One of the requirements for filing a lien is to have either physically installed material or physically made improvements to real property. Typically, when a job is cancelled, the resulting harm to the contractor, subcontractor, or fabricator is limited to lost profits from the missed opportunity to provide work. This is because no work has been performed on the real property yet, no wages have been paid to employees, and no supplies have been installed on the property.
Sometimes, however, the resulting harm can be much greater. For example, consider the situation where you order materials which must be specially fabricated for a project, the supplier produces the materials, and the project is subsequently cancelled? In such a situation, you can file a lien to recover the costs of the specially fabricated materials.
Under Texas law, a “specially fabricated material” is defined as a material fabricated for use as a component of the construction or repair so as to be reasonably unsuitable for use elsewhere.
As an example, let’s consider granite countertops. Once a slab of granite is cut to the required dimensions for a specific project, perhaps with a cut out for a sink, those pieces are usually unsuitable for use on another job.
In Texas, this scenario is addressed by Tex Prop. Code Section 53.021 (2) (b), which states that a “person who specially fabricates material has a lien even if the material is not delivered.” Further, the lien secures payment for “the specially fabricated material, even if the material has not been delivered or incorporated into the construction or repair, less its fair salvage value.” Tex. Prop. CodeSection 53.023 (2).
So, the caveat is that you are supposed to lower your damages by the fair salvage value of the product.
Now, of course, Texas can’t make it easy and have the same rule for all types of projects. There are more hoops if this is for a residential construction project. In such instances, an extra notice must be provided, and if you fail to provide the notice, you will only be able to file a lien for any items actually provided to the project. I’ll paraphrase it, but you can see the full details here: Tex. Prop. Code Section53.253.
• Notice must be given to the owner, or reputed owner, not later than the 15th day of the second month after the month in which you receive and accept the order for the material.
• The notice must contain a statement that the order has been received and accepted, and the price of the order must be included.
• The notice must be sent by registered or certified mail.
Filing a specially fabricated material lien is complicated. Are you following all of the proper procedures to protect your lien rights?