A Property Owner is required by statute (Texas Property Code Section 53.101) to retain 10% of the overall Prime Contract amount from the General Contractor for up to thirty days from completion of the entire Project (referred to as “statutory retainage”). Statutory retainage is intended to be a source of funds that unpaid Subcontractors can look to for payment. However, it typically is not enough to satisfy all unpaid claims. As such, to require the Property Owner to withhold the “entire amount of your claim” from the General Contractor (referred to as “trapped funds”), you must include certain statutory language in the Pre-Lien Notice. The trapped funds create an entirely new source of funds in which to satisfy your claim. Moreover, even before you file a Lien, you can make a demand upon the Property Owner to pay your claim from the trapped funds and if the General Contract fails to state in writing that the claim is disputed, the Property Owner is obligated to directly pay you from the trapped funds. Upon receipt of a properly prepared Pre-Lien Notice, the Property Owner must retain the trapped funds until either: (1) the time for filing the Lien has passed; or (2) if a Mechanics Lien was timely filed, until the lien claim has been satisfied or released. All of the Pre-Lien Notices contained in The Lien Professor’s Mechanics Lien Kit include the necessary statutory language to require a Property Owner to trap funds from the General Contractor and include a demand for payment from the trapped funds.
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