1-1 By: Solomons (Senate Sponsor - Shapleigh) H.B. No. 2054
1-2 (In the Senate - Received from the House April 29, 1999;
1-3 April 30, 1999, read first time and referred to Committee on
1-4 Economic Development; May 13, 1999, reported favorably by the
1-5 following vote: Yeas 7, Nays 0; May 13, 1999, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to mechanic's, contractor's, and materialmen's liens.
1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10 SECTION 1. Section 53.001, Property Code, is amended by
1-11 adding Subsection (15) to read as follows:
1-12 (15) "Completion" of an original contract means the
1-13 actual completion of the work, including any extras or change
1-14 orders reasonably required or contemplated under the original
1-15 contract, other than warranty work or replacement or repair of the
1-16 work performed under the contract.
1-17 SECTION 2. Section 53.055(a), Property Code, is amended to
1-18 read as follows:
1-19 (a) A person who files an affidavit must send a copy of the
1-20 affidavit by registered or certified mail to the owner or reputed
1-21 owner at the owner's last known business or residence address not
1-22 later than the fifth [one business] day after the date the
1-23 affidavit is filed with the county clerk.
1-24 SECTION 3. Sections 53.057(a) and (e), Property Code, are
1-25 amended to read as follows:
1-26 (a) A [Except as provided by Subchapter K, a] claimant may
1-27 give notice under this section instead of or in addition to notice
1-28 under Section 53.056 or 53.252 if the claimant is to labor, furnish
1-29 labor or materials, or specially fabricate materials under an
1-30 agreement with an original contractor or a subcontractor providing
1-31 for retainage.
1-32 (e) If a [A] claimant [who] gives notice under this section
1-33 and Section 53.055 or, if the claim relates to a residential
1-34 construction project, under this section and Section 53.252, the
1-35 claimant is not required to give any other notice as to the
1-36 retainage.
1-37 SECTION 4. Section 53.158, Property Code, is amended to read
1-38 as follows:
1-39 Sec. 53.158. PERIOD FOR BRINGING SUIT TO FORECLOSE LIEN.
1-40 (a) Except as provided by Subsection (b), suit must be brought to
1-41 foreclose the lien within two years after the last day a claimant
1-42 may file [date of filing] the lien affidavit under Section 53.052
1-43 or within one year after completion, termination, or abandonment of
1-44 the work under the original contract under which the lien is
1-45 claimed, whichever is later.
1-46 (b) For a claim arising from a residential construction
1-47 project, suit must be brought to foreclose the lien within one year
1-48 after the last day a claimant may file a lien affidavit [not later
1-49 than the first anniversary of the date the lien affidavit is filed]
1-50 under Section 53.052 or within one year after completion,
1-51 termination, or abandonment of the work under the original contract
1-52 under which the lien is claimed, whichever is later.
1-53 SECTION 5. Section 53.205(a), Property Code, is amended to
1-54 read as follows:
1-55 (a) The bond protects all persons with a claim that is:
1-56 (1) perfected in the manner prescribed for fixing a
1-57 lien under Subchapter C or, if the claim relates to a residential
1-58 construction project, under Subchapter K; or
1-59 (2) perfected in the manner prescribed by Section
1-60 53.206.
1-61 SECTION 6. Sections 53.206(a) and (b), Property Code, are
1-62 amended to read as follows:
1-63 (a) To perfect a claim against a bond in a manner other than
1-64 that prescribed by Subchapter C or K for fixing a lien, a person
2-1 must:
2-2 (1) give to the original contractor all applicable
2-3 notices under the appropriate [that] subchapter; and
2-4 (2) give to the surety on the bond, instead of the
2-5 owner, all notices under the appropriate [that] subchapter required
2-6 to be given to the owner.
2-7 (b) To perfect a claim under this section, a person is not
2-8 required to:
2-9 (1) give notice to the surety under Section 53.057,
2-10 unless the claimant has a direct contractual relationship with the
2-11 original contractor and the agreed retainage is in excess of 10
2-12 percent of the contract;
2-13 (2) give notice to the surety under [Subsection (b)
2-14 of] Section 53.058(b) or, if the claim relates to a residential
2-15 construction project, under Section 53.253(c) [53.058]; or
2-16 (3) file any affidavit with the county clerk.
2-17 SECTION 7. Section 53.207(a), Property Code, is amended to
2-18 read as follows:
2-19 (a) If the owner receives any of the notices or a lien is
2-20 fixed under Subchapter C or K, the owner shall mail to the surety
2-21 on the bond a copy of all notices received.
2-22 SECTION 8. Section 53.255(b), Property Code, is amended to
2-23 read as follows:
2-24 (b) The disclosure statement must read substantially similar
2-25 to the following:
2-26 "KNOW YOUR RIGHTS AND RESPONSIBILITIES UNDER THE LAW. You
2-27 are about to enter into a transaction to build a new home or
2-28 remodel existing residential property. Texas law requires your
2-29 contractor to provide you with this brief overview of some of your
2-30 rights, responsibilities, and risks in this transaction.
2-31 "CONVEYANCE TO CONTRACTOR NOT REQUIRED [PROHIBITED]. Your
2-32 contractor may not require you to convey your real property to your
2-33 contractor as a condition to the agreement for the construction of
2-34 improvements on your property.
2-35 "KNOW YOUR CONTRACTOR. Before you enter into your agreement
2-36 for the construction of improvements to your real property, make
2-37 sure that you have investigated your contractor. Obtain and verify
2-38 references from other people who have used the contractor for the
2-39 type and size of construction project on your property.
2-40 "GET IT IN WRITING. Make sure that you have a written
2-41 agreement with your contractor that includes: (1) a description of
2-42 the work the contractor is to perform; (2) the required or
2-43 estimated time for completion of the work; (3) the cost of the
2-44 work or how the cost will be determined; and (4) the procedure and
2-45 method of payment, including provisions for statutory retainage and
2-46 conditions for final payment. If your contractor made a promise,
2-47 warranty, or representation to you concerning the work the
2-48 contractor is to perform, make sure that promise, warranty, or
2-49 representation is specified in the written agreement. An oral
2-50 promise that is not included in the written agreement may not be
2-51 enforceable under Texas law.
2-52 "READ BEFORE YOU SIGN. Do not sign any document before you
2-53 have read and understood it. NEVER SIGN A DOCUMENT THAT INCLUDES
2-54 AN UNTRUE STATEMENT. Take your time in reviewing documents. If
2-55 you borrow money from a lender to pay for the improvements, you are
2-56 entitled to have the loan closing documents furnished to you for
2-57 review at least one business day before the closing. Do not waive
2-58 this requirement unless a bona fide emergency or another good cause
2-59 exists, and make sure you understand the documents before you sign
2-60 them. If you fail to comply with the terms of the documents, you
2-61 could lose your property. You are entitled to have your own
2-62 attorney review any documents. If you have any question about the
2-63 meaning of a document, consult an attorney.
2-64 "GET A LIST OF SUBCONTRACTORS AND SUPPLIERS. Before
2-65 construction commences, your contractor is required to provide you
2-66 with a list of the subcontractors and suppliers the contractor
2-67 intends to use on your project. Your contractor is required to
2-68 supply updated information on any subcontractors and suppliers
2-69 added after the list is provided. Your contractor is not required
3-1 to supply this information if you sign a written waiver of your
3-2 rights to receive this information.
3-3 "MONITOR THE WORK. Lenders and governmental authorities may
3-4 inspect the work in progress from time to time for their own
3-5 purposes. These inspections are not intended as quality control
3-6 inspections. Quality control is a matter for you and your
3-7 contractor. To ensure that your home is being constructed in
3-8 accordance with your wishes and specifications, you should inspect
3-9 the work yourself or have your own independent inspector review the
3-10 work in progress.
3-11 "MONITOR PAYMENTS. If you use a lender, your lender is
3-12 required to provide you with a periodic statement showing the money
3-13 disbursed by the lender from the proceeds of your loan. Each time
3-14 your contractor requests payment from you or your lender for work
3-15 performed, your [Your] contractor is also required to furnish you
3-16 with a disbursement statement that lists the name and address of
3-17 each subcontractor or supplier that the contractor intends to pay
3-18 from the requested funds [at least once each month of money
3-19 disbursed to subcontractors and suppliers for this project].
3-20 Review these statements and make sure that the money is being
3-21 properly disbursed.
3-22 "CLAIMS BY SUBCONTRACTORS AND SUPPLIERS. Under Texas law, if
3-23 a subcontractor or supplier who furnishes labor or materials for
3-24 the construction of improvements on your property is not paid, you
3-25 may become liable and your property may be subject to a lien for
3-26 the unpaid amount, even if you have not contracted directly with
3-27 the subcontractor or supplier. To avoid liability, you should take
3-28 the following actions:
3-29 (1) If you receive a written notice from a
3-30 subcontractor or supplier, you should withhold payment from
3-31 your contractor for the amount of the claim stated in the
3-32 notice until the dispute between your contractor and the
3-33 subcontractor or supplier is resolved. If your lender is
3-34 disbursing money directly to your contractor, you should
3-35 immediately provide a copy of the notice to your lender and
3-36 instruct the lender to withhold payment in the amount of the
3-37 claim stated in the notice. If you continue to pay the
3-38 contractor after receiving the written notice without
3-39 withholding the amount of the claim, you may be liable and
3-40 your property may be subject to a lien for the amount you
3-41 failed to withhold.
3-42 (2) During construction and for 30 days after
3-43 final completion, termination, or abandonment of the contract
3-44 by the contractor, you should withhold or cause your lender
3-45 to withhold 10 percent of the amount of payments made for the
3-46 work performed by your contractor. This is sometimes
3-47 referred to as 'statutory retainage.' If you choose not
3-48 [fail] to withhold the 10 percent for at least 30 days after
3-49 final completion, termination, or abandonment of the contract
3-50 by the contractor and if a valid claim is timely made by a
3-51 claimant and your contractor fails to pay the claim, you may
3-52 be personally liable and your property may be subject to a
3-53 lien up to the amount that you failed to withhold.
3-54 "If a claim is not paid within a certain time period, the
3-55 claimant is required to file a mechanic's lien affidavit in the
3-56 real property records in the county where the property is located.
3-57 A mechanic's lien affidavit is not a lien on your property, but the
3-58 filing of the affidavit could result in a court imposing a lien on
3-59 your property if the claimant is successful in litigation to
3-60 enforce the lien claim.
3-61 "SOME CLAIMS MAY NOT BE VALID. When you receive a written
3-62 notice of a claim or when a mechanic's lien affidavit is filed on
3-63 your property, you should know your legal rights and
3-64 responsibilities regarding the claim. Not all claims are valid. A
3-65 notice of a claim by a subcontractor or supplier is required to be
3-66 sent, and the mechanic's lien affidavit is required to be filed,
3-67 within strict time periods. The notice and the affidavit must
3-68 contain certain information. All claimants may not fully comply
3-69 with the legal requirements to collect on a claim. If you have
4-1 paid the contractor in full before receiving a notice of a claim
4-2 and have fully complied with the law regarding statutory retainage,
4-3 you may not be liable for that claim. Accordingly, you should
4-4 consult your attorney when you receive a written notice of a claim
4-5 to determine the true extent of your liability or potential
4-6 liability for that claim.
4-7 "OBTAIN A LIEN RELEASE AND A BILLS-PAID AFFIDAVIT. When you
4-8 receive a notice of claim, do not release withheld funds without
4-9 obtaining a signed and notarized release of lien and claim from the
4-10 claimant. You can also reduce the risk of having a claim filed by
4-11 a subcontractor or supplier by requiring as a condition of each
4-12 payment made by you or your lender that your contractor furnish you
4-13 with an affidavit stating that all bills have been paid. Under
4-14 Texas law, on final completion of the work and before final
4-15 payment, the contractor is required to furnish you with an
4-16 affidavit stating that all bills have been paid. If the contractor
4-17 discloses any unpaid bill in the affidavit, you should withhold
4-18 payment in the amount of the unpaid bill until you receive a waiver
4-19 of lien or release from that subcontractor or supplier.
4-20 "OBTAIN TITLE INSURANCE PROTECTION. You may be able to obtain
4-21 a title insurance policy to insure that the title to your property
4-22 and the existing improvements on your property are free from liens
4-23 claimed by subcontractors and suppliers. If your policy is issued
4-24 before the improvements are completed and covers the value of the
4-25 improvements to be completed, you should obtain, on the completion
4-26 of the improvements and as a condition of your final payment, a
4-27 'completion of improvements' policy endorsement. This endorsement
4-28 will protect your property from liens claimed by subcontractors and
4-29 suppliers that may arise from the date the original title policy is
4-30 issued to the date of the endorsement."
4-31 SECTION 9. Section 53.256, Property Code, is amended by
4-32 amending Subsections (a) and (b) and adding Subsection (d) to read
4-33 as follows:
4-34 (a) Except as provided by Subsection (d), for [For] the
4-35 construction of improvements under a residential construction
4-36 contract, the original contractor shall:
4-37 (1) [must attach to the disclosure statement required
4-38 by Section 53.255 or] furnish to the owner before the commencement
4-39 of construction a written list that identifies by name, address,
4-40 and telephone number each subcontractor and supplier the contractor
4-41 intends to use in the work to be performed; and
4-42 (2) [. The contractor shall] provide the owner with
4-43 an updated list of subcontractors and suppliers not later than the
4-44 15th day after the date a subcontractor or supplier is added or
4-45 deleted.
4-46 (b) The list must contain the following notice conspicuously
4-47 printed, stamped, or typed in a size equal to at least 10-point
4-48 boldface or the computer equivalent:
4-49 "NOTICE: THIS LIST OF SUBCONTRACTORS AND SUPPLIERS MAY NOT
4-50 BE A FINAL LISTING. UNLESS YOU SIGN A WAIVER OF YOUR RIGHT TO
4-51 RECEIVE UPDATED INFORMATION, THE CONTRACTOR IS REQUIRED BY LAW TO
4-52 SUPPLY UPDATED INFORMATION, AS THE INFORMATION BECOMES AVAILABLE,
4-53 FOR EACH SUBCONTRACTOR OR SUPPLIER USED IN THE WORK PERFORMED ON
4-54 YOUR RESIDENCE."
4-55 (d) An owner may waive the right to receive the list of
4-56 subcontractors and suppliers or any updated information required by
4-57 this section only as provided by this subsection. The waiver must
4-58 be in writing and may be included in the residential construction
4-59 contract. If the waiver is not included as a provision of the
4-60 residential construction contract, the separate waiver statement
4-61 must be signed by the owner. The waiver must be conspicuously
4-62 printed in at least 10-point bold-faced type and read substantially
4-63 similar to the following:
4-64 "WAIVER OF THE LIST OF SUBCONTRACTORS AND SUPPLIERS. AN
4-65 OWNER IS NOT REQUIRED TO WAIVE THE RIGHT GRANTED BY SECTION 53.256,
4-66 PROPERTY CODE, TO RECEIVE FROM THE CONTRACTOR AN ORIGINAL OR
4-67 UPDATED LIST OF SUBCONTRACTORS AND SUPPLIERS.
4-68 "BY SIGNING THIS DOCUMENT, I AGREE TO WAIVE MY RIGHT TO
4-69 RECEIVE FROM THE CONTRACTOR AN ORIGINAL OR UPDATED LIST OF
5-1 SUBCONTRACTORS AND SUPPLIERS.
5-2 "I UNDERSTAND AND ACKNOWLEDGE THAT, AFTER SIGNING THIS
5-3 DOCUMENT, THIS WAIVER MAY NOT BE CANCELED AT A LATER DATE.
5-4 "I HAVE VOLUNTARILY CONSENTED TO THIS WAIVER."
5-5 SECTION 10. Sections 53.258(a), (b), and (e), Property Code,
5-6 are amended to read as follows:
5-7 (a) At the time the original contractor requests payment
5-8 from the owner or the owner's lender for the construction of
5-9 improvements under a residential construction contract, the
5-10 original contractor shall provide to the owner a disbursement
5-11 statement. The statement may include any information agreed to by
5-12 the owner and the original contractor and must include at least the
5-13 name and address of each person who subcontracted directly with the
5-14 original contractor and who the original contractor intends to pay
5-15 from the requested funds. The original contractor shall provide
5-16 the disbursement statement:
5-17 (1) in the manner agreed to in writing by the owner
5-18 and original contractor; or
5-19 (2) if no agreement exists, by depositing the
5-20 statement in the United States mail, first class, postage paid, and
5-21 properly addressed to the owner or by hand delivering the statement
5-22 to the owner before the original contractor receives the requested
5-23 funds [For the construction of improvements under a residential
5-24 construction contract, the original contractor shall provide to the
5-25 owner a signed periodic statement that lists the bills or expenses
5-26 that the original contractor represents will be paid or that have
5-27 been paid and for which the original contractor is requesting
5-28 payment. The original contractor is not required to include in the
5-29 statement the bills or expenses for which the original contractor
5-30 has obtained a valid lien release or waiver from the subcontractor
5-31 or supplier to whom the bills or expenses are owed if the statement
5-32 includes a written representation that the balance of any funds
5-33 that are not itemized in the statement will be paid to:]
5-34 [(1) the subcontractor or supplier who provided the
5-35 lien release or waiver; or]
5-36 [(2) the original contractor as reimbursement for
5-37 expenses incurred, profit, or overhead].
5-38 (b) If the owner finances the construction of improvements
5-39 through a third party that advances loan proceeds directly to the
5-40 original contractor, the lender shall:
5-41 (1) obtain from the original contractor the signed
5-42 disbursement [periodic] statement required by Subsection (a) that
5-43 covers the funds for which the original contractor is requesting
5-44 payment; and
5-45 (2) provide to the owner a statement of funds
5-46 disbursed by the lender since the last statement was provided to
5-47 the owner.
5-48 (e) The failure of a lender or an original contractor to
5-49 comply with this section does not invalidate a lien under this
5-50 chapter, a contract lien, or a deed of trust.
5-51 SECTION 11. Section 53.260, Property Code, is amended to
5-52 read as follows:
5-53 Sec. 53.260. CONVEYANCE TO CONTRACTOR NOT REQUIRED
5-54 [PROHIBITED]. An original contractor may not require an owner of
5-55 real property to convey the real property to the original
5-56 contractor or an entity controlled by the original contractor as a
5-57 condition to the performance of the residential construction
5-58 contract for improvements to the real property.
5-59 SECTION 12. Section 53.106(e), Property Code, is repealed.
5-60 SECTION 13. (a) This Act takes effect September 1, 1999.
5-61 (b) The changes in law made by this Act apply only to
5-62 matters relating to or claims arising under an original contract,
5-63 as that term is defined by Section 53.001, Property Code, that is
5-64 entered into on or after September 1, 1999. Matters relating to or
5-65 claims arising from an original contract, as that term is defined
5-66 by Section 53.001, Property Code, that was entered into before
5-67 September 1, 1999, are governed by the law in effect when the
5-68 contract was entered into, and the former law is continued in
5-69 effect for that purpose.
6-1 SECTION 14. The importance of this legislation and the
6-2 crowded condition of the calendars in both houses create an
6-3 emergency and an imperative public necessity that the
6-4 constitutional rule requiring bills to be read on three several
6-5 days in each house be suspended, and this rule is hereby suspended.
6-6 * * * * *