Home>Levelset Community>Legal Help>We have included our retention amounts in a lien filed in Texas. GC has offered to make a partial payment less retention if we removed the lien. We have refused to cancel the lien and are being told by the GC that our lien is invalid because it includes retention amounts. The project is still under way our lien is holding up a certificate of occupancy. Were we wrong in including the retention amounts in the lien value?
We have included our retention amounts in a lien filed in Texas. GC has offered to make a partial payment less retention if we removed the lien. We have refused to cancel the lien and are being told by the GC that our lien is invalid because it includes retention amounts. The project is still under way our lien is holding up a certificate of occupancy. Were we wrong in including the retention amounts in the lien value?
That's a good question, and retainage can be such a headache in Texas. First, retainage amounts are lienable. Under § 53-023 of the Texas Property Code, a lien secures payment for "labor done or material furnished for construction or repair". Further, a subcontractor's lien is limited to "an amount equal to the proportion of the total subcontract price that the sum of the labor performed, materials furnished, materials specially fabricated, reasonable overhead costs incurred, and proportionate profit margin bears to the total subcontract price" minus "the sum of previous payments received by the claimant on the subcontract."
Thinking about the basics of retainage helps here - retainage represents amounts that are owed due to labor/materials that have already been provided. Thus, retainage payments are subject to lien based on the above definitions - even if retainage payments were set to be released at a later date.
Further, when discussing a lien based on retainage, the lien statute does set a deadline before which a lien on retainage must be made, but it does not set a date before which a lien cannot be claimed.
Practically speaking, it may make sense to leave out retainage amounts that are not yet required to be released when the claimant's work is ongoing on the project or when the deadline to file a mechanics lien isn't particularly near. Construction contracts very typically call for releasing retainage later on in the project. Of course, if the lien claimant has completed their work on the project, including retainage amounts makes perfect sense - and may even be best practice when it's obvious that payment has become a serious issue. But again - retainage amounts represent work that has been completed and unpaid, so the inclusion of retained amounts in a mechanics lien would seem very unlikely as a grounds for leaving a lien claim invalid.
Finally, regarding the certificate of occupancy - this actually puts on display the strength of mechanics liens. Mechanics liens are a powerful tool for payment, and they can halt a sale, loan, or even certificate of occupancy until the lien is resolved. Thus, when a lien claim has been filed, leveraging that power to obtain payment is one of the most effective ways to ensure construction payment. Nobody likes liens, and if a lien claim can be avoided - it should. But, if payments have become a problem, and slow pay or nonpayment is creating problems, a mechanics lien can help get the job done.