Over the last couple months I had a few posts over the ways that you can remove a mechanic’s lien if needed. This time I would like to go a bit more in-depth about how different types of residential properties effect how a mechanic’s lien may be enforced.
I do think there is a distinction between homestead and non-homestead residential. Not in terms of the notice letters and mechanic’s liens or their deadlines (more about those requirements here: Liening Homesteaded Properties in Texas), but in whether or not you can truly foreclose on your lien. As you might know, Texas protects our homesteads! You could have a ten million dollar homestead but they are not going to make you sell it and give the equity to your creditors. As a result, a lien claimant is not going to be able to foreclose on a residential property that is homesteaded. However, I have seen many situations where people were building homes with the intent to live in them as their homestead at some point but were currently residing in another home which already had the homestead exemption. It has been my position that you can’t homestead 2 properties; therefore, the residence that was currently being built had not become homesteaded yet.
In order for a property to be considered “residential” pursuant to the Texas Property Code, it must be: (A) owned by one or more adult persons; and (B) used or intended to be used as a dwelling by one of the owners. If the residential home was actually owned by a corporation (as an investment, flips, etc.), otherwise, it would not qualify as a residential project because it is not owned by one or more adult persons. One example I see a lot of is a spec home. While a spec home could obviously be considered a residential development vs. a commercial development, does it really meet the Texas Property Code requirements of a residential project? I don’t believe so: the owner of the property is most likely the company building it and is intending on selling the property, not having an owner of the company living in it.
I know you are all saying, well, this is interesting and all but what difference does it make to me how the Property Code distinguishes the different construction projects???? Well, let me tell you, if you want to properly perfect your mechanic’s liens, you must know what type of project it is pursuant to the Code. Residential projects have very specific time lines and requirements for their liens and notice letters. If you miss-characterize a property, chances are you are not properly perfecting your lien.