Texas lien laws are notoriously complicated in comparison to other states. However, some simplification is on the horizon.
The Governor of Texas just recently signed House Bill-2237 into law, which presents significant changes to notice requirements, deadlines, and more. Here’s everything Texas contractors need to know when these changes go into effect on January 1, 2022.
HB2237 signed into law
We’ve been monitoring the progress of House Bill 2237 since it was introduced back in February of this year. And given the significant impact of these proposed changes, the bill encountered a fair amount of revisions that had the construction industry abuzz.
However, the time has come: On June 15, Governor Greg Abbott put pen to paper and signed the bill into law, which will apply to all original construction contracts entered into after January 1, 2022 (so mark your calendars)!
Read the full text of House Bill 2237 here.
We reached out to Texas Senator Nathan Johnson, one of the primary sponsors of this bill, and here’s what he had to say after the bill was passed:
“Clarity helps everybody. HB 2237 overhauls construction lien law, providing for more efficient, clear, and reliable cooperation among contractors, subcontractors, owners, lenders, and more. I was pleased to be able to shepherd HB 2237 through the Senate and final passage. Its success represents years of patient negotiation and good faith collaboration among all involved.”
Overview of changes to Texas mechanics lien laws effective 1/1/2022
Here’s a breakdown of the most significant changes that contractors should familiarize themselves with to prepare for the new rules in 2022.
Design professionals’ lien rights expanded
The protection of Texas mechanics lien rights has been expanded for design professionals under this new legislation. Although architects, engineers, and surveyors are entitled to lien rights currently, there’s still a caveat: They must have a written contract with the owner (or the owner’s agent, trustee, or receiver).
This new legislation expands these rights by providing all licensed professionals lien rights, regardless of whom they contracted with.
Computation of deadlines
Another important change to note is the increased leniency when it comes to deadlines under the Texas lien statutes. Presently, under Texas case law, if the deadline for a notice (or any other action under Texas lien laws) falls on a Saturday, Sunday, or a legal holiday, the notice must be sent sooner.
Under this new legislation, there is a specific provision added that states: “If the last day of the period is a Saturday, Sunday, or legal holiday, the period is extended to include the next day that is not a Saturday, Sunday, or legal holiday.”
Methods of service of notices changed
Under this new legislation, there are additional methods of service for all written notices.
The term “registered mail” has been struck from the statutes. Instead, service of all documents can be accomplished by certified mail, or “by any other form of traceable, private delivery or mailing service that can confirm proof of receipt.”
Monthly notice requirements simplified
Those who know, know: Texas monthly notices can be stressful, particularly for those who didn’t contract directly with the general contractor (such a second-tier subs) on commercial projects.
Currently, such claimants are required to send two separate monthly notices: one to the prime contractor on the 15th day of the second month following each month of furnishing labor and/or materials (the second-month notice), and one to the owner and the prime contractor on the 15th day of the third month following each month of furnishing (third-month notice).
Under the new statutes, the notice requirements have been streamlined. Come 2022, all claimants — other than the prime contractor — are only required to send a third-month notice. In other words, remote subcontractors on commercial projects no longer need to serve a second-month notice. This essentially eliminates he distinction between subcontractor tiers.
In addition to this update, there will also be a new statutory form for all notices. The notices must be in substantially the following form:
NOTICE OF CLAIM FOR UNPAID LABOR OR MATERIALS
WARNING: This notice is provided to preserve lien rights.
Owner’s property may be subject to a lien if sufficient funds are not withheld from future payments to the original contractor to cover this debt.
Date:_______________
Project description and/or address: _______________
Claimant’s name: _______________
Type of labor or materials provided: _______________
Original contractor ’s name: _______________
Party with whom claimant contracted if different from original contractor: _______________
Claim amount: _______________
_______________ (Claimant’s contact person)
_______________ (Claimant’s address
→ Download a free Texas Monthly Notice Form (2022) here
Notice of specially fabricated materials eliminated
Another way the notice requirements in Texas have been simplified is the elimination of the Notice of Specially Fabricated Materials.
Up until this point, specially fabricated material suppliers, need to send this notice no later than the 15th day of the second month after the order for the materials has been accepted. In addition to any other required notices. This requirement has been eliminated completely.
Retainage notice gets a statutory form
First and foremost, we’ve got a verbiage change here: The current Notice of Contractual Retainage Claim has been renamed to a “Notice of Claim for Unpaid Retainage.”
The timing of this notice hasn’t changed, but two things have. The first being that, no matter your tier, the notice should be sent to both the property owner and the original contractor. The second is that, like the new monthly notices, there’s now a statutory form as well. That should read as follows:
NOTICE OF CLAIM FOR UNPAID RETAINAGE
WARNING: This notice is provided to preserve lien rights.
Owner’s property may be subject to a lien if sufficient funds are not withheld from future payments to the original contractor to cover this debt.
Date:________________
Project description and/or address: ________________
Claimant’s name: ________________
Type of labor or materials provided: ________________
Original contractor ’s name: ________________
Party with whom claimant contracted if different from original contractor: ________________
Total retainage unpaid: ________________
________________ (Claimant’s contact person)
________________ (Claimant’s address)
→ Download a free Texas Notice of Claim for Unpaid Retainage
Subcontractor claim of liens on unpaid retainage deadline
Currently, if a subcontractor wants to file a lien on unpaid retainage in Texas, the timeline can be confusing. Tex. Prop. Code §53.057 currently reads that an affidavit claiming a lien on unpaid retainage must be filed the earliest of either:
- The general lien filing deadline for the specific type of project
- The 40th day after the date of completion listed in the owner’s Affidavit of Completion
- The 40th day after the termination or abandonment of the original contract
- The 30th day after the claimant receives a written notice of demand to file a lien affidavit
Under the proposed new deadline, a lien on retainage can be filed no later than the 15th day of the third month the original contract was completed, terminated, or abandoned. This cannot be altered by any owner actions as it can be currenlty.
Foreclosure deadline simplified — with an option to extend
Currently, the deadline to enforce a Texas mechanics lien claim varies depending on the project type.
On non-residential projects, an enforcement action must be initiated within either two years from the last date the claimant could file their lien, or one year from the termination, completion, or abandonment of the project — whichever is later.
As for residential projects, it’s either one year from the last date the claimant could file, or one year from termination, completion, or abandonment of the project — whichever is later.
Under the new laws, the deadline is simplified. All lien claims must be enforced within one year (first anniversary) of the last date the claimant could file a lien claim.
However, there’s an additional twist!
Similar to California’s Notice of Credit, the deadline can be extended. To do so, the claimant and the current property owner must agree to the extension in writing, and file the agreement in the county clerk’s office prior to the expiration of the enforcement deadline.
This will extend the enforcement deadline an additional year (second anniversary) from the last date the claimant could file a lien claim.
Notarization no longer required on lien waivers
Texas is one of the 12 states that regulate the form and content of lien waivers to some extent. Additionally, Texas is one of just three states (including Mississippi and Wyoming) that require lien waivers to be notarized.
This number drops to two states come January 1, as the phrase “and notarized” will officially be removed from the statutes governing Texas lien waivers — finally putting to rest the burdensome, and frankly unnecessary, requirement that lien waivers be notarized.
One last thing to note is the distinction between conditional and unconditional waivers and lien releases in Texas. Lien waivers exchanged prior to filing a claim will no longer required to be notarized. However, to file a release of a claim with the county clerk’s office, the release must be notarized.