time to time for their own
25-12 purposes. These inspections are not intended as quality control
25-13 inspections. Quality control is a matter for you and your
25-14 contractor. To ensure that your home is being constructed in
25-15 accordance with your wishes and specifications, you should inspect
25-16 the work yourself or have your own independent inspector review the
25-17 work in progress.
25-18 "MONITOR PAYMENTS. If you use a lender, your lender is
25-19 required to provide you with a periodic statement showing the money
25-20 disbursed by the lender from the proceeds of your loan. Your
25-21 contractor is also required to furnish you with a statement at
25-22 least once each month of money disbursed to subcontractors and
25-23 suppliers for this project. Review these statements and make sure
25-24 that the money is being properly disbursed.
25-25 "CLAIMS BY SUBCONTRACTORS AND SUPPLIERS. Under Texas law, if
25-26 a subcontractor or supplier who furnishes labor or materials for
25-27 the construction of improvements on your property is not paid, you
26-1 may become liable and your property may be subject to a lien for
26-2 the unpaid amount, even if you have not contracted directly with
26-3 the subcontractor or supplier. To avoid liability, you should take
26-4 the following actions:
26-5 (1) If you receive a written notice from a
26-6 subcontractor or supplier, you should withhold payment from your
26-7 contractor for the amount of the claim stated in the notice until
26-8 the dispute between your contractor and the subcontractor or
26-9 supplier is resolved. If your lender is disbursing money directly
26-10 to your contractor, you should immediately provide a copy of the
26-11 notice to your lender and instruct the lender to withhold payment
26-12 in the amount of the claim stated in the notice. If you continue
26-13 to pay the contractor after receiving the written notice without
26-14 withholding the amount of the claim, you may be liable and your
26-15 property may be subject to a lien for the amount you failed to
26-16 withhold.
26-17 (2) During construction and for 30 days after final
26-18 completion, termination, or abandonment of the contract by the
26-19 contractor, you should withhold or cause your lender to withhold 10
26-20 percent of the amount of payments made for the work performed by
26-21 your contractor. This is sometimes referred to as 'statutory
26-22 retainage.' If you fail to withhold the 10 percent for at least 30
26-23 days after final completion, termination, or abandonment of the
26-24 contract by the contractor and if a valid claim is timely made by a
26-25 claimant, you may be personally liable and your property may be
26-26 subject to a lien up to the amount that you failed to withhold.
26-27 "If a claim is not paid within a certain time period, the
27-1 claimant is required to file a mechanic's lien affidavit in the
27-2 real property records in the county where the property is located.
27-3 A mechanic's lien affidavit is not a lien on your property, but the
27-4 filing of the affidavit could result in a court imposing a lien on
27-5 your property if the claimant is successful in litigation to
27-6 enforce the lien claim.
27-7 "SOME CLAIMS MAY NOT BE VALID. When you receive a written
27-8 notice of a claim or when a mechanic's lien affidavit is filed on
27-9 your property, you should know your legal rights and
27-10 responsibilities regarding the claim. Not all claims are valid. A
27-11 notice of a claim by a subcontractor or supplier is required to be
27-12 sent, and the mechanic's lien affidavit is required to be filed,
27-13 within strict time periods. The notice and the affidavit must
27-14 contain certain information. All claimants may not fully comply
27-15 with the legal requirements to collect on a claim. If you have
27-16 paid the contractor in full before receiving a notice of a claim
27-17 and have fully complied with the law regarding statutory retainage,
27-18 you may not be liable for that claim. Accordingly, you should
27-19 consult your attorney when you receive a written notice of a claim
27-20 to determine the true extent of your liability or potential
27-21 liability for that claim.
27-22 "OBTAIN A LIEN RELEASE AND A BILLS-PAID AFFIDAVIT. When you
27-23 receive a notice of claim, do not release withheld funds without
27-24 obtaining a signed and notarized release of lien and claim from the
27-25 claimant. You can also reduce the risk of having a claim filed by
27-26 a subcontractor or supplier by requiring as a condition of each
27-27 payment made by you or your lender that your contractor furnish you
28-1 with an affidavit stating that all bills have been paid. Under
28-2 Texas law, on final completion of the work and before final
28-3 payment, the contractor is required to furnish you with an
28-4 affidavit stating that all bills have been paid. If the contractor
28-5 discloses any unpaid bill in the affidavit, you should withhold
28-6 payment in the amount of the unpaid bill until you receive a waiver
28-7 of lien or release from that subcontractor or supplier.
28-8 "OBTAIN TITLE INSURANCE PROTECTION. You may be able to
28-9 obtain a title insurance policy to insure that the title to your
28-10 property and the existing improvements on your property are free
28-11 from liens claimed by subcontractors and suppliers. If your policy
28-12 is issued before the improvements are completed and covers the
28-13 value of the improvements to be completed, you should obtain, on
28-14 the completion of the improvements and as a condition of your final
28-15 payment, a 'completion of improvements' policy endorsement. This
28-16 endorsement will protect your property from liens claimed by
28-17 subcontractors and suppliers that may arise from the date the
28-18 original title policy is issued to the date of the endorsement."
28-19 (c) The failure of a contractor to comply with this section
28-20 does not invalidate a lien under this chapter, a contract lien, or
28-21 a deed of trust.
28-22 Sec. 53.256. LIST OF SUBCONTRACTORS AND SUPPLIERS. (a) For
28-23 the construction of improvements under a residential construction
28-24 contract, the original contractor must attach to the disclosure
28-25 statement required by Section 53.255 or furnish to the owner before
28-26 the commencement of construction a written list that identifies by
28-27 name, address, and telephone number each subcontractor and supplier
29-1 the contractor intends to use in the work to be performed. The
29-2 contractor shall provide the owner with an updated list of
29-3 subcontractors and suppliers not later than the 15th day after the
29-4 date a subcontractor or supplier is added or deleted.
29-5 (b) The list must contain the following notice conspicuously
29-6 printed, stamped, or typed in a size equal to at least 10-point
29-7 boldface or the computer equivalent:
29-8 "NOTICE: THIS LIST OF SUBCONTRACTORS AND SUPPLIERS MAY NOT
29-9 BE A FINAL LISTING. THE CONTRACTOR IS REQUIRED BY LAW TO SUPPLY
29-10 UPDATED INFORMATION, AS THE INFORMATION BECOMES AVAILABLE, FOR EACH
29-11 SUBCONTRACTOR OR SUPPLIER USED IN THE WORK PERFORMED ON YOUR
29-12 RESIDENCE."
29-13 (c) The failure of a contractor to comply with this section
29-14 does not invalidate a lien under this chapter, a contract lien, or
29-15 a deed of trust.
29-16 Sec. 53.257. PROVISIONS RELATED TO CLOSING OF LOAN FOR
29-17 CONSTRUCTION OF IMPROVEMENTS. (a) If the owner is obtaining
29-18 third-party financing for the construction of improvements under a
29-19 residential construction contract, the lender shall deliver to the
29-20 owner all documentation relating to the closing of the loan not
29-21 later than one business day before the date of the closing. If a
29-22 bona fide emergency or another good cause exists and the lender
29-23 obtains the written consent of the owner, the lender may provide
29-24 the documentation to the owner or the lender may modify previously
29-25 provided documentation on the date of closing.
29-26 (b) The lender shall provide to the owner the disclosure
29-27 statement described by Section 53.255(b). The disclosure statement
30-1 must be provided to the owner before the date of closing. If a
30-2 bona fide emergency or another good cause exists and the lender
30-3 obtains the written consent of the owner, the lender may provide
30-4 the disclosure statement at the closing. The lender shall retain a
30-5 signed and dated copy of the disclosure statement with the closing
30-6 documents.
30-7 (c) The failure of a lender to comply with this section does
30-8 not invalidate a lien under this chapter, a contract lien, or a
30-9 deed of trust.
30-10 Sec. 53.258. DISBURSEMENTS OF FUNDS. (a) For the
30-11 construction of improvements under a residential construction
30-12 contract, the original contractor shall provide to the owner a
30-13 signed periodic statement that lists the bills or expenses that the
30-14 original contractor represents will be paid or that have been paid
30-15 and for which the original contractor is requesting payment. The
30-16 original contractor is not required to include in the statement the
30-17 bills or expenses for which the original contractor has obtained a
30-18 valid lien release or waiver from the subcontractor or supplier to
30-19 whom the bills or expenses are owed if the statement includes a
30-20 written representation that the balance of any funds that are not
30-21 itemized in the statement will be paid to:
30-22 (1) the subcontractor or supplier who provided the
30-23 lien release or waiver; or
30-24 (2) the original contractor as reimbursement for
30-25 expenses incurred, profit, or overhead.
30-26 (b) If the owner finances the construction of improvements
30-27 through a third party that advances loan proceeds directly to the
31-1 original contractor, the lender shall:
31-2 (1) obtain from the original contractor the signed
31-3 periodic statement required by Subsection (a) that covers the funds
31-4 for which the original contractor is requesting payment; and
31-5 (2) provide to the owner a statement of funds
31-6 disbursed by the lender since the last statement was provided to
31-7 the owner.
31-8 (c) The lender shall provide to the owner the lender's
31-9 disbursement statement and the disbursement statement the lender
31-10 obtained from the contractor before the lender disburses the funds
31-11 to the original contractor. The disbursement statements may be
31-12 provided in any manner agreed to by the lender and the owner.
31-13 (d) The lender is not responsible for the accuracy of the
31-14 information contained in the disbursement statement obtained from
31-15 the original contractor.
31-16 (e) The failure of a lender to comply with this section does
31-17 not invalidate a lien under this chapter, a contract lien, or a
31-18 deed of trust.
31-19 (f) A person commits an offense if the person intentionally,
31-20 knowingly, or recklessly provides false or misleading information
31-21 in a disbursement statement required under this section. An
31-22 offense under this section is a misdemeanor. A person adjudged
31-23 guilty of an offense under this section shall be punished by a fine
31-24 not to exceed $4,000 or confinement in jail for a term not to
31-25 exceed one year or both a fine and confinement. A person may not
31-26 receive community supervision for the offense.
31-27 Sec. 53.259. FINAL BILLS-PAID AFFIDAVIT REQUIRED. (a) As a
32-1 condition of final payment under a residential construction
32-2 contract, the original contractor shall, at the time the final
32-3 payment is tendered, execute and deliver to the owner, or the
32-4 owner's agent, an affidavit stating that the original contractor
32-5 has paid each person in full for all labor and materials used in
32-6 the construction of improvements on the real property. If the
32-7 original contractor has not paid each person in full, the original
32-8 contractor shall state in the affidavit the amount owed and the
32-9 name and, if known, the address and telephone number of each person
32-10 to whom a payment is owed.
32-11 (b) The seller of any real property on which a structure of
32-12 not more than four units is constructed and that is intended as the
32-13 principal place of residence for the purchaser shall, at the
32-14 closing of the purchase of the real property, execute and deliver
32-15 to the purchaser, or the purchaser's agent, an affidavit stating
32-16 that the seller has paid each person in full for all labor and
32-17 materials used in the construction of improvements on the real
32-18 property and that the seller is not indebted to any person by
32-19 reason of any construction. In the event that the seller has not
32-20 paid each person in full, the seller shall state in the affidavit
32-21 the amount owed and the name and, if known, the address and
32-22 telephone number of each person to whom a payment is owed.
32-23 (c) A person commits an offense if the person intentionally,
32-24 knowingly, or recklessly makes a false or misleading statement in
32-25 an affidavit under this section. An offense under this section is
32-26 a misdemeanor. A person adjudged guilty of an offense under this
32-27 section shall be punished by a fine not to exceed $4,000 or
33-1 confinement in jail for a term not to exceed one year or both a
33-2 fine and confinement. A person may not receive community
33-3 supervision for the offense.
33-4 (d) A person signing an affidavit under this section is
33-5 personally liable for any loss or damage resulting from any false
33-6 or incorrect information in the affidavit.
33-7 Sec. 53.260. CONVEYANCE TO CONTRACTOR PROHIBITED. An
33-8 original contractor may not require an owner of real property to
33-9 convey the real property to the original contractor or an entity
33-10 controlled by the original contractor as a condition to the
33-11 performance of the residential construction contract for
33-12 improvements to the real property.
33-13 SECTION 24. Section 53.059, Property Code, is repealed.
33-14 SECTION 25. (a) This Act takes effect September 1, 1997.
33-15 (b) The changes in law made by this Act apply only to
33-16 matters relating to or claims arising under an original contract,
33-17 as that term is defined by Section 53.001, Property Code, that is
33-18 entered into on or after September 1, 1997. Matters relating to or
33-19 claims arising under an original contract, as that term is defined
33-20 by Section 53.001, Property Code, that was entered into before
33-21 September 1, 1997, are governed by the law as it existed on the
33-22 date the original contract was entered into, and the former law is
33-23 continued in effect for that purpose.
33-24 SECTION 26. The importance of this legislation and the
33-25 crowded condition of the calendars in both houses create an
33-26 emergency and an imperative public necessity that the
33-27 constitutional rule requiring bills to be read on three several
34-1 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 740 was passed by the House on April
30, 1997, by a non-record vote.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 740 was passed by the Senate on May
19, 1997, by the following vote: Yeas 31, Nays 0.
_______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor