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A BILL TO BE ENTITLED
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AN ACT
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relating to a mechanic's or materialman's lien for retained funds |
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under certain construction contracts. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter F, Chapter 53, Property Code, is |
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amended by adding Section 53.125 to read as follows: |
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Sec. 53.125. PRIORITY OF LIEN FOR CERTAIN RETAINED FUNDS. |
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(a) This section does not apply to funds retained under a contract |
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for construction or repair of a single-family house or a duplex used |
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for residential purposes. |
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(b) A lien for retained funds withheld from the original |
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contractor that is perfected under this chapter has equal priority |
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with a lien of a person with whom the owner has entered into a loan |
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or financing agreement to fund the construction of an improvement |
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of real property that is secured by a lien on the property or |
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improvement, unless a preference for the retained funds is provided |
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by other law. |
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(c) The priority provided under Subsection (b) does not |
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apply to retained funds that have been paid to the original |
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contractor. |
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(d) A waiver or release of the priority provided by this |
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section is unenforceable unless the waiver or release is contained |
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in: |
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(1) an accord and satisfaction of an identified |
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dispute; |
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(2) an agreement concerning an action pending in a |
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court or arbitration proceeding; or |
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(3) an agreement that is executed after an affidavit |
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claiming a lien for retained funds has been filed. |
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SECTION 2. The heading to Subchapter I, Chapter 53, |
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Property Code, is amended to read as follows: |
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SUBCHAPTER I. CONTRACTOR'S BOND TO PAY LIENS OR CLAIMS |
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SECTION 3. Chapter 53, Property Code, is amended by adding |
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Subchapter I-1 to read as follows: |
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SUBCHAPTER I-1. OWNER'S BOND IN LIEU OF LIEN FOR RETAINED FUNDS |
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Sec. 53.221. BOND IN LIEU OF LIEN FOR RETAINED FUNDS. The |
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lien for retained funds under this chapter does not attach to the |
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owner's property if, before withholding retained funds from the |
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original contractor, the owner furnishes and files a bond under |
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this subchapter. |
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Sec. 53.222. BOND REQUIREMENTS. A bond under this |
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subchapter must: |
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(1) be in a penal sum at least equal to the total of: |
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(A) 10 percent of the original contract amount; |
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and |
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(B) the lesser of: |
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(i) 10 percent of the normal and usual |
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extras; or |
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(ii) 1.5 percent of the original contract |
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amount; |
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(2) be in favor of each claimant who is due prompt |
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payment under Subdivision (4); |
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(3) be executed by: |
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(A) the owner as principal; and |
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(B) a corporate surety authorized to execute |
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surety bonds in this state under Subchapter A, Chapter 3503, |
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Insurance Code; |
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(4) be conditioned on prompt payment of retained funds |
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owed for all labor, subcontracts, materials, and specially |
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fabricated materials furnished by any person to accomplish work |
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required under an original contract; and |
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(5) clearly and prominently display on the bond or on |
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an attachment to the bond: |
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(A) the name, mailing address, physical address, |
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and telephone number, including the area code, of the surety |
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company to which any notice of claim should be sent; or |
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(B) the toll-free telephone number maintained by |
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the Texas Department of Insurance under Subchapter B, Chapter 521, |
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Insurance Code, and a statement that the address of the surety |
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company to which any notice of claim should be sent may be obtained |
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from the Texas Department of Insurance by calling the toll-free |
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telephone number. |
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Sec. 53.223. RECORDING OF BOND AND CONTRACT. The |
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requirements for recording a bond and contract under Section 53.203 |
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apply to a bond issued under this subchapter and to the related |
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contract. |
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Sec. 53.224. RELIANCE ON RECORD. A purchaser, lender, or |
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other person acquiring an interest in the owner's property or an |
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insurer of title is entitled to rely on the record of the bond and |
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contract as constituting payment of all claims and liens for |
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retained funds owed for labor, subcontracts, materials, or |
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specially fabricated materials incurred by the owner as if each |
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person furnishing labor or materials for the work performed under |
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the original contract had filed a complete release and |
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relinquishment of a lien for retained funds of record. |
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Sec. 53.225. ENFORCEABLE CLAIMS. The bond protects all |
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persons with a claim for retained funds. A claimant is not required |
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to give any notice to the surety to bring a claim under this |
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subchapter. |
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Sec. 53.226. ACTION ON BOND. (a) The claimant must sue on |
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the bond within two years following the date on which the claim on |
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retained funds becomes due. |
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(b) The suit must be brought in the county in which the |
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property being improved is located in whole or in part. |
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Sec. 53.227. CLAIMS IN EXCESS OF BOND AMOUNT. If 10 percent |
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of the total of the original contract amount and any modifications |
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is an amount that exceeds the penal sum of the bond under Section |
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53.222, each person who has perfected a lien claim under this |
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chapter is entitled to the priority of the lien under Section 53.125 |
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for the difference between the total original contract amount, as |
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modified, and the penal sum. |
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Sec. 53.228. ATTEMPTED COMPLIANCE. Any provision in any |
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payment bond furnished or filed in attempted compliance with this |
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subchapter that expands or restricts the rights or liabilities |
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provided under this chapter shall be disregarded and the provisions |
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of this subchapter shall be read into that bond. |
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Sec. 53.229. WAIVER AND RELEASE OF PAYMENT BOND CLAIM. Any |
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waiver or release of a payment bond claim under this subchapter is |
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unenforceable unless the waiver or release is executed under |
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Subchapter L or is contained in: |
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(1) an accord and satisfaction of an identified |
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dispute; |
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(2) an agreement concerning an action pending in any |
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court or arbitration proceeding; or |
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(3) an agreement that is executed after a bond claim |
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has been made. |
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SECTION 4. Section 53.156, Property Code, is amended to |
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read as follows: |
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Sec. 53.156. COSTS AND ATTORNEY'S FEES. In any proceeding |
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to foreclose a lien or to enforce a claim against a bond issued |
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under Subchapter H, I, I-1, or J or in any proceeding to declare |
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that any lien or claim is invalid or unenforceable in whole or in |
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part, the court shall award costs and reasonable attorney's fees as |
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are equitable and just. With respect to a lien or claim arising out |
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of a residential construction contract, the court is not required |
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to order the property owner to pay costs and attorney's fees under |
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this section. |
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SECTION 5. The changes in law made by this Act apply only to |
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a lien relating to a contract entered into on or after the effective |
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date of this Act. A lien relating to a contract entered into before |
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the effective date of this Act is governed by the law applicable to |
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the lien immediately before the effective date of this Act, and that |
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law is continued in effect for that purpose. |
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SECTION 6. This Act takes effect September 1, 2017. |