Texas Mechanics Lien Laws

Are the Requirements and Deadlines for Serving and Filing Mechanics Lien Documents Different for Protecting “Unpaid Progress Payments” Versus “Withheld Contractual Retainage”?

YES.

The procedures and deadlines for filing a Lien to protect withheld contractual retainage are different than they are for filing a Lien for unpaid progress payments.  “Contractual retainage” is any amount withheld by the contractor who hired you from your monthly progress payments.  Typically, the amount withheld is 5% to 10% of your overall contract and is not due until the entire Project is complete.

Step One—Serve Notice of Contractual Retainage:  If you were not hired by the Property Owner, or the Property Owner’s Agent, then you must notify the Property Owner in writing that your contract allows the contractor who hired you to withhold retainage from your progress payments.  If your contract is with a Subcontractor, then you must serve the General Contractor with the Notice as well.  The Notice must be served within the earlier of: (1) the 30th day from when you complete, terminate, or abandon your contract; or (2) before the 30th day after the contract between the Property Owner and the General Contractor is completed, terminated, or abandoned.  This simple notice requirement can easily be incorporated into the standard Pre-Lien Notice for unpaid progress payments or sent independently.  The Lien Professor’s Mechanics Lien Kit contains an independent Notice specifically drafted for this purpose.  See Section 53.057 of the Texas Property Code to learn more about the Notice of Contractual Retainage.

Warning

The deadline to serve a Notice is not extended if the 15th falls on a Sunday or legal holiday.  Therefore, if your deadline falls on one of these days, you must serve the Notice on the preceding business day for it to be timely.

Step Two—File the Mechanics Lien Affidavit:  A claim for withheld contractual retainage does not accrue until the contract between the Property Owner and the General Contractor is completed, settled, terminated, or abandoned.  At that point, you have until the 15th day of the fourth month (on a commercial Project) or the 15th day of the third month (on a residential Project) to timely file a Lien Affidavit.  As such, if you provide labor/materials at the outset of a large scale Project, it is likely that your right to file a Lien for withheld/unpaid contractual retainage may not arise until well after you have completed your work. The retainage Mechanics Lien laws can be tricky, if you have a question please .

Example

Assume that in March you installed and completed the foundation on a commercial Project and that the entire Project was not completed until December of that same year.  Your right to the retainage would not accrue until December (completion of the Project) and you would have until April 15th of the next year to timely file the Lien.   (See below for a Warning.)

Warning

Generally speaking, a Property Owner is permitted to release final payment (typically withheld statutory retainage) to the General Contractor within 30 days after completion of the entire Project.  If a Property Owner timely receives Notice of Contractual Retainage (as discussed above) it should not release the statutory retainage to the General Contractor until after the deadline to file a Lien for contractual retainage has passed.  However, Property Owners do not always know or follow the law.  Therefore, best practice is to always file your Mechanics Lien Affidavit for withheld contractual retainage within no later than 30 days from completion of the Project as opposed to waiting until your deadline.

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