I often say that learning how to file a lien is possible the single most important legal task for a contractor. A lien can be the difference between getting paid and being left out in the cold.
Simply: A lien is similar to a mortgage, providing a claim against a piece of property for the value of your labor and/or materials.
Knowing the lien laws can help you perfect your lien and get you paid. This is especially true the further down the chain you happen to be. If you are a subcontractor, supplier or a simple laborer, it behooves you to take a moment and study up on the basics of Texas lien law.
This article focuses on the five things that you must know in order to perfect your lien and secure your right to payment. Of course, there are a myriad of concerns and variables that we cannot touch upon in this pithy article. But, this is a fairly comprehensive guide on how to lien a construction project.
The lien law can be found in the Revised Code of Texas’s Title 60, Chapter 60.04 (RCW 60.04). It is always handy to know where to look in the event you have a question, and cannot access immediate legal assistance. If you question cannot simply be answered by an easy read of the code, I would strongly suggest that you contact an attorney and discuss your issue.
In order to file a lien, you should know and practice the following five things:
(1) Know Your Role
A contractor should always get a good feeling for where it is on the contractor tree. Its important to know whether you are working directly for the general contractor, one of the general’s subcontractors, Houston realtor near downtown, or a subcontractor’s contractor. This relationship will determine your obligations before filing a lien.
If you are the general contractor, you already know who you are. But, if you are lower down the chain (what we refer to herein as a “sub-tier contractor”), obtain the owner’s and the general contractor’s information. This is vital for serving notice and serving a lien, if you get that far.
(2) Know When to Send Notice
There are three types of notice: (1) General Contractor notice, (2) Subcontractor notice, and (3) Sub-tier Contractor notice.
General Contractors – The General Contractor does not have to provide a lien notice, but it does have to produce a Model Disclosure Statement under RCW 18.27.114. This is a simple statutory statement which must be delivered to the owner, signed by the owner and maintained by the contractor for 3 years.
Subcontractors – If you have a contract with the General Contractor, you are considered a subcontractor. A subcontractor to the general does not have to serve a notice unless you are working on a residential project. If your project is residential, you should serve a lien notice under RCW60.04.031 no later than 10 days (if new construction) or 60 days (if a remodel) after beginning the work. Notice is served by sending a copy via certified mail or by personally serving it on the owner.
Sub-Tier Contractors – Any sub-tier contractors will likely have to serve a notice of their right to file a lien, regardless of the type of project. You are considered a sub-tier contractor if you do not have a direct contract with the owner, meaning you were contracted by some other party (general, subcontractor, etc.). If you are a sub-tier contractor you should serve a lien notice under RCW60.04.031 no later than 10 days (if new residential construction) or 60 days (anything else) after beginning the work. Notice by a sub-tier contractor should be served on both the owner and the general contractor.
If you have to file notice – make sure to document. Keep a record of your certified mailing or collect an affidavit if personally served.
(3) Know When to File
It is very important that you can establish the final date that you performed labor or provided materials to a job. This date can represent either the date of termination, abandonment or completion of the job – as long as its the final day that you performed work (or delivered materials).
You will want to be sure to memorialize proof that you performed work or delivered materials on that specific date. Be sure to keep timesheets, job logs or bills of lading to prove that you performed work or delivered materials on a particular date.
Once you know the date – set your timer. You have precisely 90 days in order to file your lien. If you file the lien after those 90 days, it will be null and void.
One thing to remember is that you cannot attempt to elongate your filing period by returning to the job to add work or deliver materials, unless you were expressly authorized to do so. Your final date should be the final date you were told, or were authorized, to perform labor or deliver materials.
(4) Know How to File
This is probably the most daunting step for most contractors. It can be broken down into a two-step process: file and enforce.
A lien should be filed in accordance with RCW 60.04.091 (in fact a sample form is written into the code). This means to follow the form requirements in 60.04.091, sign and execute it properly (remember that a corporation requires an attestation).
After you have a properly drafted and executed document – file it. A lien must be filed, within the deadlines that we discussed above, at your County Recorders Office. There is a fee associated with this filing.
After it has been filed, you are required to serve a copy on the property’s owner or reputed owner within 14 days from the date the lien was recorded. You may serve this lien only by certified/registered mail or by personal service.
(5) Know How to Enforce
The final step is enforcement. If you have not settled your lien with the property owner, you must file a lawsuit seeking foreclosure of the lien within 8 months from the date it was recorded. An attorney can best help you ensure that your suit properly enforces the lien.
Well there you have it – how to file a lien. Remember that the lien laws are strictly construed by courts of law. Thus, it is vital that you stay within the bounds of RCW 60.04, if you expect to have an enforceable lien.