About Kelly M. Davis Esq.

Kelly M. Davis is the owner of Kelly M. Davis & Associates, LLC. She grew up around the construction industry and knew once she opened her practice she would help construction related businesses.

Foreclosure of Your Mechanic’s Lien

So you filed a lien on a property and now you want to know what else you might do to get paid.  And the answer is it depends (I’m sure you’ve never heard that answer from an attorney!).   There are a lot of factors that go into the different alternatives of getting you paid.  Is it a commercial property?  Is it considered a residential property?  A homestead?  Is there a bank note on the property or are they paying cash? Was it a onetime close at the beginning of the project? When was the lien placed on the property?  Did the General Contractor post a bond?  That any many other factors go into determining other alternatives to get you paid.  I would like to go over a few of the ways you may get paid or some of the additional things you may have to do to get paid.

I’m going to focus on properties that don’t have bonds, since those really don’t involve Mechanic’s Liens.  The intent of the law is to allow a way for contractors and suppliers to secure a method of payment if they are not paid by the GC.  So if everything goes according to plan, when the construction is substantially complete, the title to the property is clouded and the owner and/or builder or general contractor must work out a payment with the mechanic’s lien holder to remove the cloud of title.  So what happens if the stars don’t line up and that doesn’t happen?

If for some reason this doesn’t work and you don’t get paid or the payment does not come quickly, you can also institute a suit to foreclose on your mechanic’s lien.  Just like how a bank can foreclose their lien if they don’t get paid, you can institute a lawsuit to obtain an order from a District Court foreclosing (or allowing you to sell at the county’s monthly foreclosure sale) the property subject to your lien.  In addition to, or in the alternative, you can seek an Order from the Court allowing you to enter the property and remove a “removable” from the Property to help compensate you for the amount owed to you.  Generally, you file a Petition in court alleging non-payment and proving that you have filed a valid lien affidavit.  There are many rules and timelines that go into the process; however, there are a few that you should be specifically aware:

Non-Residential – You have 2 years after last day you could have filed the lien affidavit or 1 year after completion, termination, or abandonment of the work under the original contract under which the lien is claimed, whichever is later.

Residential (but not homestead) – You have 1 year after last day claimant could have filed lien affidavit or 1 year after completion, termination, or abandonment of the work under the original contract under which the lien is claimed, whichever is later.

Homestead – you are unable to foreclose on a homestead but you are able to seek an order from the court to remove any “removable” that can be removed to help satisfy the debt.

A Removable – this is generally something you provided for the project that can be removed with little or no damage.  The Texas courts have held that items such as these are considered removable:

  • Garbage disposals and dishwashers,
  • Air conditioning and heating system equipment such as furnaces, air conditioning coil, compressor, thermostat, and condensing unit,
  • Windows and doors,
  • Lighting fixtures, cabinets, chimes, buttons, mail boxes and lamps, and
  • Pumps fastened to beds of concrete.

Here are some examples that the Courts have considered to be non-removable:

  • Concrete roof tiles,
  • Window frames, and
  • Cabinets.

If you decide to go through the process of foreclosure you really need to look at this like any other business decision.  This is a real lawsuit and could be potentially costly if there is a dispute or if the facts aren’t straight forward, in some situations, if your lien is not for a large enough amount, equity would indicate that it is not financially worth your while to pursue your lien through a foreclosure.

Next time I will continue this discussion to discuss what happens if you fail to foreclose on your mechanic’s lien within the time provided for by law

Comments

  1. Great job with this post. I practice construction law right next door to you (in Louisiana – http://www.wolfelaw.com), and although our two states have different deadlines and different statutory notice and lien requirements, like every other state we have these same big picture lien principals like: (1) what is removable and unremovable, and therefore, lienable; and (2) Liens must be enforced within specific time periods, or forfeited.

    Look forward to the next discussion about what happens if liens are not foreclosed upon, and like your Texas mechanic lien deadline posts. The Texas deadline scheme is one of the confusing out there – I even posted about this on a mechanic lien service I founded’s (http://www.expresslien.com) blog:

    http://constructionlienblog.com/2009/12/charts-to-make-texas-lien-and-notice-deadlines-easy/

    • Thanks Scott. You have been a leader in our industry in trying to keep clients informed on the quagmire of lien laws and when we developed our blog it was developed with the main concept of trying to explain the laws that come out of Austin (which, you are right, are very confusing). I’ve been practicing construction litigation for over 10 years now and still consider them it an extremely volatile and evolving area of the law. The biggest advice I can give in Texas is to use an attorney that practices in all areas of lien laws – whether it be the filing or even the removal. It’s amazing how learning to argue against an invalid lien can really help your other clients in making sure their liens are filed correctly.

      It is always good to keep an eye on how other states are handling lien issues. As you say, it may not apply directly but you do never know what you might learn and may be able to apply to your own practice. Thanks again.

  2. Kimberly Benford says:

    I have a mechanic lien on a property in GA. It looks as if the home is going into foreclosure. How would I be able to get the money owed to my company if the bank foreclose. I can foreclose on the home to secure my lien position.

    • Kelly M. Davis Esq. says:

      Kimberly,
      In Texas all liens have various levels of priority. The Bank usually gets what is called a priority status, which means they trump all other liens (except IRS), so when they foreclose on a property technically the other liens get cancelled out. Now in practice I have seen that Title Companies do sometimes require old Mechanics Liens to be paid off even after that scenario. If the home is already up for foreclosure in Texas it would be pretty hard to file suit to foreclose on a Mechanics lien due to the time limitations (i.e. the bank can usually foreclose within 60 days and it might take you a year to get an Order from a Court allowing you to foreclose). The process is a full lawsuit that takes time and money to be able to proceed through all the legal steps.

      You would be best served to find an Attorney in your area that does construction law to find out how Georgia law handles Mechanics Liens and what security is provided to a lien claimant when a bank forecloses out their lien.

  3. I have a question… I purchased property with an old broken down house (needs to be torn down) in 2007 and just got it paid off. (This property use to be in our family years ago). Anyways, we were getting the title put into our name and found out that there is an old Mechanic’s Lien from 1996 on it. Apparently it got assumed by another company in 2004. This property was taken back by the original owner earlier this year with a Warrany Deed in leau of foreclosure, and it was sold to us. The people that had it that she took it back from are the ones that got siding or something done to the house that had the mechanic’s lein on it.

    My question is: I am afraid to put the property in my name with the lien on it but I have paid all this money for the family property. I also now own the adjoining property. Is there a statue of limitations that someone has to file “foreclosure on a mechanics lien” in Texas? If they put the orginial lien in 1996 and it was assumed in 2004 can they still come in and foreclose or is there a way to fight this lein because it is not my debt?

    Thanks and God Bless

    • Kelly M. Davis Esq. says:

      Julie,
      The person that put the lien on the property had up to 2 years (this time varies by type of property but 2 yrs is the longest time to be on the safe side) to file for forclosure on the debt owed. Since it dates back to 1996 it would seem that you are okay. If I understand you correctly, you are saying that at some point the company that had the lien on the property foreclosed or took possession of the property by way of their lien. This should have essentially extinguished the lien but, for whatever reason, the lien was never removed and continues to cloud the title. While it is true that the statute of limitations ran long ago, you still have to deal with the issue that the lien continues to cloud title. The easiest way to deal with this would be to send a demand to the lien claimant demanding that they remove the lien or “cloud of title” from the property within a fixed number of days otherwise they would be subjecting themselves to a suit for the removal of an invalid lien and a trespass to try title action which could subject them to substantial damages.

  4. Sorry the field had “kelly” as the name but it was from me, Julie. Kelly, Please let me know what you think about the situation if the deed of trust on the mechanics lien makes a difference on statue of limitations.

  5. I have a question? I want to foreclose on my materialman’s lien, but there is a 1st mortgage lien on the property. What will happen if I choose to foreclose my lien, and have the property auction at a sheriff sale?

    • Kelly M. Davis Esq. says:

      We have to assume first that this is not a residential house that is their homestead. If it is a homestead you are unable to foreclose on your lien. Once you have gone through the foreclosure of the property and sell it at the Sherriff’s sale it is the purchaser of the property takes the property subject to all liens and is essentially responsible for the mortgage on the property. If you are unable to sell it at the sale to a third party and instead buy it yourself than you the mortgage is attached to the property. In my experience you probably have 1-2 months to locate a legitimate buyer and pay off the mortgage or to try and work out a deal with the mortgage company to assume the mortgage in your own name. Otherwise, the mortgage company will eventually foreclose themselves and take the property back.

  6. Our company installed a fence for a customer who now refuses to pay and won’t return any of our phone calls. We have filed an affidavit of lien. I wonder if it is legal in the state of Texas to remove the fence for non payment?

    • Kelly M. Davis Esq. says:

      Because of trespassing laws I would not recommend doing so without getting a judgment on your lien granting foreclosure and allowing foreclosure of your “removeable” which would be your fence.