By Solomons H.B. No. 2054
76R7572 PAM-F
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. Section 53.158, Property Code, is amended to read
1-19 as follows:
1-20 Sec. 53.158. PERIOD FOR BRINGING SUIT TO FORECLOSE LIEN.
1-21 (a) Except as provided by Subsection (b), suit must be brought to
1-22 foreclose the mechanic's lien within two years after the date of
1-23 filing the lien affidavit under Section 53.052 or within one year
1-24 after completion, termination, or abandonment of the work under the
2-1 original contract under which the lien is claimed, whichever is
2-2 later.
2-3 (b) For a claim arising from a residential construction
2-4 project, suit must be brought to foreclose the mechanic's lien not
2-5 later than the first anniversary of the date the lien affidavit is
2-6 filed under Section 53.052.
2-7 SECTION 4. Section 53.205(a), Property Code, is amended to
2-8 read as follows:
2-9 (a) The bond protects all persons with a claim that is:
2-10 (1) perfected in the manner prescribed for fixing a
2-11 lien under Subchapter C or, if the claim relates to a residential
2-12 construction project, under Subchapter K; or
2-13 (2) perfected in the manner prescribed by Section
2-14 53.206.
2-15 SECTION 5. Sections 53.206(a) and (b), Property Code, are
2-16 amended to read as follows:
2-17 (a) To perfect a claim against a bond in a manner other than
2-18 that prescribed by Subchapter C or K for fixing a lien, a person
2-19 must:
2-20 (1) give to the original contractor all applicable
2-21 notices under the appropriate [that] subchapter; and
2-22 (2) give to the surety on the bond, instead of the
2-23 owner, all notices under the appropriate [that] subchapter required
2-24 to be given to the owner.
2-25 (b) To perfect a claim under this section, a person is not
2-26 required to:
2-27 (1) give notice to the surety under Section 53.057,
3-1 unless the claimant has a direct contractual relationship with the
3-2 original contractor and the agreed retainage is in excess of 10
3-3 percent of the contract;
3-4 (2) give notice to the surety under [Subsection (b)
3-5 of] Section 53.058(b) or, if the claim relates to a residential
3-6 construction project, under Section 53.253(c) [53.058]; or
3-7 (3) file any affidavit with the county clerk.
3-8 SECTION 6. Section 53.207(a), Property Code, is amended to
3-9 read as follows:
3-10 (a) If the owner receives any of the notices or a lien is
3-11 fixed under Subchapter C or K, the owner shall mail to the surety
3-12 on the bond a copy of all notices received.
3-13 SECTION 7. Section 53.255(b), Property Code, is amended to
3-14 read as follows:
3-15 (b) The disclosure statement must read substantially similar
3-16 to the following:
3-17 "KNOW YOUR RIGHTS AND RESPONSIBILITIES UNDER THE LAW. You
3-18 are about to enter into a transaction to build a new home or
3-19 remodel existing residential property. Texas law requires your
3-20 contractor to provide you with this brief overview of some of your
3-21 rights, responsibilities, and risks in this transaction.
3-22 "CONVEYANCE TO CONTRACTOR NOT REQUIRED [PROHIBITED]. Your
3-23 contractor may not require you to convey your real property to your
3-24 contractor as a condition to the agreement for the construction of
3-25 improvements on your property.
3-26 "KNOW YOUR CONTRACTOR. Before you enter into your agreement
3-27 for the construction of improvements to your real property, make
4-1 sure that you have investigated your contractor. Obtain and verify
4-2 references from other people who have used the contractor for the
4-3 type and size of construction project on your property.
4-4 "GET IT IN WRITING. Make sure that you have a written
4-5 agreement with your contractor that includes: (1) a description of
4-6 the work the contractor is to perform; (2) the required or
4-7 estimated time for completion of the work; (3) the cost of the
4-8 work or how the cost will be determined; and (4) the procedure and
4-9 method of payment, including provisions for statutory retainage and
4-10 conditions for final payment. If your contractor made a promise,
4-11 warranty, or representation to you concerning the work the
4-12 contractor is to perform, make sure that promise, warranty, or
4-13 representation is specified in the written agreement. An oral
4-14 promise that is not included in the written agreement may not be
4-15 enforceable under Texas law.
4-16 "READ BEFORE YOU SIGN. Do not sign any document before you
4-17 have read and understood it. NEVER SIGN A DOCUMENT THAT INCLUDES
4-18 AN UNTRUE STATEMENT. Take your time in reviewing documents. If
4-19 you borrow money from a lender to pay for the improvements, you are
4-20 entitled to have the loan closing documents furnished to you for
4-21 review at least one business day before the closing. Do not waive
4-22 this requirement unless a bona fide emergency or another good cause
4-23 exists, and make sure you understand the documents before you sign
4-24 them. If you fail to comply with the terms of the documents, you
4-25 could lose your property. You are entitled to have your own
4-26 attorney review any documents. If you have any question about the
4-27 meaning of a document, consult an attorney.
5-1 "GET A LIST OF SUBCONTRACTORS AND SUPPLIERS. Before
5-2 construction commences, your contractor is required to provide you
5-3 with a list of the subcontractors and suppliers the contractor
5-4 intends to use on your project. Your contractor is required to
5-5 supply updated information on any subcontractors and suppliers
5-6 added after the list is provided. Your contractor is not required
5-7 to supply this information if you sign a written waiver of your
5-8 rights to receive this information.
5-9 "MONITOR THE WORK. Lenders and governmental authorities may
5-10 inspect the work in progress from time to time for their own
5-11 purposes. These inspections are not intended as quality control
5-12 inspections. Quality control is a matter for you and your
5-13 contractor. To ensure that your home is being constructed in
5-14 accordance with your wishes and specifications, you should inspect
5-15 the work yourself or have your own independent inspector review the
5-16 work in progress.
5-17 "MONITOR PAYMENTS. If you use a lender, your lender is
5-18 required to provide you with a periodic statement showing the money
5-19 disbursed by the lender from the proceeds of your loan. Each time
5-20 your contractor requests payment from you or your lender for work
5-21 performed, your [Your] contractor is also required to furnish you
5-22 with a disbursement statement that lists the name and address of
5-23 each subcontractor or supplier that the contractor intends to pay
5-24 from the requested funds [at least once each month of money
5-25 disbursed to subcontractors and suppliers for this project].
5-26 Review these statements and make sure that the money is being
5-27 properly disbursed.
6-1 "CLAIMS BY SUBCONTRACTORS AND SUPPLIERS. Under Texas law, if
6-2 a subcontractor or supplier who furnishes labor or materials for
6-3 the construction of improvements on your property is not paid, you
6-4 may become liable and your property may be subject to a lien for
6-5 the unpaid amount, even if you have not contracted directly with
6-6 the subcontractor or supplier. To avoid liability, you should take
6-7 the following actions:
6-8 (1) If you receive a written notice from a
6-9 subcontractor or supplier, you should withhold payment from
6-10 your contractor for the amount of the claim stated in the
6-11 notice until the dispute between your contractor and the
6-12 subcontractor or supplier is resolved. If your lender is
6-13 disbursing money directly to your contractor, you should
6-14 immediately provide a copy of the notice to your lender and
6-15 instruct the lender to withhold payment in the amount of the
6-16 claim stated in the notice. If you continue to pay the
6-17 contractor after receiving the written notice without
6-18 withholding the amount of the claim, you may be liable and
6-19 your property may be subject to a lien for the amount you
6-20 failed to withhold.
6-21 (2) During construction and for 30 days after
6-22 final completion, termination, or abandonment of the contract
6-23 by the contractor, Texas law allows you to [should] withhold
6-24 or cause your lender to withhold 10 percent of the amount of
6-25 payments made for the work performed by your contractor.
6-26 This is sometimes referred to as 'statutory retainage.'
6-27 Unless [If] you [fail to] withhold the 10 percent for at
7-1 least 30 days after final completion, termination, or
7-2 abandonment of the contract by the contractor and if a valid
7-3 claim is timely made by a claimant, you may be personally
7-4 liable and your property may be subject to a lien up to the
7-5 amount that you failed to withhold.
7-6 "If a claim is not paid within a certain time period, the
7-7 claimant is required to file a mechanic's lien affidavit in the
7-8 real property records in the county where the property is located.
7-9 A mechanic's lien affidavit is not a lien on your property, but the
7-10 filing of the affidavit could result in a court imposing a lien on
7-11 your property if the claimant is successful in litigation to
7-12 enforce the lien claim.
7-13 "SOME CLAIMS MAY NOT BE VALID. When you receive a written
7-14 notice of a claim or when a mechanic's lien affidavit is filed on
7-15 your property, you should know your legal rights and
7-16 responsibilities regarding the claim. Not all claims are valid. A
7-17 notice of a claim by a subcontractor or supplier is required to be
7-18 sent, and the mechanic's lien affidavit is required to be filed,
7-19 within strict time periods. The notice and the affidavit must
7-20 contain certain information. All claimants may not fully comply
7-21 with the legal requirements to collect on a claim. If you have
7-22 paid the contractor in full before receiving a notice of a claim
7-23 and have fully complied with the law regarding statutory retainage,
7-24 you may not be liable for that claim. Accordingly, you should
7-25 consult your attorney when you receive a written notice of a claim
7-26 to determine the true extent of your liability or potential
7-27 liability for that claim.
8-1 "OBTAIN A LIEN RELEASE AND A BILLS-PAID AFFIDAVIT. When you
8-2 receive a notice of claim, do not release withheld funds without
8-3 obtaining a signed and notarized release of lien and claim from the
8-4 claimant. You can also reduce the risk of having a claim filed by
8-5 a subcontractor or supplier by requiring as a condition of each
8-6 payment made by you or your lender that your contractor furnish you
8-7 with an affidavit stating that all bills have been paid. Under
8-8 Texas law, on final completion of the work and before final
8-9 payment, the contractor is required to furnish you with an
8-10 affidavit stating that all bills have been paid. If the contractor
8-11 discloses any unpaid bill in the affidavit, you should withhold
8-12 payment in the amount of the unpaid bill until you receive a waiver
8-13 of lien or release from that subcontractor or supplier.
8-14 "OBTAIN TITLE INSURANCE PROTECTION. You may be able to obtain
8-15 a title insurance policy to insure that the title to your property
8-16 and the existing improvements on your property are free from liens
8-17 claimed by subcontractors and suppliers. If your policy is issued
8-18 before the improvements are completed and covers the value of the
8-19 improvements to be completed, you should obtain, on the completion
8-20 of the improvements and as a condition of your final payment, a
8-21 'completion of improvements' policy endorsement. This endorsement
8-22 will protect your property from liens claimed by subcontractors and
8-23 suppliers that may arise from the date the original title policy is
8-24 issued to the date of the endorsement."
8-25 SECTION 8. Section 53.256, Property Code, is amended by
8-26 amending Subsections (a) and (b) and adding Subsection (d) to read
8-27 as follows:
9-1 (a) Except as provided by Subsection (d), for [For] the
9-2 construction of improvements under a residential construction
9-3 contract, the original contractor shall:
9-4 (1) [must attach to the disclosure statement required
9-5 by Section 53.255 or] furnish to the owner before the commencement
9-6 of construction a written list that identifies by name, address,
9-7 and telephone number each subcontractor and supplier the contractor
9-8 intends to use in the work to be performed; and
9-9 (2) [. The contractor shall] provide the owner with
9-10 an updated list of subcontractors and suppliers not later than the
9-11 15th day after the date a subcontractor or supplier is added or
9-12 deleted.
9-13 (b) The list must contain the following notice conspicuously
9-14 printed, stamped, or typed in a size equal to at least 10-point
9-15 boldface or the computer equivalent:
9-16 "NOTICE: THIS LIST OF SUBCONTRACTORS AND SUPPLIERS MAY NOT
9-17 BE A FINAL LISTING. UNLESS YOU SIGN A WAIVER OF YOUR RIGHT TO
9-18 RECEIVE UPDATED INFORMATION, THE CONTRACTOR IS REQUIRED BY LAW TO
9-19 SUPPLY UPDATED INFORMATION, AS THE INFORMATION BECOMES AVAILABLE,
9-20 FOR EACH SUBCONTRACTOR OR SUPPLIER USED IN THE WORK PERFORMED ON
9-21 YOUR RESIDENCE."
9-22 (d) An owner may waive the right to receive the list of
9-23 subcontractors and suppliers or any updated information required by
9-24 this section only as provided by this subsection. The waiver must
9-25 be in writing and may be included in the residential construction
9-26 contract. If the waiver is not included as a provision of the
9-27 residential construction contract, the separate waiver statement
10-1 must be signed by the owner. The waiver must be conspicuously
10-2 printed in at least 10-point bold-faced type and read substantially
10-3 similar to the following:
10-4 "WAIVER OF THE LIST OF SUBCONTRACTORS AND SUPPLIERS. AN
10-5 OWNER IS NOT REQUIRED TO WAIVE THE RIGHT GRANTED BY SECTION 53.256,
10-6 PROPERTY CODE, TO RECEIVE FROM THE CONTRACTOR AN ORIGINAL OR
10-7 UPDATED LIST OF SUBCONTRACTORS AND SUPPLIERS.
10-8 "BY SIGNING THIS DOCUMENT, I AGREE TO WAIVE MY RIGHT TO
10-9 RECEIVE FROM THE CONTRACTOR AN ORIGINAL OR UPDATED LIST OF
10-10 SUBCONTRACTORS AND SUPPLIERS.
10-11 "I UNDERSTAND AND ACKNOWLEDGE THAT, AFTER SIGNING THIS
10-12 DOCUMENT, THIS WAIVER MAY NOT BE CANCELED AT A LATER DATE.
10-13 "I HAVE VOLUNTARILY CONSENTED TO THIS WAIVER."
10-14 SECTION 9. Sections 53.258(a), (b), and (e), Property Code,
10-15 are amended to read as follows:
10-16 (a) At the time the original contractor requests payment
10-17 from the owner or the owner's lender for the construction of
10-18 improvements under a residential construction contract, the
10-19 original contractor shall provide to the owner a disbursement
10-20 statement. The statement may include any information agreed to by
10-21 the owner and the original contractor and must include at least the
10-22 name and address of each person who subcontracted directly with the
10-23 original contractor and who the original contractor intends to pay
10-24 from the requested funds. The original contractor shall provide
10-25 the disbursement statement:
10-26 (1) in the manner agreed to in writing by the owner
10-27 and original contractor; or
11-1 (2) if no agreement exists, by depositing the
11-2 statement in the United States mail, first class, postage paid, and
11-3 properly addressed to the owner or by hand delivering the statement
11-4 to the owner before the original contractor receives the requested
11-5 funds [For the construction of improvements under a residential
11-6 construction contract, the original contractor shall provide to the
11-7 owner a signed periodic statement that lists the bills or expenses
11-8 that the original contractor represents will be paid or that have
11-9 been paid and for which the original contractor is requesting
11-10 payment. The original contractor is not required to include in the
11-11 statement the bills or expenses for which the original contractor
11-12 has obtained a valid lien release or waiver from the subcontractor
11-13 or supplier to whom the bills or expenses are owed if the statement
11-14 includes a written representation that the balance of any funds
11-15 that are not itemized in the statement will be paid to:]
11-16 [(1) the subcontractor or supplier who provided the
11-17 lien release or waiver; or]
11-18 [(2) the original contractor as reimbursement for
11-19 expenses incurred, profit, or overhead].
11-20 (b) If the owner finances the construction of improvements
11-21 through a third party that advances loan proceeds directly to the
11-22 original contractor, the lender shall:
11-23 (1) obtain from the original contractor the signed
11-24 disbursement [periodic] statement required by Subsection (a) that
11-25 covers the funds for which the original contractor is requesting
11-26 payment; and
11-27 (2) provide to the owner a statement of funds
12-1 disbursed by the lender since the last statement was provided to
12-2 the owner.
12-3 (e) The failure of a lender or an original contractor to
12-4 comply with this section does not invalidate a lien under this
12-5 chapter, a contract lien, or a deed of trust.
12-6 SECTION 10. Section 53.260, Property Code, is amended to
12-7 read as follows:
12-8 Sec. 53.260. CONVEYANCE TO CONTRACTOR NOT REQUIRED
12-9 [PROHIBITED]. An original contractor may not require an owner of
12-10 real property to convey the real property to the original
12-11 contractor or an entity controlled by the original contractor as a
12-12 condition to the performance of the residential construction
12-13 contract for improvements to the real property.
12-14 SECTION 11. Section 53.106(e), Property Code, is repealed.
12-15 SECTION 12. (a) This Act takes effect September 1, 1999.
12-16 (b) The changes in law made by this Act apply only to
12-17 matters relating to or claims arising under an original contract,
12-18 as that term is defined by Section 53.001, Property Code, that is
12-19 entered into on or after September 1, 1999. Matters relating to or
12-20 claims arising from an original contract, as that term is defined
12-21 by Section 53.001, Property Code, that was entered into before
12-22 September 1, 1999, are governed by the law in effect when the
12-23 contract was entered into, and the former law is continued in
12-24 effect for that purpose.
12-25 SECTION 13. The importance of this legislation and the
12-26 crowded condition of the calendars in both houses create an
12-27 emergency and an imperative public necessity that the
13-1 constitutional rule requiring bills to be read on three several
13-2 days in each house be suspended, and this rule is hereby suspended.