Statutes, created by the Texas legislature, recognize that contractors, subcontractors, vendors and suppliers needed a greater remedy for non-payment for their work than merely the right to sue on their contracts. In Texas we fortunately have a very generous amount of law dedicated to the lien claimants. The downside to having that much law is that it becomes more cumbersome to understand. Also Texas law is particularly unforgiving to subcontractors and suppliers whose notice letters or liens are untimely or improper.
KMDA’s primary responsibility is to help our clients understand what they need to do to retain and protect their lien rights. KMDA has mastered the art of sending accurate and timely notice letters and liens with the least amount of hassle to the client at a reasonable price. KMDA also understands that just having a lien doesn’t do any good if you can’t collect on it. So we strive to draft our mechanic’s lien demands in a manner that give our clients the largest possibility to collect the debt. Additionally, we send out monthly emails to our mechanic’s lien clients to try and not only remind them of their upcoming deadlines but to inform them of some of the nuances in the mechanic’s lien law and educate them on ways to protect their receivables.
Probably the hardest part of the Lien process to get right is the verbiage that needs to be used in both the Notice of Lien letter and the Lien Affidavit. The trap a lot of subcontractors fall into is they have a form they use for filing all liens. Using a form is problematic because the forms floating out there on the internet are not always state specific and the verbiage used in the form doesn’t change. There are so many variables to making sure your notice letters and liens are filed correctly. You must have the property address exactly correct, know who the Owner is (exact names), know where and who to send the notices and liens, etc. Additionally, there is a lot of verbiage required by the Texas Property Code and it is all dependent on whether or not the property is considered Commercial or Residential and, to add more complication, whether it is considered a Homestead. Further, the deadlines are very difficult to figure out. Not only do you have to know whether or not you are considered an Original Contractor, First, Second or Third Tier Claimant, but there are special provisions relating to specially fabricated goods and even more problems can occur when you supply the product / labor towards the end of the construction project. Then you have to worry about things such as Substantial Completion and do you really have the full amount of time to file your lien.
In addition to the issues already mentioned, many people are running around with liens that are not up to date and do not contain some of the more recent updates of the Texas Property Code.
What does this mean to you, the person who is owed money? If you file an invalid lien on a property, not only have you lost an essential means of collecting on your work, but you can also face extremely harsh legal penalties for doing so. In most cases, you might have to pay the property owner whatever their costs and attorney’s fees were incurred to remove the lien. Even more alarming, if your lien is found to be fraudulent under the Chapter 12 of the Texas Civil Practice and Remedies Code, you can be held liable for minimum damages in the amount of $10,000.00 plus court costs, reasonable attorney fees and exemplary damages in an amount determined by the court.
Very rare is the situation that a non-lawyer can file their own lien and perfect it correctly. Even more surprising is the amount of attorneys out there that file the occasional mechanic’s lien and, because they don’t do it as a primary part of their practice, they too are confused by the quagmire of the mechanic’s lien laws. Mechanic’s liens are a lot like a maze. You can start traveling down one path only to hit a dead end and have to turn around. Or, you can get really far in the process only to discover you took a wrong turn. KMDA takes the time to learn their clients’ business. This helps in trying to get the liens filed and perfected correctly.
Once you have a valid lien you need to decide how to proceed to try and recover the money owed. The most common option is to just leave the lien filed and attached to the property and hope the owner tries to sell or refinance the property. However, in the age of foreclosures and bankruptcies, the often smarter option (depending on the amount of controversy) is to foreclose on the property and sue the person you contracted with for breach of contract. Recent changes to the law, such as the Prompt Pay Statute and Texas Trust Fund Act, have added a great deal more substance to collection efforts and have even provided a way to “pierce” the corporate veil and sue people personally if they improperly divert trust funds that were suppose to go to pay you.