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Residential Construction in Texas: Do Retainage Rules Apply?

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Texas, as mentioned on this blog in multiple places over a period of many years, has exceptionally complicated and intricate laws related to liens, notices, prompt payment, retainage, lien waivers, and everything else related to construction payment.

One common question that many folks in the construction industry have is whether the Texas retainage rules apply to residential projects. Should construction industry participants make sure to comply with retainage requirements and the associated required notices on projects that are residential in nature? Or are residential projects not subject to those additional rules? To find out, please read on.

Retainage Rules Apply to Residential Projects in Texas, as Supported by Texas Law

Some project participants believe that the Texas’ private project retainage rules are not applicable to residential projects under a belief that the Texas lien laws seem to limit themselves to “commercial” and “public” projects.

Notwithstanding the fact that residential and commercial projects are both subsets of “private” projects, Texas’ lien laws contain sufficient wording in the support of the fact that retainage is directly applicable residential projects.

We’ll discuss some of the specifics of that language in the box below.


Further Reading

Follow the link below to read a collection of zlien articles all about retainage and how it can affect getting paid on a project.

Read About Retainage


What the Texas Property Code Says About
Retainage on Residential Projects

Section § 53-057 of the Texas property code sets forth notice and other requirements for derivative claimants (not direct contractors) making a claim against contractual retainage.

This section specifies that: “A claimant may give notice under this section instead of or in addition to notice under Section 53.056 or 53.252 if the claimant is to labor, furnish labor or materials, or specially fabricate materials, or has labored, furnished labor or materials, or specially fabricated materials, under an agreement with an original contractor or a subcontractor providing for retainage.” (emphasis added).

Since section 53.252 is a notice provision specifically related and limited to residential construction projects, it is clear that retainage is contemplated for residential projects, otherwise the notice provisions of 53.252 would be inconsequential and inapplicable.

Further, section 53.101 “Required Retainage” holds that retainage shall be held “During the progress of work under an original contract for which a mechanic’s lien may be claimed. . . (emphasis added).

Since mechanics lien protection is granted on residential projects (provided the requirements are met), it is specifically contemplated by the required retainage provision that residential projects are not exempt, and that TX retainage rules apply.

Further, and providing more support to the position that the legislature intended retainage rules to apply to residential projects, can be found in the fact that other sections of the code related to some aspect of retainage specifically disclaim applicability to residential projects, see Sec. 53-107(e), which states “This section does not apply to a residential construction project.”

So, if the legislature wanted retainage to not apply to residential projects, that specific disclaimer or one like it should appear in the general retainage sections; and, the specific reference to residential notice requirements would not appear.

Accordingly, since:

  • there is nothing specifically limiting the application of the retainage rules, and,
  • the notice provisions specifically mention residential notice requirements, and,
  • residential projects are work for which a mechanics lien may be claimed, then

…it appears that Texas retainage rules apply to residential projects.


Free Resource from zlien

We’ve got a guide for construction industry participants in the great state of Texas that tells you everything you need to know to file a mechanics lien in the Lone Star State. Click on the button below to download your own copy.

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Summary
Residential Construction in Texas: Do Retainage Rules Apply?
Article Name
Residential Construction in Texas: Do Retainage Rules Apply?
Description
Retainage rules do apply to residential construction projects in Texas | Securing payments on construction projects in Texas can be very complicated
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zlien
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Published on Oct 10, 2017

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Nate, along with being a husband, father, Eagle Scout, Teen Jeopardy! contestant, and musician, is the Chief Legal Officer and General Counsel at zlien, a vertical SaaS platform designed to help construction industry participants by promoting a collaborative construction payment process. Nate was recently recognized as one of the nation's Top General Counsels, and is working to get better at it every day. Nate is a licensed attorney in Louisiana and Texas, and a graduate of Stanford University (B.A.) and Tulane Law School (J.D.). He manages and oversees the Lien Genome and zlien's products, processes, and resources, directs the Construction Payment Blog, protects zlien's interests and intellectual property, and performs general counsel duties.

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