1-1 By: Solomons (Senate Sponsor - Harris) H.B. No. 740
1-2 (In the Senate - Received from the House May 1, 1997;
1-3 May 2, 1997, read first time and referred to Committee on
1-4 Jurisprudence; May 13, 1997, reported favorably by the following
1-5 vote: Yeas 7, Nays 0; May 13, 1997, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to mechanics', contractors', and materialmen's liens;
1-9 providing penalties.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Section 41.001(b), Property Code, is amended to
1-12 read as follows:
1-13 (b) Encumbrances may be properly fixed on homestead property
1-14 for:
1-15 (1) purchase money;
1-16 (2) taxes on the property;
1-17 (3) work and material used in constructing
1-18 improvements on the property if contracted for in writing as
1-19 provided by Sections 53.254 [53.059](a), (b), and (c);
1-20 (4) an owelty of partition imposed against the
1-21 entirety of the property by a court order or by a written agreement
1-22 of the parties to the partition, including a debt of one spouse in
1-23 favor of the other spouse resulting from a division or an award of
1-24 a family homestead in a divorce proceeding; or
1-25 (5) the refinance of a lien against a homestead,
1-26 including a federal tax lien resulting from the tax debt of both
1-27 spouses, if the homestead is a family homestead, or from the tax
1-28 debt of the owner.
1-29 SECTION 2. Section 53.001, Property Code, is amended to read
1-30 as follows:
1-31 Sec. 53.001. DEFINITIONS. In this chapter:
1-32 (1) "Contract price" means the cost to the owner for
1-33 any part of construction or repair performed under an original
1-34 contract.
1-35 (2) "Improvement" includes:
1-36 (A) abutting sidewalks and streets and utilities
1-37 in or on those sidewalks and streets;
1-38 (B) clearing, grubbing, draining, or fencing of
1-39 land;
1-40 (C) wells, cisterns, tanks, reservoirs, or
1-41 artificial lakes or pools made for supplying or storing water;
1-42 (D) pumps, siphons, and windmills or other
1-43 machinery or apparatuses used for raising water for stock, domestic
1-44 use, or irrigation; and
1-45 (E) planting orchard trees, grubbing out
1-46 orchards and replacing trees, and pruning of orchard trees.
1-47 (3) "Labor" means labor used in the direct prosecution
1-48 of the work.
1-49 (4) "Material" means all or part of:
1-50 (A) the material, machinery, fixtures, or tools
1-51 incorporated into the work, consumed in the direct prosecution of
1-52 the work, or ordered and delivered for incorporation or
1-53 consumption;
1-54 (B) rent at a reasonable rate and actual running
1-55 repairs at a reasonable cost for construction equipment used or
1-56 reasonably required and delivered for use in the direct prosecution
1-57 of the work at the site of the construction or repair; or
1-58 (C) power, water, fuel, and lubricants consumed
1-59 or ordered and delivered for consumption in the direct prosecution
1-60 of the work.
1-61 (5) "Mechanic's lien" means the lien provided by this
1-62 chapter.
1-63 (6) "Original contract" means an agreement to which an
1-64 owner is a party either directly or by implication of law.
2-1 (7) "Original contractor" means a person contracting
2-2 with an owner either directly or through the owner's agent.
2-3 (8) "Residence" means a single-family house, duplex,
2-4 triplex, or quadruplex or a unit in a multiunit structure used for
2-5 residential purposes that is:
2-6 (A) owned by one or more adult persons; and
2-7 (B) used or intended to be used as a dwelling by
2-8 one of the owners.
2-9 (9) "Residential construction contract" means a
2-10 contract between an owner and a contractor in which the contractor
2-11 agrees to construct or repair the owner's residence, including
2-12 improvements appurtenant to the residence.
2-13 (10) "Residential construction project" means a
2-14 project for the construction or repair of a new or existing
2-15 residence, including improvements appurtenant to the residence, as
2-16 provided by a residential construction contract.
2-17 (11) "Retainage" means an amount representing part of
2-18 a contract payment that is not required to be paid to the claimant
2-19 within the month following the month in which labor is performed,
2-20 material is furnished, or specially fabricated material is
2-21 delivered. The term does not include retainage under Subchapter E.
2-22 (12) [(9)] "Specially fabricated material" means
2-23 material fabricated for use as a component of the construction or
2-24 repair so as to be reasonably unsuitable for use elsewhere.
2-25 (13) [(10)] "Subcontractor" means a person who has
2-26 furnished labor or materials to fulfill an obligation to an
2-27 original contractor or to a subcontractor to perform all or part of
2-28 the work required by an original contract.
2-29 (14) [(11)] "Work" means any part of construction or
2-30 repair performed under an original contract.
2-31 SECTION 3. Section 53.003(a), Property Code, is amended to
2-32 read as follows:
2-33 (a) This section applies to notices required by Subchapters
2-34 B through G and K.
2-35 SECTION 4. Section 53.026(a), Property Code, is amended to
2-36 read as follows:
2-37 (a) A person who labors, specially fabricates materials, or
2-38 furnishes labor or materials under a direct contractual
2-39 relationship with another person is considered to be in direct
2-40 contractual relationship with the owner and has a lien as an
2-41 original contractor, if:
2-42 (1) the owner contracted with the other person for the
2-43 construction or repair of a house, building, or improvements and
2-44 the owner can effectively control that person through ownership of
2-45 voting stock, interlocking directorships, or otherwise;
2-46 (2) the owner contracted with the other person for the
2-47 construction or repair of a house, building, or improvements and
2-48 that other person can effectively control the owner through
2-49 ownership of voting stock, interlocking directorships, or
2-50 otherwise; or
2-51 (3) [(2)] the owner contracted with the other person
2-52 for the construction or repair of a house, building, or
2-53 improvements and the contract was made without good faith intention
2-54 of the parties that the other person was to perform the contract.
2-55 SECTION 5. Section 53.052, Property Code, is amended to read
2-56 as follows:
2-57 Sec. 53.052. FILING OF AFFIDAVIT. (a) Except as provided
2-58 by Subsection (b), the [The] person claiming the lien must file an
2-59 affidavit with the county clerk of the county in which the property
2-60 is located or into which the railroad extends not later than the
2-61 15th day of the fourth calendar month after the day on which the
2-62 indebtedness accrues.
2-63 (b) A person claiming a lien arising from a residential
2-64 construction project must file an affidavit with the county clerk
2-65 of the county in which the property is located not later than the
2-66 15th day of the third calendar month after the day on which the
2-67 indebtedness accrues.
2-68 (c) The county clerk shall record the affidavit in records
2-69 kept for that purpose and shall index and cross-index the affidavit
3-1 in the names of the claimant, the original contractor, and the
3-2 owner. Failure of the county clerk to properly record or index a
3-3 filed affidavit does not invalidate the lien.
3-4 SECTION 6. Sections 53.054(a) and (b), Property Code, are
3-5 amended to read as follows:
3-6 (a) The affidavit must be signed by the person claiming the
3-7 lien or by another person on the claimant's behalf and must contain
3-8 substantially:
3-9 (1) a sworn statement of the amount of the claim[,
3-10 including the amount];
3-11 (2) the name and last known address of the owner or
3-12 reputed owner;
3-13 (3) a general statement of the kind of work done and
3-14 materials furnished by the claimant and, for a claimant other than
3-15 an original contractor, a statement of each month in which the work
3-16 was done and materials furnished for which payment is requested;
3-17 (4) the name and last known address of the person by
3-18 whom the claimant was employed or to whom the claimant furnished
3-19 the materials or labor;
3-20 (5) the name and last known address of the original
3-21 contractor;
3-22 (6) a description, legally sufficient for
3-23 identification, of the property sought to be charged with the lien;
3-24 [and]
3-25 (7) the claimant's name, mailing address, and, if
3-26 different, physical [business] address; and
3-27 (8) for a claimant other than an original contractor,
3-28 a statement identifying the date each notice of the claim was sent
3-29 to the owner and the method by which the notice was sent.
3-30 (b) The claimant may attach to the affidavit a copy of any
3-31 applicable written agreement or contract and a copy of each notice
3-32 sent to the owner.
3-33 SECTION 7. Section 53.055(a), Property Code, is amended to
3-34 read as follows:
3-35 (a) A person who files an affidavit must send a copy of the
3-36 affidavit by registered or certified mail to the owner or reputed
3-37 owner at the owner's last known business or residence address not
3-38 later than one business day after the date the affidavit is filed
3-39 with the county clerk [the earlier of:]
3-40 [(1) the 10th business day after the date the person
3-41 files the affidavit; or]
3-42 [(2) the date the affidavit is required to be filed].
3-43 SECTION 8. Section 53.056(a), Property Code, is amended to
3-44 read as follows:
3-45 (a) Except as provided by Subchapter K, a [A] claimant other
3-46 than an original contractor must give the notice prescribed by this
3-47 section for the lien to be valid.
3-48 SECTION 9. Section 53.057(a), Property Code, is amended to
3-49 read as follows:
3-50 (a) Except as provided by Subchapter K, a [A] claimant may
3-51 give notice under this section instead of or in addition to notice
3-52 under Section 53.056 if the claimant is to labor, furnish labor or
3-53 materials, or specially fabricate materials under an agreement with
3-54 an original contractor or a subcontractor providing for retainage.
3-55 SECTION 10. Section 53.058(a), Property Code, is amended to
3-56 read as follows:
3-57 (a) Except as provided by Subchapter K, a [A] claimant who
3-58 specially fabricates material must give notice under this section
3-59 for the lien to be valid.
3-60 SECTION 11. Sections 53.081(a), (b), and (d), Property Code,
3-61 are amended to read as follows:
3-62 (a) If an owner receives notice under Section 53.056,
3-63 53.057, [or] 53.058, 53.252, or 53.253, the owner may withhold from
3-64 payments to the original contractor an amount necessary to pay the
3-65 claim for which he receives notice.
3-66 (b) If notice is sent in a form that substantially complies
3-67 with Section 53.056 or 53.252, the owner may withhold the funds
3-68 immediately on receipt of the notice.
3-69 (d) If notice is sent under Section 53.058, the owner may
4-1 withhold funds immediately on receipt of the notices sent under
4-2 Subsection (e) of that section. If notice is sent as provided by
4-3 Section 53.253(b), the owner may withhold funds immediately on
4-4 receipt of the notice sent as required by Section 53.252.
4-5 SECTION 12. Section 53.084(b), Property Code, is amended to
4-6 read as follows:
4-7 (b) If the owner has received the notices required by
4-8 Subchapter C or K, if the lien has been secured, and if the claim
4-9 has been reduced to final judgment, the owner is liable and the
4-10 owner's property is subject to a claim for any money paid to the
4-11 original contractor after the owner was authorized to withhold
4-12 funds under this subchapter. The owner is liable for that amount
4-13 in addition to any amount for which he is liable under Subchapter
4-14 E.
4-15 SECTION 13. Section 53.085, Property Code, is amended to
4-16 read as follows:
4-17 Sec. 53.085. AFFIDAVIT REQUIRED. (a) Any person who
4-18 furnishes labor or materials for the construction of improvements
4-19 on real property shall, if requested and as a condition of payment
4-20 for such labor or materials, provide to the requesting party, or
4-21 the party's [its] agent, an affidavit stating that the [such]
4-22 person has paid each of the person's [his] subcontractors,
4-23 laborers, or materialmen in full for all labor and materials
4-24 provided to the person [him] for the construction. In the event,
4-25 however, that the person has not paid each of the person's [his]
4-26 subcontractors, laborers, or materialmen in full, the person shall
4-27 state in the affidavit the amount owed and the name and, if known,
4-28 the address and telephone number of each subcontractor, laborer, or
4-29 materialman to whom the [such] payment is owed.
4-30 (b) The seller of any real property shall, upon request by
4-31 the purchaser or the purchaser's [its] agent prior to closing of
4-32 the purchase of the [such] real property, provide to the [such]
4-33 purchaser or the purchaser's [its] agent, a written affidavit
4-34 stating that the seller has paid each of the seller's [his]
4-35 contractors, laborers, or materialmen in full for all labor and
4-36 materials provided to the seller through the date specified in the
4-37 affidavit for any construction of improvements on the real property
4-38 and that the seller is not indebted to any person, firm, or
4-39 corporation by reason of any such construction through the date
4-40 specified in the affidavit. In the event that the seller has not
4-41 paid each of the seller's [his] contractors, laborers, or
4-42 materialmen in full for labor and material provided through the
4-43 date specified in the affidavit, the seller shall state in the
4-44 affidavit the amount owed and the name and, if known, the address
4-45 and telephone number of each contractor, laborer, or materialman
4-46 to whom the [such] payment is owed.
4-47 (c) The affidavit may include:
4-48 (1) a waiver or release of lien rights by the affiant
4-49 that is conditioned on the receipt of actual payment or collection
4-50 of funds when payment is made by check or draft;
4-51 (2) a warranty or representation that certain bills or
4-52 classes of bills will be paid by the affiant from funds paid in
4-53 reliance on the affidavit; and
4-54 (3) an indemnification by the affiant for any loss or
4-55 expense resulting from false or incorrect information in the
4-56 affidavit.
4-57 (d) A person, including a seller, commits an offense if the
4-58 person intentionally, knowingly, or recklessly makes a false or
4-59 misleading statement in an affidavit under this section. An
4-60 offense under this section is a [Class A] misdemeanor. A person
4-61 adjudged guilty of an offense under this section shall be punished
4-62 by a fine not to exceed $4,000 or confinement in jail for a term
4-63 not to exceed one year or both a fine and confinement. A person
4-64 may not receive community supervision for the offense.
4-65 (e) A person signing an affidavit under this section is
4-66 personally liable for any loss or damage resulting from any false
4-67 or incorrect information in the affidavit.
4-68 SECTION 14. Sections 53.106(b), (c), and (d), Property Code,
4-69 are amended to read as follows:
5-1 (b) A copy of the affidavit must be sent by certified or
5-2 registered mail to the original contractor not later than the [10th
5-3 day after the] date the affidavit is filed and to each claimant who
5-4 sends a notice of lien liability to the owner under Section 53.056,
5-5 53.057, [or] 53.058, 53.252, or 53.253 not later than the date the
5-6 affidavit is filed or the 10th day after the date the owner
5-7 receives the notice of lien liability [or after the date the
5-8 affidavit is filed], whichever is later.
5-9 (c) A copy of the affidavit must also be sent to each person
5-10 who furnishes labor or materials for the property and who furnishes
5-11 the owner with a written request for the copy. The owner must
5-12 furnish the copy to the person not later than the date the
5-13 affidavit is filed or the 10th day after the date the request is
5-14 received [or after the date the affidavit is filed], whichever is
5-15 later.
5-16 (d) Except as provided by this subsection, an [An] affidavit
5-17 filed under this section on or before the 10th day after the date
5-18 of completion of the improvements is prima facie evidence of the
5-19 date the work under the original contract is completed for purposes
5-20 of this subchapter. If the affidavit is filed after the 10th day
5-21 after the date of completion, the date of completion for purposes
5-22 of this subchapter is the date the affidavit is filed. This
5-23 subsection does not apply to a person to whom the affidavit was not
5-24 sent as required by this section.
5-25 SECTION 15. Section 53.157, Property Code, is amended to
5-26 read as follows:
5-27 Sec. 53.157. DISCHARGE OF LIEN. A mechanic's lien or
5-28 affidavit claiming a mechanic's lien filed under Section 53.052 may
5-29 be discharged of record by:
5-30 (1) recording a lien release signed by the claimant
5-31 under Section 53.152;
5-32 (2) failing to institute suit to foreclose the lien in
5-33 the county in which the property is located within the period
5-34 prescribed by Section 53.158, 53.175, or 53.208;
5-35 (3) recording the original or certified copy of a
5-36 final judgment or decree of a court of competent jurisdiction
5-37 providing for the discharge;
5-38 (4) filing the bond and[,] notice[, and return] in
5-39 compliance with Subchapter H; [or]
5-40 (5) filing the bond in compliance with Subchapter I;
5-41 or
5-42 (6) recording a certified copy of the order removing
5-43 the lien under Section 53.160 and a certificate from the clerk of
5-44 the court that states that no bond or deposit as described by
5-45 Section 53.161 was filed by the claimant within 30 days after the
5-46 date the order was entered.
5-47 SECTION 16. Section 53.158, Property Code, is amended to
5-48 read as follows:
5-49 Sec. 53.158. PERIOD FOR BRINGING SUIT TO FORECLOSE LIEN.
5-50 (a) Except as provided by Subsection (b), suit [Suit] must be
5-51 brought to foreclose the lien within two years after the date of
5-52 filing the lien affidavit under Section 53.052 or within one year
5-53 after completion of the work under the original contract under
5-54 which the lien is claimed, whichever is later.
5-55 (b) For a claim arising from a residential construction
5-56 project, suit must be brought to foreclose the lien not later than
5-57 the first anniversary of the date the lien affidavit is filed under
5-58 Section 53.052.
5-59 SECTION 17. Subchapter G, Chapter 53, Property Code, is
5-60 amended by adding Sections 53.160, 53.161, and 53.162 to read as
5-61 follows:
5-62 Sec. 53.160. SUMMARY MOTION TO REMOVE INVALID OR
5-63 UNENFORCEABLE LIEN. (a) In a suit brought to foreclose a lien or
5-64 to declare a claim or lien invalid or unenforceable, a party
5-65 objecting to the validity or enforceability of the claim or lien
5-66 may file a motion to remove the claim or lien. The motion must be
5-67 verified and state the legal and factual basis for objecting to the
5-68 validity or enforceability of the claim or lien. The motion may be
5-69 accompanied by supporting affidavits.
6-1 (b) The grounds for objecting to the validity or
6-2 enforceability of the claim or lien for purposes of the motion are
6-3 limited to the following:
6-4 (1) notice of claim was not furnished to the owner or
6-5 original contractor as required by Section 53.056, 53.057, 53.058,
6-6 53.252, or 53.253;
6-7 (2) an affidavit claiming a lien failed to comply with
6-8 Section 53.054 or was not filed as required by Section 53.052;
6-9 (3) notice of the filed affidavit was not furnished to
6-10 the owner or original contractor as required by Section 53.055;
6-11 (4) the owner complied with the requirements of
6-12 Section 53.101 and paid the retainage and all other funds owed to
6-13 the original contractor before:
6-14 (A) the claimant perfected the lien claim; and
6-15 (B) the owner received a notice of the claim as
6-16 required by this chapter;
6-17 (5) all funds subject to the notice of a claim to the
6-18 owner and the perfection of a claim against the statutory retainage
6-19 have been deposited in the registry of the court and the owner has
6-20 no additional liability to the claimant;
6-21 (6) when the lien affidavit was filed on homestead
6-22 property:
6-23 (A) no contract was executed or filed as
6-24 required by Section 53.254;
6-25 (B) the affidavit claiming a lien failed to
6-26 contain the notice as required by Section 53.254; or
6-27 (C) the notice of the claim failed to include
6-28 the statement required by Section 53.254; and
6-29 (7) the claimant executed a valid and enforceable
6-30 waiver or release of the claim or lien claimed in the affidavit.
6-31 (c) The claimant is not required to file a response. The
6-32 claimant and any other party that has appeared in the proceeding
6-33 must be notified by at least 21 days before the date of the hearing
6-34 on the motion. A motion may not be heard before the 21st day after
6-35 the date the claimant answers or appears in the proceeding.
6-36 (d) At the hearing on the motion, the burden is on:
6-37 (1) the claimant to prove that the notice of claim and
6-38 affidavit of lien were furnished to the owner and original
6-39 contractor as required by this chapter; and
6-40 (2) the movant to establish that the lien should be
6-41 removed for any other ground authorized by this section.
6-42 (e) The court shall promptly determine a motion to remove a
6-43 claim or lien under this section. If the court determines that the
6-44 movant is not entitled to remove the lien, the court shall enter an
6-45 order denying the motion. If the court determines that the movant
6-46 is entitled to remove the lien, the court shall enter an order
6-47 removing the lien claimed in the lien affidavit. A party to the
6-48 proceeding may not file an interlocutory appeal from the court's
6-49 order.
6-50 (f) Any admissible evidence offered at the hearing may be
6-51 admitted in the trial of the case. The court's order under
6-52 Subsection (e) is not admissible as evidence in determining the
6-53 validity and enforceability of the claim or lien.
6-54 Sec. 53.161. BOND REQUIREMENTS AFTER ORDER TO REMOVE. (a)
6-55 In the order removing a lien, the court shall set the amount of
6-56 security that the claimant may provide in order to stay the removal
6-57 of the claim or lien. The sum must be an amount that the court
6-58 determines is a reasonable estimate of the costs and attorney's
6-59 fees the movant is likely to incur in the proceeding to determine
6-60 the validity or enforceability of the lien. The sum may not exceed
6-61 the amount of the lien claim.
6-62 (b) The court shall stay the order removing the lien if the
6-63 claimant files a bond or a deposit in lieu of a bond in the amount
6-64 set in the order with the clerk of the court not later than the
6-65 30th day after the date the order is entered by the court unless,
6-66 for good cause, the court orders a later date for filing the bond
6-67 or the deposit in lieu of a bond. If the court fails to set the
6-68 amount of the security required, the amount required is the amount
6-69 of the lien claim.
7-1 (c) The bond must be:
7-2 (1) executed by a corporate surety authorized to do
7-3 business in this state and licensed by this state to execute bonds
7-4 as surety; and
7-5 (2) conditioned on the claimant's payment of any final
7-6 judgment rendered against the claimant in the proceeding for
7-7 attorney's fees and costs to the movant under Section 53.156.
7-8 (d) In lieu of filing a bond, the claimant may deposit in
7-9 the amount set by the court for the surety bond:
7-10 (1) cash;
7-11 (2) a negotiable obligation of the federal government
7-12 or a federal agency; or
7-13 (3) a negotiable obligation of a financial institution
7-14 chartered by the federal or state government that is insured by the
7-15 federal government or a federal agency.
7-16 (e) A deposit made under Subsection (d) must be conditioned
7-17 in the same manner as a surety bond. Any interest accrued on the
7-18 deposit amount is a part of the deposit.
7-19 (f) If the claimant fails to file the bond or the deposit in
7-20 lieu of the bond in compliance with this section, the owner may
7-21 file:
7-22 (1) a certified copy of the order; and
7-23 (2) a certificate from the clerk of the court stating
7-24 that:
7-25 (A) no bond or deposit in lieu of the bond was
7-26 filed within 30 days after the date the order was entered by the
7-27 court; and
7-28 (B) no order staying the order to remove the
7-29 lien was entered by the court.
7-30 (g) The claim or lien is removed and extinguished as to a
7-31 creditor or subsequent purchaser for valuable consideration who
7-32 obtains an interest in the property after the certified copy of the
7-33 order and certificate of the clerk of the court are filed with the
7-34 county clerk. The removal of the lien does not constitute a
7-35 release of the liability of the owner, if any, to the claimant.
7-36 Sec. 53.162. REVIVAL OF REMOVED LIEN. (a) If an order
7-37 removing the lien is not stayed as provided by Section 53.161 and
7-38 the claimant later obtains a final judgment in the suit
7-39 establishing the validity and ordering the foreclosure of the lien,
7-40 the claimant may file a certified copy of the final judgment with
7-41 the county clerk.
7-42 (b) The filed judgment revives the lien, and the claimant
7-43 may foreclose the lien.
7-44 (c) A lien revived under this section is void as to a
7-45 creditor or subsequent purchaser for valuable consideration who
7-46 obtained an interest in the property:
7-47 (1) after the order removing the lien and the
7-48 certificate from the clerk of the court was filed with the county
7-49 clerk; and
7-50 (2) before the final judgment reviving the lien was
7-51 filed with the county clerk.
7-52 SECTION 18. Section 53.171, Property Code, is amended by
7-53 adding Subsection (c) to read as follows:
7-54 (c) A mechanic's lien claim against an owner's property is
7-55 discharged after:
7-56 (1) a bond that complies with Section 53.172 is filed;
7-57 (2) the notice of the bond is issued as provided by
7-58 Section 53.173; and
7-59 (3) the bond and notice are recorded as provided by
7-60 Section 53.174.
7-61 SECTION 19. Sections 53.173(c) and (d), Property Code, are
7-62 amended to read as follows:
7-63 (c) The notice must [may] be served on each obligee by
7-64 mailing [having] a copy of the notice and the bond [delivered] to
7-65 the obligee by certified United States mail, return receipt
7-66 requested, addressed to the claimant at the address stated in the
7-67 lien affidavit for the obligee [any means authorized for the
7-68 service of an original petition under the Texas Rules of Civil
7-69 Procedure].
8-1 (d) If the claimant's lien affidavit does not state the
8-2 claimant's address, the notice is not required to be mailed to the
8-3 claimant [The original notice shall be returned to the office of
8-4 the county clerk, and the person making service of copies shall
8-5 make an oath on the back of the copies showing on whom and on what
8-6 date the copies were served].
8-7 SECTION 20. Section 53.174, Property Code, is amended to
8-8 read as follows:
8-9 Sec. 53.174. RECORDING OF BOND AND NOTICE. (a) The county
8-10 clerk shall record the bond, the notice, and a certificate of
8-11 mailing [return] in the real property records.
8-12 (b) In acquiring an interest in or insuring title to real
8-13 property, a purchaser, insurer of title, or lender may rely on and
8-14 is absolutely protected by the record of the bond and the[,]
8-15 notice[, and return] to the same extent as if the lien claimant had
8-16 filed a release of lien in the real property records.
8-17 SECTION 21. Section 53.175(b), Property Code, is amended to
8-18 read as follows:
8-19 (b) The bond is not exhausted by one action against it.
8-20 Each named obligee or assignee of an obligee may maintain a
8-21 separate suit on the bond in any court of jurisdiction in the
8-22 county in which the real property is located.
8-23 SECTION 22. Section 53.201(a), Property Code, is amended to
8-24 read as follows:
8-25 (a) An original contractor who has a written contract with
8-26 the owner may furnish at any time a bond for the benefit of
8-27 claimants.
8-28 SECTION 23. Chapter 53, Property Code, is amended by adding
8-29 Subchapter K to read as follows:
8-30 SUBCHAPTER K. RESIDENTIAL CONSTRUCTION PROJECTS
8-31 Sec. 53.251. PROCEDURES FOR RESIDENTIAL CONSTRUCTION
8-32 PROJECTS. (a) This subchapter applies only to residential
8-33 construction projects.
8-34 (b) A person must comply with this subchapter in addition to
8-35 the other applicable provisions of this chapter to perfect a lien
8-36 that arises from a claim resulting from a residential construction
8-37 project.
8-38 Sec. 53.252. DERIVATIVE CLAIMANT: NOTICE TO OWNER OR
8-39 ORIGINAL CONTRACTOR. (a) A claimant other than an original
8-40 contractor must give the notice prescribed by this section for the
8-41 lien to be valid. If the property that is the subject of the lien
8-42 is a homestead, the notice must also comply with Section 53.254.
8-43 (b) The claimant must give to the owner or reputed owner and
8-44 the original contractor written notice of the unpaid balance. The
8-45 claimant must give the notice not later than the 15th day of the
8-46 second month following each month in which all or part of the
8-47 claimant's labor was performed or material or specially fabricated
8-48 material was delivered.
8-49 (c) To authorize the owner to withhold funds under
8-50 Subchapter D, the notice to the owner must state that if the claim
8-51 remains unpaid, the owner may be personally liable and the owner's
8-52 property may be subjected to a lien unless:
8-53 (1) the owner withholds payments from the contractor
8-54 for payment of the claim; or
8-55 (2) the claim is otherwise paid or settled.
8-56 (d) The notice must be sent by registered or certified mail
8-57 and must be addressed to the owner or reputed owner and the
8-58 original contractor, as applicable, at the person's last known
8-59 business or residence address.
8-60 (e) A copy of the statement or billing in the usual and
8-61 customary form is sufficient as notice under this section.
8-62 Sec. 53.253. DERIVATIVE CLAIMANT: NOTICE FOR SPECIALLY
8-63 FABRICATED ITEMS. (a) If specially fabricated materials have not
8-64 been delivered to the property or incorporated in the residential
8-65 construction project, the claimant who specially fabricates
8-66 material for incorporation in the residential construction project
8-67 must give notice under this section for the lien to be valid.
8-68 (b) Once the specially fabricated materials have been
8-69 delivered, the claimant must give notice under Section 53.252.
9-1 (c) The claimant must give the owner or reputed owner notice
9-2 not later than the 15th day of the second month after the month in
9-3 which the claimant receives and accepts the order for the material.
9-4 If the indebtedness is incurred by a person other than the original
9-5 contractor, the claimant must also give notice within that time to
9-6 the original contractor.
9-7 (d) The notice must contain:
9-8 (1) a statement that the order has been received and
9-9 accepted; and
9-10 (2) the price of the order.
9-11 (e) The notice must be sent by registered or certified mail
9-12 to the last known business or residence address of the owner or the
9-13 reputed owner or the original contractor, as applicable.
9-14 (f) The lien of a claimant who accepts an order but fails to
9-15 give notice under this section is valid as to delivered items if
9-16 the claimant has given notice under Section 53.252.
9-17 Sec. 53.254. HOMESTEAD. (a) To fix a lien on a homestead,
9-18 the person who is to furnish material or perform labor and the
9-19 owner must execute a written contract setting forth the terms of
9-20 the agreement.
9-21 (b) The contract must be executed before the material is
9-22 furnished or the labor is performed.
9-23 (c) If the owner is married, the contract must be signed by
9-24 both spouses.
9-25 (d) If the contract is made by an original contractor, the
9-26 contract inures to the benefit of all persons who labor or furnish
9-27 material for the original contractor.
9-28 (e) The contract must be filed with the county clerk of the
9-29 county in which the homestead is located. The county clerk shall
9-30 record the contract in records kept for that purpose.
9-31 (f) An affidavit for lien filed under this subchapter that
9-32 relates to a homestead must contain the following notice
9-33 conspicuously printed, stamped, or typed in a size equal to at
9-34 least 10-point boldface or the computer equivalent, at the top of
9-35 the page:
9-36 "NOTICE: THIS IS NOT A LIEN. THIS IS ONLY AN AFFIDAVIT
9-37 CLAIMING A LIEN."
9-38 (g) For the lien on a homestead to be valid, the notice
9-39 required to be given to the owner under Section 53.252 must include
9-40 or have attached the following statement:
9-41 "If a subcontractor or supplier who furnishes materials or
9-42 performs labor for construction of improvements on your property is
9-43 not paid, your property may be subject to a lien for the unpaid
9-44 amount if:
9-45 (1) after receiving notice of the unpaid claim from
9-46 the claimant, you fail to withhold payment to your contractor that
9-47 is sufficient to cover the unpaid claim until the dispute is
9-48 resolved; or
9-49 (2) during construction and for 30 days after
9-50 completion of construction, you fail to retain 10 percent of the
9-51 contract price or 10 percent of the value of the work performed by
9-52 your contractor.
9-53 "If you have complied with the law regarding the 10 percent
9-54 retainage and you have withheld payment to the contractor
9-55 sufficient to cover any written notice of claim and have paid that
9-56 amount, if any, to the claimant, any lien claim filed on your
9-57 property by a subcontractor or supplier, other than a person who
9-58 contracted directly with you, will not be a valid lien on your
9-59 property. In addition, except for the required 10 percent
9-60 retainage, you are not liable to a subcontractor or supplier for
9-61 any amount paid to your contractor before you received written
9-62 notice of the claim."
9-63 Sec. 53.255. DISCLOSURE STATEMENT REQUIRED FOR RESIDENTIAL
9-64 CONSTRUCTION CONTRACT. (a) Before a residential construction
9-65 contract is executed by the owner, the original contractor shall
9-66 deliver to the owner a disclosure statement described by this
9-67 section.
9-68 (b) The disclosure statement must read substantially similar
9-69 to the following:
10-1 "KNOW YOUR RIGHTS AND RESPONSIBILITIES UNDER THE LAW. You
10-2 are about to enter into a transaction to build a new home or
10-3 remodel existing residential property. Texas law requires your
10-4 contractor to provide you with this brief overview of some of your
10-5 rights, responsibilities, and risks in this transaction.
10-6 "CONVEYANCE TO CONTRACTOR PROHIBITED. Your contractor may
10-7 not require you to convey your real property to your contractor as
10-8 a condition to the agreement for the construction of improvements
10-9 on your property.
10-10 "KNOW YOUR CONTRACTOR. Before you enter into your agreement
10-11 for the construction of improvements to your real property, make
10-12 sure that you have investigated your contractor. Obtain and verify
10-13 references from other people who have used the contractor for the
10-14 type and size of construction project on your property.
10-15 "GET IT IN WRITING. Make sure that you have a written
10-16 agreement with your contractor that includes: (1) a description of
10-17 the work the contractor is to perform; (2) the required or
10-18 estimated time for completion of the work; (3) the cost of the work
10-19 or how the cost will be determined; and (4) the procedure and
10-20 method of payment, including provisions for statutory retainage and
10-21 conditions for final payment. If your contractor made a promise,
10-22 warranty, or representation to you concerning the work the
10-23 contractor is to perform, make sure that promise, warranty, or
10-24 representation is specified in the written agreement. An oral
10-25 promise that is not included in the written agreement may not be
10-26 enforceable under Texas law.
10-27 "READ BEFORE YOU SIGN. Do not sign any document before you
10-28 have read and understood it. NEVER SIGN A DOCUMENT THAT INCLUDES
10-29 AN UNTRUE STATEMENT. Take your time in reviewing documents. If
10-30 you borrow money from a lender to pay for the improvements, you are
10-31 entitled to have the loan closing documents furnished to you for
10-32 review at least one business day before the closing. Do not waive
10-33 this requirement unless a bona fide emergency or another good cause
10-34 exists, and make sure you understand the documents before you sign
10-35 them. If you fail to comply with the terms of the documents, you
10-36 could lose your property. You are entitled to have your own
10-37 attorney review any documents. If you have any question about the
10-38 meaning of a document, consult an attorney.
10-39 "GET A LIST OF SUBCONTRACTORS AND SUPPLIERS. Before
10-40 construction commences, your contractor is required to provide you
10-41 with a list of the subcontractors and suppliers the contractor
10-42 intends to use on your project. Your contractor is required to
10-43 supply updated information on any subcontractors and suppliers
10-44 added after the list is provided.
10-45 "MONITOR THE WORK. Lenders and governmental authorities may
10-46 inspect the work in progress from time to time for their own
10-47 purposes. These inspections are not intended as quality control
10-48 inspections. Quality control is a matter for you and your
10-49 contractor. To ensure that your home is being constructed in
10-50 accordance with your wishes and specifications, you should inspect
10-51 the work yourself or have your own independent inspector review the
10-52 work in progress.
10-53 "MONITOR PAYMENTS. If you use a lender, your lender is
10-54 required to provide you with a periodic statement showing the money
10-55 disbursed by the lender from the proceeds of your loan. Your
10-56 contractor is also required to furnish you with a statement at
10-57 least once each month of money disbursed to subcontractors and
10-58 suppliers for this project. Review these statements and make sure
10-59 that the money is being properly disbursed.
10-60 "CLAIMS BY SUBCONTRACTORS AND SUPPLIERS. Under Texas law, if
10-61 a subcontractor or supplier who furnishes labor or materials for
10-62 the construction of improvements on your property is not paid, you
10-63 may become liable and your property may be subject to a lien for
10-64 the unpaid amount, even if you have not contracted directly with
10-65 the subcontractor or supplier. To avoid liability, you should take
10-66 the following actions:
10-67 (1) If you receive a written notice from a
10-68 subcontractor or supplier, you should withhold payment from your
10-69 contractor for the amount of the claim stated in the notice until
11-1 the dispute between your contractor and the subcontractor or
11-2 supplier is resolved. If your lender is disbursing money directly
11-3 to your contractor, you should immediately provide a copy of the
11-4 notice to your lender and instruct the lender to withhold payment
11-5 in the amount of the claim stated in the notice. If you continue
11-6 to pay the contractor after receiving the written notice without
11-7 withholding the amount of the claim, you may be liable and your
11-8 property may be subject to a lien for the amount you failed to
11-9 withhold.
11-10 (2) During construction and for 30 days after final
11-11 completion, termination, or abandonment of the contract by the
11-12 contractor, you should withhold or cause your lender to withhold 10
11-13 percent of the amount of payments made for the work performed by
11-14 your contractor. This is sometimes referred to as 'statutory
11-15 retainage.' If you fail to withhold the 10 percent for at least 30
11-16 days after final completion, termination, or abandonment of the
11-17 contract by the contractor and if a valid claim is timely made by a
11-18 claimant, you may be personally liable and your property may be
11-19 subject to a lien up to the amount that you failed to withhold.
11-20 "If a claim is not paid within a certain time period, the
11-21 claimant is required to file a mechanic's lien affidavit in the
11-22 real property records in the county where the property is located.
11-23 A mechanic's lien affidavit is not a lien on your property, but the
11-24 filing of the affidavit could result in a court imposing a lien on
11-25 your property if the claimant is successful in litigation to
11-26 enforce the lien claim.
11-27 "SOME CLAIMS MAY NOT BE VALID. When you receive a written
11-28 notice of a claim or when a mechanic's lien affidavit is filed on
11-29 your property, you should know your legal rights and
11-30 responsibilities regarding the claim. Not all claims are valid. A
11-31 notice of a claim by a subcontractor or supplier is required to be
11-32 sent, and the mechanic's lien affidavit is required to be filed,
11-33 within strict time periods. The notice and the affidavit must
11-34 contain certain information. All claimants may not fully comply
11-35 with the legal requirements to collect on a claim. If you have
11-36 paid the contractor in full before receiving a notice of a claim
11-37 and have fully complied with the law regarding statutory retainage,
11-38 you may not be liable for that claim. Accordingly, you should
11-39 consult your attorney when you receive a written notice of a claim
11-40 to determine the true extent of your liability or potential
11-41 liability for that claim.
11-42 "OBTAIN A LIEN RELEASE AND A BILLS-PAID AFFIDAVIT. When you
11-43 receive a notice of claim, do not release withheld funds without
11-44 obtaining a signed and notarized release of lien and claim from the
11-45 claimant. You can also reduce the risk of having a claim filed by
11-46 a subcontractor or supplier by requiring as a condition of each
11-47 payment made by you or your lender that your contractor furnish you
11-48 with an affidavit stating that all bills have been paid. Under
11-49 Texas law, on final completion of the work and before final
11-50 payment, the contractor is required to furnish you with an
11-51 affidavit stating that all bills have been paid. If the contractor
11-52 discloses any unpaid bill in the affidavit, you should withhold
11-53 payment in the amount of the unpaid bill until you receive a waiver
11-54 of lien or release from that subcontractor or supplier.
11-55 "OBTAIN TITLE INSURANCE PROTECTION. You may be able to
11-56 obtain a title insurance policy to insure that the title to your
11-57 property and the existing improvements on your property are free
11-58 from liens claimed by subcontractors and suppliers. If your policy
11-59 is issued before the improvements are completed and covers the
11-60 value of the improvements to be completed, you should obtain, on
11-61 the completion of the improvements and as a condition of your final
11-62 payment, a 'completion of improvements' policy endorsement. This
11-63 endorsement will protect your property from liens claimed by
11-64 subcontractors and suppliers that may arise from the date the
11-65 original title policy is issued to the date of the endorsement."
11-66 (c) The failure of a contractor to comply with this section
11-67 does not invalidate a lien under this chapter, a contract lien, or
11-68 a deed of trust.
11-69 Sec. 53.256. LIST OF SUBCONTRACTORS AND SUPPLIERS. (a) For
12-1 the construction of improvements under a residential construction
12-2 contract, the original contractor must attach to the disclosure
12-3 statement required by Section 53.255 or furnish to the owner before
12-4 the commencement of construction a written list that identifies by
12-5 name, address, and telephone number each subcontractor and supplier
12-6 the contractor intends to use in the work to be performed. The
12-7 contractor shall provide the owner with an updated list of
12-8 subcontractors and suppliers not later than the 15th day after the
12-9 date a subcontractor or supplier is added or deleted.
12-10 (b) The list must contain the following notice conspicuously
12-11 printed, stamped, or typed in a size equal to at least 10-point
12-12 boldface or the computer equivalent:
12-13 "NOTICE: THIS LIST OF SUBCONTRACTORS AND SUPPLIERS MAY NOT
12-14 BE A FINAL LISTING. THE CONTRACTOR IS REQUIRED BY LAW TO SUPPLY
12-15 UPDATED INFORMATION, AS THE INFORMATION BECOMES AVAILABLE, FOR EACH
12-16 SUBCONTRACTOR OR SUPPLIER USED IN THE WORK PERFORMED ON YOUR
12-17 RESIDENCE."
12-18 (c) The failure of a contractor to comply with this section
12-19 does not invalidate a lien under this chapter, a contract lien, or
12-20 a deed of trust.
12-21 Sec. 53.257. PROVISIONS RELATED TO CLOSING OF LOAN FOR
12-22 CONSTRUCTION OF IMPROVEMENTS. (a) If the owner is obtaining
12-23 third-party financing for the construction of improvements under a
12-24 residential construction contract, the lender shall deliver to the
12-25 owner all documentation relating to the closing of the loan not
12-26 later than one business day before the date of the closing. If a
12-27 bona fide emergency or another good cause exists and the lender
12-28 obtains the written consent of the owner, the lender may provide
12-29 the documentation to the owner or the lender may modify previously
12-30 provided documentation on the date of closing.
12-31 (b) The lender shall provide to the owner the disclosure
12-32 statement described by Section 53.255(b). The disclosure statement
12-33 must be provided to the owner before the date of closing. If a
12-34 bona fide emergency or another good cause exists and the lender
12-35 obtains the written consent of the owner, the lender may provide
12-36 the disclosure statement at the closing. The lender shall retain a
12-37 signed and dated copy of the disclosure statement with the closing
12-38 documents.
12-39 (c) The failure of a lender to comply with this section does
12-40 not invalidate a lien under this chapter, a contract lien, or a
12-41 deed of trust.
12-42 Sec. 53.258. DISBURSEMENTS OF FUNDS. (a) For the
12-43 construction of improvements under a residential construction
12-44 contract, the original contractor shall provide to the owner a
12-45 signed periodic statement that lists the bills or expenses that the
12-46 original contractor represents will be paid or that have been paid
12-47 and for which the original contractor is requesting payment. The
12-48 original contractor is not required to include in the statement the
12-49 bills or expenses for which the original contractor has obtained a
12-50 valid lien release or waiver from the subcontractor or supplier to
12-51 whom the bills or expenses are owed if the statement includes a
12-52 written representation that the balance of any funds that are not
12-53 itemized in the statement will be paid to:
12-54 (1) the subcontractor or supplier who provided the
12-55 lien release or waiver; or
12-56 (2) the original contractor as reimbursement for
12-57 expenses incurred, profit, or overhead.
12-58 (b) If the owner finances the construction of improvements
12-59 through a third party that advances loan proceeds directly to the
12-60 original contractor, the lender shall:
12-61 (1) obtain from the original contractor the signed
12-62 periodic statement required by Subsection (a) that covers the funds
12-63 for which the original contractor is requesting payment; and
12-64 (2) provide to the owner a statement of funds
12-65 disbursed by the lender since the last statement was provided to
12-66 the owner.
12-67 (c) The lender shall provide to the owner the lender's
12-68 disbursement statement and the disbursement statement the lender
12-69 obtained from the contractor before the lender disburses the funds
13-1 to the original contractor. The disbursement statements may be
13-2 provided in any manner agreed to by the lender and the owner.
13-3 (d) The lender is not responsible for the accuracy of the
13-4 information contained in the disbursement statement obtained from
13-5 the original contractor.
13-6 (e) The failure of a lender to comply with this section does
13-7 not invalidate a lien under this chapter, a contract lien, or a
13-8 deed of trust.
13-9 (f) A person commits an offense if the person intentionally,
13-10 knowingly, or recklessly provides false or misleading information
13-11 in a disbursement statement required under this section. An
13-12 offense under this section is a misdemeanor. A person adjudged
13-13 guilty of an offense under this section shall be punished by a fine
13-14 not to exceed $4,000 or confinement in jail for a term not to
13-15 exceed one year or both a fine and confinement. A person may not
13-16 receive community supervision for the offense.
13-17 Sec. 53.259. FINAL BILLS-PAID AFFIDAVIT REQUIRED. (a) As a
13-18 condition of final payment under a residential construction
13-19 contract, the original contractor shall, at the time the final
13-20 payment is tendered, execute and deliver to the owner, or the
13-21 owner's agent, an affidavit stating that the original contractor
13-22 has paid each person in full for all labor and materials used in
13-23 the construction of improvements on the real property. If the
13-24 original contractor has not paid each person in full, the original
13-25 contractor shall state in the affidavit the amount owed and the
13-26 name and, if known, the address and telephone number of each person
13-27 to whom a payment is owed.
13-28 (b) The seller of any real property on which a structure of
13-29 not more than four units is constructed and that is intended as the
13-30 principal place of residence for the purchaser shall, at the
13-31 closing of the purchase of the real property, execute and deliver
13-32 to the purchaser, or the purchaser's agent, an affidavit stating
13-33 that the seller has paid each person in full for all labor and
13-34 materials used in the construction of improvements on the real
13-35 property and that the seller is not indebted to any person by
13-36 reason of any construction. In the event that the seller has not
13-37 paid each person in full, the seller shall state in the affidavit
13-38 the amount owed and the name and, if known, the address and
13-39 telephone number of each person to whom a payment is owed.
13-40 (c) A person commits an offense if the person intentionally,
13-41 knowingly, or recklessly makes a false or misleading statement in
13-42 an affidavit under this section. An offense under this section is
13-43 a misdemeanor. A person adjudged guilty of an offense under this
13-44 section shall be punished by a fine not to exceed $4,000 or
13-45 confinement in jail for a term not to exceed one year or both a
13-46 fine and confinement. A person may not receive community
13-47 supervision for the offense.
13-48 (d) A person signing an affidavit under this section is
13-49 personally liable for any loss or damage resulting from any false
13-50 or incorrect information in the affidavit.
13-51 Sec. 53.260. CONVEYANCE TO CONTRACTOR PROHIBITED. An
13-52 original contractor may not require an owner of real property to
13-53 convey the real property to the original contractor or an entity
13-54 controlled by the original contractor as a condition to the
13-55 performance of the residential construction contract for
13-56 improvements to the real property.
13-57 SECTION 24. Section 53.059, Property Code, is repealed.
13-58 SECTION 25. (a) This Act takes effect September 1, 1997.
13-59 (b) The changes in law made by this Act apply only to
13-60 matters relating to or claims arising under an original contract,
13-61 as that term is defined by Section 53.001, Property Code, that is
13-62 entered into on or after September 1, 1997. Matters relating to or
13-63 claims arising under an original contract, as that term is defined
13-64 by Section 53.001, Property Code, that was entered into before
13-65 September 1, 1997, are governed by the law as it existed on the
13-66 date the original contract was entered into, and the former law is
13-67 continued in effect for that purpose.
13-68 SECTION 26. The importance of this legislation and the
13-69 crowded condition of the calendars in both houses create an
14-1 emergency and an imperative public necessity that the
14-2 constitutional rule requiring bills to be read on three several
14-3 days in each house be suspended, and this rule is hereby suspended.
14-4 * * * * *