Texas’s Major Lien Law Makeover: What You Need to Know
National Association of Surety Bond Producers (NASBP)
Chapter 53 of the Texas Property Code just received major updates for the first time in years. On June 15, 2021, Gov. Greg Abbott signed into law HB 2237. This bill makes many notable changes to Texas’s lien laws. The construction industry and construction lawyers should take note of these changes to the complex and often confusing world of mechanic’s, contractor’s, and materialman’s liens in Texas. These changes to the Texas Property Code will take effect on January 1, 2022. Below is a review of some notable changes made to Chapter 53 of the Texas Property Code. To see all the changes enacted visit the Texas Legislature’s website to view HB 2237 in its entirety.
- HB 2237 includes various changes to the definitions within Chapter 53, including the definition of “Improvement,” “Labor,” “Material,” “Residence,” “Retainage,” “Subcontractor,” and “Work.” Additionally, the amendments in HB 2237 add a definition for “Purported original contractor.” This newly defined term is used in Section 53.026. Under this revision a person who is in a direct contractual relationship with a “Purported Original Contractor” is considered an original contractor for lien perfecting purposes. This is a change from the previous version which required a direct contractual relationship with the owner to be considered an original contractor. A few of the notable changes to the existing definitions include the addition of designs, drawings, plans, plats, surveys and specifications by architects, engineers, and surveyors to the definition of “Improvement.” The definition of “Labor” received similar changes to include the professional services in the “direct preparation for the work of a design, drawing, plan, plat, survey, or specification.” The definition of “Subcontractor” was clarified to include one who furnishes labor or materials to the original contractor or to a subcontractor “of any tier.” The language including a subcontractor “at any tier” was specifically added to the definition.
- Section 53.003: “Notices” has been amended to require in-person service of notice, certified mail service of notice, or other traceable forms of private mail that include proof of receipt. Although permitted in the current rule, under the amended rule registered mail is no longer a permitted method of delivery. Also notable in this section, is that the Legislature expressly provides that if the deadline for providing notice falls on a Saturday, Sunday or legal holiday, the period extends to the next day that is not a Saturday, Sunday, or legal holiday.
- Section 53.056: “Derivative Claimant: Notice to Owner and Original Contractor” also received significant and notable changes designed to simplify the notice requirements for subcontractors. A notable change was made to the double notice requirement for subcontractors. Formerly, subcontractors of non-residential projects were required to send a notice to the original contractor “not later than the 15thday of the second month” after the month the labor was performed or materials delivered, and then send the same notice to the owner and original contractor “not later than the 15th day of the third month” following “each month in which all or part of the claimant’s labor was performed or material or specially fabricated material was delivered.” There are many complexities with accurately meeting these notice requirements based on different deadlines. The Legislature simplified the notice required by amending the rule to require only one notice be sent to the contractor and owner at the same time and by the same deadline. Instead of having to track two different deadlines, now Section 53.056 only requires one notice sent to both the original contractor and the owner no later than the 15th day following the third month.
- Section 53.057: “Derivative Claimant: Notice for Contractual Retainage Claim” covering retainage also received a makeover in HB 2237. First, the title changed to “Derivative Claimant: Notice of Claim for Unpaid Retainage.” More importantly, the deadline for filing an affidavit claiming a lien currently is the earlier of several listed days. Effective January 1, 2022, the deadline is simplified and is based on the date required for filing an affidavit under the applicable provision of Section 53.052.
- The time for bringing a suit to foreclose a lien has been modified. The deadline that was previously the later of “two years after the last day a claimant may file the lien affidavit under Section 53.052 or within one year after completion, termination, or abandonment of the work under the original contract under which the lien is claimed” is now set as “the first anniversary of the last day a claimant may file the lien affidavit under Section 53.052.” The deadline may now be extended by agreement to the second anniversary of the last day a claimant may file the lien affidavit under Section 53.052 under specific circumstances.
Numerous other changes were made to the Texas Property Code in HB 2237. Accordingly, any construction lawyer in Texas or advising clients in Texas should review these changes to ensure compliance with the amended rules come January 1, 2022.
This article, “Texas's Major Lien Law Makeover: What You Need to Know,” was published on July 12, 2021 by the NASBP.