In the construction industry, securing your project payments can be a challenge. In Texas, however, it’s a huge challenge.
Yes, as we’ve written on many occasions in the past, the state of Texas has the most complicated and confusing mechanics lien and notice requirements in the entire United States. Bam! There you have it!
But when has any self-respecting Texan ever shied away from a tough fight? Remember the Alamo?!? Taking on impossible challenges is such a common trait in Texas that it’s practically part of the DNA!
But just because a Texan welcomes a good fight and loves a tough challenge, that doesn’t mean that you shouldn’t do everything you can ahead of time to prepare for the coming battle, and perhaps even move the odds a little bit in your favor. With that in mind, here are 5 common mistakes that Texas contractors can’t afford to make when it comes to getting paid on their projects.
5 Mistakes Texas Contractors Can’t Afford to Make
1. Forgetting to Send a Monthly Notice for Each Month That You Do Work on a Project
When we say that Texas has the most challenging lien and notice requirements in the entire country, the Texas Monthly Recurring Notice requirement (also known as the “Monthly Fund Trapping Notice”) is the chief reason why.
Just like the state itself, the Texas notice requirements are in a league all their own!
2. Not Understanding All of the Lien and Notice Requirements
This is an easy mistake to make, because there are so many requirements that must be managed. Seriously! Take a look at the Texas page in the construction payment resources section of the zlien website and you’ll see what we mean. Lots of information there to keep straight!
You know that Jeff Foxworthy joke, “You might be a redneck if…”?
Well, for folks in the construction industry you could say, “You might be a contractor in Texas if…you’re worried about Homestead requirements!”
Like so many other aspects of Texas’ lien laws, the Homestead Act, and how it affects lien rights, is yet another one of those “only in Texas” situations that must be managed in order to guarantee payment.
There’s also yet another unique-to-Texas requirement, this one mandating the use of Construction Trust Fund accounts on residential homestead projects. While this latter requirement primarily affects general contractors, it’s important for all industry participants in Texas to be familiar with how these special accounts work.
4. Not Including All of the Required Information on Your Notices and/or Lien Claim
We’ve already taken a brief look at the Texas notice requirements (above). But when it comes to filing a lien claim itself, Texas isn’t about to let anybody off that easily! For a closer look at the requirements to file a mechanics lien in Texas, take a look at this article.
5. Cutting it Too Close to the Deadline
Alright, this is something of a gimme, since the importance of lien and notice deadlines is hardly unique to construction companies working in Texas. But part of what makes managing deadlines in Texas so difficult is that there are so many of them! There isn’t just one notice deadline – there’s a deadline for every month that you’re on the project! And all it takes is one missed deadline for your lien rights to potentially buy the farm.