76R9835 PAM-F
By Solomons H.B. No. 2054
Substitute the following for H.B. No. 2054:
By Solomons C.S.H.B. No. 2054
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to mechanic's, contractor's, and materialmen's liens.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 53.001, Property Code, is amended by
1-5 adding Subsection (15) to read as follows:
1-6 (15) "Completion" of an original contract means the
1-7 actual completion of the work, including any extras or change
1-8 orders reasonably required or contemplated under the original
1-9 contract, other than warranty work or replacement or repair of the
1-10 work performed under the contract.
1-11 SECTION 2. Section 53.055(a), Property Code, is amended to
1-12 read as follows:
1-13 (a) A person who files an affidavit must send a copy of the
1-14 affidavit by registered or certified mail to the owner or reputed
1-15 owner at the owner's last known business or residence address not
1-16 later than the fifth [one business] day after the date the
1-17 affidavit is filed with the county clerk.
1-18 SECTION 3. Sections 53.057(a) and (e), Property Code, are
1-19 amended to read as follows:
1-20 (a) A [Except as provided by Subchapter K, a] claimant may
1-21 give notice under this section instead of or in addition to notice
1-22 under Section 53.056 or 53.252 if the claimant is to labor, furnish
1-23 labor or materials, or specially fabricate materials under an
1-24 agreement with an original contractor or a subcontractor providing
2-1 for retainage.
2-2 (e) If a [A] claimant [who] gives notice under this section
2-3 and Section 53.055 or, if the claim relates to a residential
2-4 construction project, under this section and Section 53.252, the
2-5 claimant is not required to give any other notice as to the
2-6 retainage.
2-7 SECTION 4. Section 53.158, Property Code, is amended to read
2-8 as follows:
2-9 Sec. 53.158. PERIOD FOR BRINGING SUIT TO FORECLOSE LIEN.
2-10 (a) Except as provided by Subsection (b), suit must be brought to
2-11 foreclose the lien within two years after the last day a claimant
2-12 may file [date of filing] the lien affidavit under Section 53.052
2-13 or within one year after completion, termination, or abandonment of
2-14 the work under the original contract under which the lien is
2-15 claimed, whichever is later.
2-16 (b) For a claim arising from a residential construction
2-17 project, suit must be brought to foreclose the lien within one year
2-18 after the last day a claimant may file a lien affidavit [not later
2-19 than the first anniversary of the date the lien affidavit is filed]
2-20 under Section 53.052 or within one year after completion,
2-21 termination, or abandonment of the work under the original contract
2-22 under which the lien is claimed, whichever is later.
2-23 SECTION 5. Section 53.205(a), Property Code, is amended to
2-24 read as follows:
2-25 (a) The bond protects all persons with a claim that is:
2-26 (1) perfected in the manner prescribed for fixing a
2-27 lien under Subchapter C or, if the claim relates to a residential
3-1 construction project, under Subchapter K; or
3-2 (2) perfected in the manner prescribed by Section
3-3 53.206.
3-4 SECTION 6. Sections 53.206(a) and (b), Property Code, are
3-5 amended to read as follows:
3-6 (a) To perfect a claim against a bond in a manner other than
3-7 that prescribed by Subchapter C or K for fixing a lien, a person
3-8 must:
3-9 (1) give to the original contractor all applicable
3-10 notices under the appropriate [that] subchapter; and
3-11 (2) give to the surety on the bond, instead of the
3-12 owner, all notices under the appropriate [that] subchapter required
3-13 to be given to the owner.
3-14 (b) To perfect a claim under this section, a person is not
3-15 required to:
3-16 (1) give notice to the surety under Section 53.057,
3-17 unless the claimant has a direct contractual relationship with the
3-18 original contractor and the agreed retainage is in excess of 10
3-19 percent of the contract;
3-20 (2) give notice to the surety under [Subsection (b)
3-21 of] Section 53.058(b) or, if the claim relates to a residential
3-22 construction project, under Section 53.253(c) [53.058]; or
3-23 (3) file any affidavit with the county clerk.
3-24 SECTION 7. Section 53.207(a), Property Code, is amended to
3-25 read as follows:
3-26 (a) If the owner receives any of the notices or a lien is
3-27 fixed under Subchapter C or K, the owner shall mail to the surety
4-1 on the bond a copy of all notices received.
4-2 SECTION 8. Section 53.255(b), Property Code, is amended to
4-3 read as follows:
4-4 (b) The disclosure statement must read substantially similar
4-5 to the following:
4-6 "KNOW YOUR RIGHTS AND RESPONSIBILITIES UNDER THE LAW. You
4-7 are about to enter into a transaction to build a new home or
4-8 remodel existing residential property. Texas law requires your
4-9 contractor to provide you with this brief overview of some of your
4-10 rights, responsibilities, and risks in this transaction.
4-11 "CONVEYANCE TO CONTRACTOR NOT REQUIRED [PROHIBITED]. Your
4-12 contractor may not require you to convey your real property to your
4-13 contractor as a condition to the agreement for the construction of
4-14 improvements on your property.
4-15 "KNOW YOUR CONTRACTOR. Before you enter into your agreement
4-16 for the construction of improvements to your real property, make
4-17 sure that you have investigated your contractor. Obtain and verify
4-18 references from other people who have used the contractor for the
4-19 type and size of construction project on your property.
4-20 "GET IT IN WRITING. Make sure that you have a written
4-21 agreement with your contractor that includes: (1) a description of
4-22 the work the contractor is to perform; (2) the required or
4-23 estimated time for completion of the work; (3) the cost of the
4-24 work or how the cost will be determined; and (4) the procedure and
4-25 method of payment, including provisions for statutory retainage and
4-26 conditions for final payment. If your contractor made a promise,
4-27 warranty, or representation to you concerning the work the
5-1 contractor is to perform, make sure that promise, warranty, or
5-2 representation is specified in the written agreement. An oral
5-3 promise that is not included in the written agreement may not be
5-4 enforceable under Texas law.
5-5 "READ BEFORE YOU SIGN. Do not sign any document before you
5-6 have read and understood it. NEVER SIGN A DOCUMENT THAT INCLUDES
5-7 AN UNTRUE STATEMENT. Take your time in reviewing documents. If
5-8 you borrow money from a lender to pay for the improvements, you are
5-9 entitled to have the loan closing documents furnished to you for
5-10 review at least one business day before the closing. Do not waive
5-11 this requirement unless a bona fide emergency or another good cause
5-12 exists, and make sure you understand the documents before you sign
5-13 them. If you fail to comply with the terms of the documents, you
5-14 could lose your property. You are entitled to have your own
5-15 attorney review any documents. If you have any question about the
5-16 meaning of a document, consult an attorney.
5-17 "GET A LIST OF SUBCONTRACTORS AND SUPPLIERS. Before
5-18 construction commences, your contractor is required to provide you
5-19 with a list of the subcontractors and suppliers the contractor
5-20 intends to use on your project. Your contractor is required to
5-21 supply updated information on any subcontractors and suppliers
5-22 added after the list is provided. Your contractor is not required
5-23 to supply this information if you sign a written waiver of your
5-24 rights to receive this information.
5-25 "MONITOR THE WORK. Lenders and governmental authorities may
5-26 inspect the work in progress from time to time for their own
5-27 purposes. These inspections are not intended as quality control
6-1 inspections. Quality control is a matter for you and your
6-2 contractor. To ensure that your home is being constructed in
6-3 accordance with your wishes and specifications, you should inspect
6-4 the work yourself or have your own independent inspector review the
6-5 work in progress.
6-6 "MONITOR PAYMENTS. If you use a lender, your lender is
6-7 required to provide you with a periodic statement showing the money
6-8 disbursed by the lender from the proceeds of your loan. Each time
6-9 your contractor requests payment from you or your lender for work
6-10 performed, your [Your] contractor is also required to furnish you
6-11 with a disbursement statement that lists the name and address of
6-12 each subcontractor or supplier that the contractor intends to pay
6-13 from the requested funds [at least once each month of money
6-14 disbursed to subcontractors and suppliers for this project].
6-15 Review these statements and make sure that the money is being
6-16 properly disbursed.
6-17 "CLAIMS BY SUBCONTRACTORS AND SUPPLIERS. Under Texas law, if
6-18 a subcontractor or supplier who furnishes labor or materials for
6-19 the construction of improvements on your property is not paid, you
6-20 may become liable and your property may be subject to a lien for
6-21 the unpaid amount, even if you have not contracted directly with
6-22 the subcontractor or supplier. To avoid liability, you should take
6-23 the following actions:
6-24 (1) If you receive a written notice from a
6-25 subcontractor or supplier, you should withhold payment from
6-26 your contractor for the amount of the claim stated in the
6-27 notice until the dispute between your contractor and the
7-1 subcontractor or supplier is resolved. If your lender is
7-2 disbursing money directly to your contractor, you should
7-3 immediately provide a copy of the notice to your lender and
7-4 instruct the lender to withhold payment in the amount of the
7-5 claim stated in the notice. If you continue to pay the
7-6 contractor after receiving the written notice without
7-7 withholding the amount of the claim, you may be liable and
7-8 your property may be subject to a lien for the amount you
7-9 failed to withhold.
7-10 (2) During construction and for 30 days after
7-11 final completion, termination, or abandonment of the contract
7-12 by the contractor, you should withhold or cause your lender
7-13 to withhold 10 percent of the amount of payments made for the
7-14 work performed by your contractor. This is sometimes
7-15 referred to as 'statutory retainage.' If you choose not
7-16 [fail] to withhold the 10 percent for at least 30 days after
7-17 final completion, termination, or abandonment of the contract
7-18 by the contractor and if a valid claim is timely made by a
7-19 claimant and your contractor fails to pay the claim, you may
7-20 be personally liable and your property may be subject to a
7-21 lien up to the amount that you failed to withhold.
7-22 "If a claim is not paid within a certain time period, the
7-23 claimant is required to file a mechanic's lien affidavit in the
7-24 real property records in the county where the property is located.
7-25 A mechanic's lien affidavit is not a lien on your property, but the
7-26 filing of the affidavit could result in a court imposing a lien on
7-27 your property if the claimant is successful in litigation to
8-1 enforce the lien claim.
8-2 "SOME CLAIMS MAY NOT BE VALID. When you receive a written
8-3 notice of a claim or when a mechanic's lien affidavit is filed on
8-4 your property, you should know your legal rights and
8-5 responsibilities regarding the claim. Not all claims are valid. A
8-6 notice of a claim by a subcontractor or supplier is required to be
8-7 sent, and the mechanic's lien affidavit is required to be filed,
8-8 within strict time periods. The notice and the affidavit must
8-9 contain certain information. All claimants may not fully comply
8-10 with the legal requirements to collect on a claim. If you have
8-11 paid the contractor in full before receiving a notice of a claim
8-12 and have fully complied with the law regarding statutory retainage,
8-13 you may not be liable for that claim. Accordingly, you should
8-14 consult your attorney when you receive a written notice of a claim
8-15 to determine the true extent of your liability or potential
8-16 liability for that claim.
8-17 "OBTAIN A LIEN RELEASE AND A BILLS-PAID AFFIDAVIT. When you
8-18 receive a notice of claim, do not release withheld funds without
8-19 obtaining a signed and notarized release of lien and claim from the
8-20 claimant. You can also reduce the risk of having a claim filed by
8-21 a subcontractor or supplier by requiring as a condition of each
8-22 payment made by you or your lender that your contractor furnish you
8-23 with an affidavit stating that all bills have been paid. Under
8-24 Texas law, on final completion of the work and before final
8-25 payment, the contractor is required to furnish you with an
8-26 affidavit stating that all bills have been paid. If the contractor
8-27 discloses any unpaid bill in the affidavit, you should withhold
9-1 payment in the amount of the unpaid bill until you receive a waiver
9-2 of lien or release from that subcontractor or supplier.
9-3 "OBTAIN TITLE INSURANCE PROTECTION. You may be able to obtain
9-4 a title insurance policy to insure that the title to your property
9-5 and the existing improvements on your property are free from liens
9-6 claimed by subcontractors and suppliers. If your policy is issued
9-7 before the improvements are completed and covers the value of the
9-8 improvements to be completed, you should obtain, on the completion
9-9 of the improvements and as a condition of your final payment, a
9-10 'completion of improvements' policy endorsement. This endorsement
9-11 will protect your property from liens claimed by subcontractors and
9-12 suppliers that may arise from the date the original title policy is
9-13 issued to the date of the endorsement."
9-14 SECTION 9. Section 53.256, Property Code, is amended by
9-15 amending Subsections (a) and (b) and adding Subsection (d) to read
9-16 as follows:
9-17 (a) Except as provided by Subsection (d), for [For] the
9-18 construction of improvements under a residential construction
9-19 contract, the original contractor shall:
9-20 (1) [must attach to the disclosure statement required
9-21 by Section 53.255 or] furnish to the owner before the commencement
9-22 of construction a written list that identifies by name, address,
9-23 and telephone number each subcontractor and supplier the contractor
9-24 intends to use in the work to be performed; and
9-25 (2) [. The contractor shall] provide the owner with
9-26 an updated list of subcontractors and suppliers not later than the
9-27 15th day after the date a subcontractor or supplier is added or
10-1 deleted.
10-2 (b) The list must contain the following notice conspicuously
10-3 printed, stamped, or typed in a size equal to at least 10-point
10-4 boldface or the computer equivalent:
10-5 "NOTICE: THIS LIST OF SUBCONTRACTORS AND SUPPLIERS MAY NOT
10-6 BE A FINAL LISTING. UNLESS YOU SIGN A WAIVER OF YOUR RIGHT TO
10-7 RECEIVE UPDATED INFORMATION, THE CONTRACTOR IS REQUIRED BY LAW TO
10-8 SUPPLY UPDATED INFORMATION, AS THE INFORMATION BECOMES AVAILABLE,
10-9 FOR EACH SUBCONTRACTOR OR SUPPLIER USED IN THE WORK PERFORMED ON
10-10 YOUR RESIDENCE."
10-11 (d) An owner may waive the right to receive the list of
10-12 subcontractors and suppliers or any updated information required by
10-13 this section only as provided by this subsection. The waiver must
10-14 be in writing and may be included in the residential construction
10-15 contract. If the waiver is not included as a provision of the
10-16 residential construction contract, the separate waiver statement
10-17 must be signed by the owner. The waiver must be conspicuously
10-18 printed in at least 10-point bold-faced type and read substantially
10-19 similar to the following:
10-20 "WAIVER OF THE LIST OF SUBCONTRACTORS AND SUPPLIERS. AN
10-21 OWNER IS NOT REQUIRED TO WAIVE THE RIGHT GRANTED BY SECTION 53.256,
10-22 PROPERTY CODE, TO RECEIVE FROM THE CONTRACTOR AN ORIGINAL OR
10-23 UPDATED LIST OF SUBCONTRACTORS AND SUPPLIERS.
10-24 "BY SIGNING THIS DOCUMENT, I AGREE TO WAIVE MY RIGHT TO
10-25 RECEIVE FROM THE CONTRACTOR AN ORIGINAL OR UPDATED LIST OF
10-26 SUBCONTRACTORS AND SUPPLIERS.
10-27 "I UNDERSTAND AND ACKNOWLEDGE THAT, AFTER SIGNING THIS
11-1 DOCUMENT, THIS WAIVER MAY NOT BE CANCELED AT A LATER DATE.
11-2 "I HAVE VOLUNTARILY CONSENTED TO THIS WAIVER."
11-3 SECTION 10. Sections 53.258(a), (b), and (e), Property Code,
11-4 are amended to read as follows:
11-5 (a) At the time the original contractor requests payment
11-6 from the owner or the owner's lender for the construction of
11-7 improvements under a residential construction contract, the
11-8 original contractor shall provide to the owner a disbursement
11-9 statement. The statement may include any information agreed to by
11-10 the owner and the original contractor and must include at least the
11-11 name and address of each person who subcontracted directly with the
11-12 original contractor and who the original contractor intends to pay
11-13 from the requested funds. The original contractor shall provide
11-14 the disbursement statement:
11-15 (1) in the manner agreed to in writing by the owner
11-16 and original contractor; or
11-17 (2) if no agreement exists, by depositing the
11-18 statement in the United States mail, first class, postage paid, and
11-19 properly addressed to the owner or by hand delivering the statement
11-20 to the owner before the original contractor receives the requested
11-21 funds [For the construction of improvements under a residential
11-22 construction contract, the original contractor shall provide to the
11-23 owner a signed periodic statement that lists the bills or expenses
11-24 that the original contractor represents will be paid or that have
11-25 been paid and for which the original contractor is requesting
11-26 payment. The original contractor is not required to include in the
11-27 statement the bills or expenses for which the original contractor
12-1 has obtained a valid lien release or waiver from the subcontractor
12-2 or supplier to whom the bills or expenses are owed if the statement
12-3 includes a written representation that the balance of any funds
12-4 that are not itemized in the statement will be paid to:]
12-5 [(1) the subcontractor or supplier who provided the
12-6 lien release or waiver; or]
12-7 [(2) the original contractor as reimbursement for
12-8 expenses incurred, profit, or overhead].
12-9 (b) If the owner finances the construction of improvements
12-10 through a third party that advances loan proceeds directly to the
12-11 original contractor, the lender shall:
12-12 (1) obtain from the original contractor the signed
12-13 disbursement [periodic] statement required by Subsection (a) that
12-14 covers the funds for which the original contractor is requesting
12-15 payment; and
12-16 (2) provide to the owner a statement of funds
12-17 disbursed by the lender since the last statement was provided to
12-18 the owner.
12-19 (e) The failure of a lender or an original contractor to
12-20 comply with this section does not invalidate a lien under this
12-21 chapter, a contract lien, or a deed of trust.
12-22 SECTION 11. Section 53.260, Property Code, is amended to
12-23 read as follows:
12-24 Sec. 53.260. CONVEYANCE TO CONTRACTOR NOT REQUIRED
12-25 [PROHIBITED]. An original contractor may not require an owner of
12-26 real property to convey the real property to the original
12-27 contractor or an entity controlled by the original contractor as a
13-1 condition to the performance of the residential construction
13-2 contract for improvements to the real property.
13-3 SECTION 12. Section 53.106(e), Property Code, is repealed.
13-4 SECTION 13. (a) This Act takes effect September 1, 1999.
13-5 (b) The changes in law made by this Act apply only to
13-6 matters relating to or claims arising under an original contract,
13-7 as that term is defined by Section 53.001, Property Code, that is
13-8 entered into on or after September 1, 1999. Matters relating to or
13-9 claims arising from an original contract, as that term is defined
13-10 by Section 53.001, Property Code, that was entered into before
13-11 September 1, 1999, are governed by the law in effect when the
13-12 contract was entered into, and the former law is continued in
13-13 effect for that purpose.
13-14 SECTION 14. The importance of this legislation and the
13-15 crowded condition of the calendars in both houses create an
13-16 emergency and an imperative public necessity that the
13-17 constitutional rule requiring bills to be read on three several
13-18 days in each house be suspended, and this rule is hereby suspended.