A PRIMER FOR TRADESMEN AND SUPPLIERS
A Mechanics and Materialmen’s Lien (M&M lien) is a collection tool available to tradesmen and suppliers to enforce payment for work done or materials supplied on construction projects. If a tradesmen or material supplier (“contractor”) is not timely paid by a property owner, a properly filed M&M lien allows the property to be foreclosed and sold to satisfy the unpaid debt.
Rules for an M&M lien vary, depending on whether the construction is for a homestead, residential or commercial structure. This article will be limited to the M&M lien rules applicable to homesteads, as these provide the most protection for homeowners and put stringent requirements on contractors. There are additional rules for subcontractors, which will not be dealt with here.
Some of the requirements for the contract on which an M&M lien may be taken are:
1. The contract must be in writing and signed by both the owner and spouse, if married. Any change orders must be in writing and signed by both the contractor, the owner and owner’s spouse. The contract must be executed prior to work commencing and filed with the county clerk in the county where the property is located.
2. A statutory disclosure and warning to the homeowner must be included in the contract, the language which is stipulated in Texas Property Code, Sect. 53.255.
3. The contractor is required to provide the homeowner with a list of the subcontractors and suppliers to be used on the project. The homeowner may execute a waiver of this requirement.
If the contract meets the above requirements, an M&M lien may be filed for unpaid amounts any time after 15 days in the month the work was substantially completed or material delivered. It is good practice, but not a requirement, for the contractor to give the homeowner notice of intent to file an M&M lien.
The deadline for filing an M&M lien is the 15th day of the 3rd month after substantial completion of the work, or the material delivered. The M&M lien is an affidavit, whose contents are stipulated by Texas Property Code, Sect. 53.054 and Sect. 53.254(f) and (g). Within 5 days of filing the affidavit of M&M lien, the contractor must send the owner, by certified mail, return receipt requested, a copy of same along with a statutory notice.
The filing of the M&M lien, by itself, does not put money in the contractor’s pocket. In many instances (but not all), the filing of an M&M lien incentivizes the homeowner to pay up. Where the homeowner remains uncooperative, the only way to compel payment is to obtain a judgment to foreclose on the property that the M&M lien attaches to. This requires the filing of a separate judicial foreclosure lawsuit. The time limit for filing such a foreclosure suit is generally one year after a valid lien is filed.
If you are a contractor or supplier with questions on the proper language in your construction contracts that will allow the filing of an enforceable M&M lien or any questions concerning the collections process on accounts payable, contact the Law Office of Elliott Klein, PLLC for a consultation.