In previous blogs, I have discussed the differences between commercial and residential liens and about how homesteaded residential properties differ from non-homesteaded residential properties in the in-ability to foreclose on a valid lien. What I have never really covered is how liens placed on homesteaded properties in Texas have different requirements than liens placed on non-homesteaded properties. Since Texas is a state that really believes in a person’s rights to preserve their homestead, there are some additional requirements that often trap unwary contractors.
While this might not apply to contractors who only build “new” construction, it definitely applies to any contractor who performs work on what we commonly refer to as “residential” construction. Typically this would be the situation where someone is already living in a home or considers it their “homestead” or primary residence. There are several trades that often perform work on properties which are homesteaded: roofers, A/C, pool builders and even some landscape companies (for larger projects such as retaining walls, fences).
To provide you an example that recently came to light in my own life. I had some retaining wall work performed for my house and the company only required one party (my husband or I) to sign the contract. Now of course, if there were any problems they could have always sued my husband for breach of contract but because they didn’t follow the requirements set out under the Texas Property Code to secure a lien for a homestead property they never had the ability to secure a valid lien on our property.
Section 53.254 of Texas Property Code sets forth the requirements for liens on homestead properties. Below are some snippits detailing the “extra” steps:
“(a) To fix a lien on a homestead, the person who is to furnish material or perform labor and the owner must execute a written contract setting forth the terms of the agreement.”
“(b) The contract must be executed before the material is furnished or the labor is performed.”
“(c) If the owner is married, the contract must be signed by both spouses.”
“(e) The contract must be filed with the county clerk of the county in which the homestead is located. The county clerk shall record the contract in records kept for that purpose.”
Part C is the section I alluded to earlier with our contract for a retaining wall, since I didn’t sign the contract. This puts the onus on you to specifically find out if they are married and insist that their spouse sign the contract also. Parts A & B aren’t probably an issue for most cases since you always want a signed contract before you start working, but it does mean a “verbal” contract (also due to part C&E) would not be allowed. Part E is interesting because there is no time frame required in the Code. Most of the time, if this provision has become an issue, we have filed the contract at that time or with the lien. It is also an option to file the contract as an attachment to the lien.
I always try to remind people that Mechanic’s Liens aren’t a sure fire way to get the money that is owed to them but they are probably one of the strongest tools that the state allows for contractors & laborers to collect it. So with the added complexity a homestead adds to the ability to secure the lien rights and the inability to foreclose on the lien, I believe contractors need to have their eyes wide open when having large contracts on homesteaded properties.