Warning for Fraudulent Lien Laws
Due to the complex nature of mechanic’s lien laws, it is highly discouraged to attempt to perfect a mechanic’s lien without the guidance of a licensed attorney specializing in Texas lien law. This includes the third-party mechanic’s lien companies that contractors will often use. Under Texas fraudulent lien law (Tex. Civ. Prac. & Rem. Code § 12.002; Tex. Gov’t Code § 51.901(c), and Tex. Penal Code § 32.49), a contractor may face civil liability, which can be the greater of $10,000.00 or actual damages, with no actual damages required (see Harris County, Texas v. MERSCORP, Inc., 791 F.3d 545 (5th Cir. 2015); Vanderbilt Mortg. & Fin., Inc. v. Flores, 692 F.3d 358, 370, 372 (5th Cir. 2012)), plus costs, attorneys’ fees, and exemplary (punitive) damages.
Although Section 12.002(c) of the Texas Civil Practice and Remedies Code provides some protection to uninformed contractors filing mechanic’s liens in Texas by requiring an “intent to defraud,” it should be noted that “intent to defraud” can arise from various actions. For example, claiming a larger amount than owed (Taylor Elec. Servs. v. Armstrong Elec. Supply Co., 167 S.W.3d 522, 530 (Tex. App.—Fort Worth 2005, no pet.), but see RMDG Construction, LLC, et al. v. Oakwood Custom Homes Group, Ltd., 2014 Tex. App. LEXIS 6032 (Tex. App.—Waco June 5, 2014, no pet.)), refusing to release the lien, among other transgressions (Gray v. Entis Mech. Servs., LLC, 2012 Tex. App. LEXIS 3278 (Tex. App.—Houston [1st Dist.] Apr. 26, 2012, no pet.), or re-filing a previously released lien (Roberts v. Dixon, No. 12-15-00181-CV, 2016 Tex. App. LEXIS 2449, at *6 (App.—Tyler 2016)). The refusal to release a fraudulent lien is also deemed a Class A misdemeanor, as per Tex. Penal Code §32.49.
While judicial interpretation may vary on what constitutes an “intent to defraud,” contractors should seek the counsel of a specialized, licensed attorney when pursuing the perfection of mechanic’s liens in Texas to avoid the risk of the penalties outlined above.
Disclaimer: This is for informational purposes only and should not be considered legal advice. Consult a licensed attorney for advice. Additionally, the information provided may be subject to change or become outdated.
