Some significant and revolutionary changes — at least in Texas — might soon be coming to the law regarding mechanic’s and materialman’s liens.
A mechanic’s and materialman’s lien provides a legal recourse to a subcontractor employed by a contractor and who has provided labor or materials through that contractor to benefit a property owner. The subcontractor would be able to obtain a lien on the owner’s property to secure payment when the contractor fails to pay him.
The changes are being sought by a group of reformers representing the Texas Construction Association, the Associated Builders and Contractors of Texas and the Texas Building Branch of the Associated General Contractors.
The three most important changes are moving from a “debt notice” system to a “preliminary notice” system, adding lien agents and simplifying the process of enforcement, which is initiated by a “notice of commencement.”
1.DEBT NOTICE
The first of the proposals changes the existing lien system from a debt notice system to a preliminary notice system. The old system starts the notice obligations by when the debt was accrued, a calculation which was often thorny and fraught with problems. By shifting to a preliminary notice system, nightmarish issues, such as when the subcontractor’s debt accrued and whether proper and timely notices were given to the owners and contractors, would be bypassed.
Essentially, the preliminary system would require potential claimants to send a “notice of furnishing” to the contractor and owner. The notice of furnishing lets the contractor and owner know the subcontractor will be providing or has provided labor or materials benefitting the owner. This notice would have a 90-day scope that covers labor and materials provided 45 days before the notice and 45 days after. This one and only notice would be sufficient to capture the benefits of the mechanic’s lien statute for the 90-day period.
2. LIEN AGENT
Another key feature of the proposed reforms is the addition of the lien agent. Owners would be able to appoint and identify a lien agent, who would be available via internet. They would be the first person given notice that a claimant intends to enforce his mechanic’s lien.
3. NOTICE OF COMMENCEMENT
The third significant proposed change is the enforcement of a mechanic’s lien would start through a “notice of commencement.” This notice would be posted via the lien agent’s website and would be handled by the lien agent.
NEXT STEPS
Lien affidavits are still expected to be a feature of the new law. They will continue to be filed with the county clerk; however, the time for filing the lien affidavits would no longer be based upon when the claimant terminates his work but, rather, when the entire project is completed. The affidavits would have to be filed within 30 days after the end of the entire project.
Obviously, the proposed modifications have no force of law — yet. Before they become legally binding and enforceable, the Texas Legislature will have to jump on the reform bandwagon. The next opportunity for that to happen begins Jan. 10, 2017, when the 85th legislative session gavels to order at the state capitol in Austin.