The Dotted Line: New Texas liens streamline process, but hurdles remain

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This feature is part of The Dotted Line series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series, click here.

A recent Texas lien change eases a complex process and brings it closer to that in other jurisdictions, but local bottlenecks still loom, according to industry sources.

“I think the legislature was trying to simplify things as much as possible,” said Alex Benarroche, construction law attorney at Levelset, a New Orleans-based provider of construction payment and compliance technology. “It’s definitely more in line with general requirements in most other states now.”

Alex Benarroche

Permission granted by Levelset

The issue of payments in the construction industry has recently received a lot of attention. The Texas extension of liens is just the latest of recent changes across the country to ensure subcontractors are paid, such as: wage theft law in new york, “Pay if Paid” clauses in Virginia and liquidity problems for small and minority-owned construction companies.

A lien is a legal right to an asset, such as a property. B. Real estate used to settle a debt. In Texas, the new changes mean owners must now ensure all lower-level design professionals are paid for the project or they face a lien. That’s important, because lenders often require an asset to be free of liens before releasing new funds into a project, even if it’s an ongoing one.

The new laws now allow subcontractors to file liens and expanded the list of workers who can put a “cloud on the title” of a property, making any future sale more difficult or ultimately forcing a sale of the property to include payment for their services cover up. after David VanderhiderMember of Dykemaa Detroit-based law firm.

David Vanderhider

Permission granted by Dykema

“This particular expansion affects architects, engineers, surveyors, landscapers and demolition contractors the most,” said Vanderhider. “Before this new law, for example, architects had liens, but only if they deal directly with the owners. Now, as a result of the new law, the five I mentioned, starting with architects, now have liens, even though they don’t interact directly with the owner.”

Not just Texas

extension of the lien all levels of subcontractors is a broader trend beyond Texas, Benarroche said. For example, Ohio in 2021, Michigan in 2018, and Massachusetts in 2011 have all strengthened protections for design professionals on projects.

New York has similar liens, said construction attorney Randy Heller, a partner at New York-based Gallet Dreyer & Berkey.

“Before the owner pays their architect in full, they must provide proof that the architect has paid all sub-consultants,” Heller said. “There’s just more people out there for the owner to take care of before paying their final advance to the contractor.”

Randy Heller

Permission granted by Gallet Dreyer & Berkey

Texas is notorious for its Byzantine lien-related notification requirements, procedures and deadlines, Benarroche said. But that has changed.

Eliminating notarial deeds offers more leeway when filing liens, Vanderhider said. However, he also noted that county-level rules still pose a challenge.

“Sometimes many Texas counties where the lien is registered require notarized deeds before filing a lien,” Vanderhider said. “So there might be an issue that a particular county doesn’t want to file or record the lien without notarization,” he said.

Constitutional vs. statutory liens

However, there are certain liens unique to the Texas constitution. For example, the state allows both constitutional building liens and statutory liens different procedures.

Constitutional liens are granted by the Texas constitution to general contractors on private construction projects. These are self-executing, that is, communications and liens are not required for a contractor to make a claim, although there are additional protections if they are filed, Benarroche said.

Statutory liens, on the other hand, fall under the more common type of mechanic’s lien granted by law to prime contractors, subcontractors and suppliers. Applicants must meet all statutory reporting and filing requirements to make a valid claim.

Recent changes in Texas only apply to statutory liens. It’s unclear whether any changes to the statutory lien would affect the constitutional lien, Vanderhider said.

“For now, we are proceeding as if the statutory lien changes would not affect the constitutional lien unless and until we are notified otherwise,” Vanderhider said. “I certainly didn’t see anything in the statute.”

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