BILL ANALYSIS

 

 

 

C.S.H.B. 1456

By: Orr

Business & Industry

Committee Report (Substituted)

 

 

 

BACKGROUND AND PURPOSE

 

Mechanic's, contractor's, and materialman's liens help contractors, subcontractors, and suppliers collect money due them for labor or materials they provide for construction projects. Some interested parties are concerned that the guidance as to the information to be included in a lien waiver and release is inadequate, which may result in disagreement among the parties regarding the terms of the lien waiver or release and subsequent delays in payments, the filing of additional liens, and even litigation. C.S.H.B. 1456 seeks to address this situation by creating standardized lien waiver and release forms.

 

RULEMAKING AUTHORITY

 

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

 

ANALYSIS

 

C.S.H.B. 1456 amends the Property Code to establish that any waiver and release of a mechanic's, contractor's, or materialman's lien or payment bond claim under provisions of law relating to such liens is unenforceable unless a waiver and release is executed and delivered in accordance with the bill's provisions. The bill establishes that a waiver and release is effective to release the owner, the owner's property, the contractor, and the surety on a payment bond from claims and liens only if the waiver and release substantially complies with one of the forms prescribed by the bill, is signed by the claimant or the claimant's authorized agent and notarized, and, in the case of a conditional release, evidence of payment to the claimant exists.

 

C.S.H.B. 1456 provides that a statement purporting to waive, release, or otherwise adversely affect such a lien or payment bond claim is unenforceable and specifies that such a statement does not create an estoppel or impairment of a lien or payment bond claim unless the statement is in writing and complies with the bill's provisions; the claimant has actually received payment in good and sufficient funds in full for the lien or payment bond claim; or the statement is in a written original contract or subcontract for the construction, remodel, or repair of a single-family house or duplex and is made before labor or materials are provided under the original contract or subcontract and a good faith dispute exists regarding the quality of the labor or material provided by the original contractor or subcontractor that has resulted in the nonpayment of the original contractor or subcontractor.

 

C.S.H.B. 1456 establishes that its provisions do not affect the enforceability of an accord and satisfaction regarding a bona fide dispute or any agreement made in settlement of an action pending in any court if the accord and satisfaction or agreement makes specific reference to the lien or payment bond claim. The bill establishes that the filing of a lien rendered unenforceable by a lien waiver under the bill's provisions does not violate statutory provisions governing liability related to a fraudulent court record or a fraudulent lien or claim filed against real or personal property. The bill prohibits a person from requiring a claimant or potential claimant to execute an unconditional waiver and release for a progress payment or final payment amount unless the claimant or potential claimant received payment in that amount in good and sufficient funds.

 

C.S.H.B. 1456 establishes that a waiver and release given by a claimant or potential claimant is unenforceable unless it substantially complies with the applicable form described by the bill. The bill provides the required language for four types of waiver and release documents, and specifies the purpose of each, as follows:

·         a conditional waiver and release on progress payment, to be used by a claimant or potential claimant who is required to execute such a document in exchange for, or to induce the payment of, a progress payment and who is not paid in exchange for the waiver and release or if a single payee check or joint payee check is given in exchange for the waiver and release;

·         an unconditional waiver and release on progress payment, to be used by a claimant or potential claimant who is required to execute such a document to prove the receipt of good and sufficient funds for a progress payment and who asserts in the waiver and release that the claimant or potential claimant has been paid the progress payment; 

·         a conditional waiver and release on final payment, to be used by a claimant or potential claimant who is required to execute such a document in exchange for, or to induce the payment of, a final payment and who is not paid in good and sufficient funds in exchange for the waiver and release or if a single payee check or joint payee check is given in exchange for the waiver and release; and

·         an unconditional waiver and release on final payment, to be used by a claimant or potential claimant who is required to execute such a document to prove the receipt of good and sufficient funds for a final payment and who asserts in the waiver and release that the claimant or potential claimant has been paid the final payment. 

 

The bill requires the forms for an unconditional waiver and release to include a notice at the top of each document in specified format stating the purpose, consequences, enforceability, and unlawful actions relating to the waiver and release.

 

C.S.H.B. 1456  requires a waiver or release to be construed to comply with the bill's provisions and establishes that such a document is enforceable in the same manner as a waiver and release under those provisions if the waiver or release is furnished in attempted compliance with, or evidences by its terms intent to comply with, the bill's provisions. The bill requires any provision in any waiver or release furnished in attempted compliance with the bill's provisions that expands or restricts the rights or liabilities provided under the bill's provisions to be disregarded and requires the bill's provisions to be read into that waiver or release. The bill specifies that these provisions setting out requirements for a waiver and release expire August 31, 2012.

 

C.S.H.B. 1456 makes any contract, agreement, or understanding purporting to waive the right to file or enforce any lien or claim created under the bill's provisions void as against public policy. The bill makes its provisions inapplicable to a written agreement to subordinate, release, or satisfy all or part of a lien claimed after a notice of lien has been filed. The bill makes its provisions applicable only to a contract executed on or after September 1, 2011.

 

C.S.H.B. 1456 makes conforming changes. 

 

EFFECTIVE DATE

 

September 1, 2011.

 

COMPARISON OF ORIGINAL AND SUBSTITUTE

 

C.S.H.B. 1456 differs from the original by specifying, as a condition for a waiver and release being effective to release the owner, the owner's property, the contractor, and the surety on a payment bond from claims and liens, that the waiver and release be notarized, among other requirements, whereas the original does not include that specification. The substitute contains a provision not included in the original adding as an alternative to the conditions making a statement purporting to waive, release, or otherwise adversely affect a lien or payment bond claim enforceable and creating an estoppel or impairment of a lien or payment bond claim that the statement is in a written original contract or subcontract for the construction, remodel, or repair of a single-family house or duplex and is made before labor or materials are provided under the original contract or subcontract and a good faith dispute exists regarding the quality of the labor or material provided by the original contractor or subcontractor that has resulted in the nonpayment of the original contractor or subcontractor.

 

C.S.H.B. 1456 contains a provision not included in the original establishing that the filing of a lien rendered unenforceable by a lien waiver under the substitute's provisions does not violate statutory provisions governing liability relating to a fraudulent court record or a fraudulent lien or claim filed against real or personal property. The substitute contains a provision not included in the original prohibiting a person from requiring a claimant or potential claimant to execute an unconditional waiver and release for a progress payment or final payment amount unless the claimant or potential claimant received payment in that amount in good and sufficient funds.

 

C.S.H.B. 1456 omits language included in the original, in the documents for  a conditional waiver and release on progress payment and an unconditional waiver and release on progress payment,  providing the total amount of the unpaid retention of payment, pending modifications and changes, and other items furnished as of the date such a document is signed.  The substitute differs from the original by including in the required notice at the top of an unconditional waiver and release on progress payment and an unconditional waiver and release on final payment a statement that it is unlawful for a person to require the claimant or potential claimant to sign the document if the claimant or potential claimant has not been paid the amount specified in the document. The substitute omits language included in the original, in the documents for a conditional waiver and release on final payment and an unconditional waiver and release on final payment, creating an exception from the waiver and release of certain claims for payment by the signer of the document for claims for disputed work in the amount specified in the document. 

 

C.S.H.B. 1456 contains a provision not included in the original making the requirement for a waiver or release to be construed to comply with the bill's provisions and certain enforceability provisions temporary and set to expire August 31, 2012.