Why are the Texas Mechanics Lien and Construction Notice laws so confusing?
It is apparent that these laws are clearly the most clumsy in the nation, and unfortunately, the confusion is simply the victim of very poor drafting by the Texas legislators. We can all cross our fingers that the state will one day clean up the mess (unlikely, since they appear to be quite proud of it), but must comply with them in the interim.
Graph That Depicts The Texas Construction Notices Applicable To Your Company
Texas laws are confusing because they are poorly written, but not necessarily because they are overly burdensome for compliance. It’s actually quite simple and quite liberal, as most companies will not need to send a notice of any sort until a client account is in or near default. So why is the Texas construction notice framework so confusing?
Texas Construction Notices Have No Name
This sounds dumb, but I really think that some of the confusion about Texas notices is that they are not formally named. People call them all sorts of things, and they are quite passionate about the label. If we say we sent a “Three Month Notice,” a party might get very upset because it was supposed to be a “Fund Trapping Notice.” AH! It’s the same thing!
Texas construction notices go by many names including: (i) Lien Notices; (ii) Notices of Intent to Lien; (iii) Preliminary Notices; (iv) Two Month or Three Month Notices; (v) Second Month or Third Month Notices; (vi) Fund Trapping Notices, etc.
Don’t fret – it’s virtually all the same thing.
I’m sure I’ll have a lawyer get his panties in a wad about me saying this and possibly leave a comment to the post to point out the nuances of distinction between a two month and a three month notice, or a notice of contract retainage or a notice of specially fabricated materials, or the like. Or possibly you’ve been advised by an attorney about all this stuff. These attorneys suffer from the curse of knowledge. What you need is a simple explanation.
Determine What Type Of Notice Your Company Needs To Send With Graph
Now that you are not suffocated by terminology, it is time to determine what notices you’ll need to send to preserve your lien rights. I’ve prepared this helpful chart. Find where you belong and follow the instructions.
It’s this simple people.
If you contracted with the owner, you need not send any notices. If you contracted with the prime, you need only send the “Three Month Notice.” If you contracted with anyone else, you must send a “Two Month Notice” and a “Three Month Notice.”
The only exception to this is the Notice of Specially Fabricated Materials, which must be delivered by anyone who is specially fabricating materials for a project. This is not a Texas detail, it’s a nationwide nuance, and we talked about it on this blog in the past under the Specially Fabricated Materials tag.
Texas Construction Notices: The Timing
The most confusing thing about Texas Construction Notices is not the notices themselves, but the timing. The statutory text reads that notices are due “on the 15th day of the month two [or three] months after the month the unpaid work was performed.” Oh my god, stop this nonsense! This language is impossible.
There are two things you’ll need to know or realize to properly send a Texas construction notice.
First, you’ll need to realize that you only need to send construction notices to protect your lien rights on material or services that are unpaid. If you are paid for your work or materials, you need not send the notice. The only time this causes a problem is when you’re payment is delayed or isn’t due because of long payment terms.
Second, you’ll need to know exactly when the deadline will arise, and understand that the deadline can come (and your notice be required) over and over again. The requirement to send a Texas notice is triggered for each and every month that you have any materials or labor that goes unpaid. We’ve put together a Texas Notice Deadline Chart that is very helpful. It is reproduced below:
Look at the above triangle graph to figure out whether you need to send the 3 Month Notice, or both the 2 Month and 3 Month notice. Then, look to when the “Unpaid work or materials” were furnished. The deadline falls on the 15th day of the month designated in this chart.
If you furnished materials to a subcontractor in January, and your materials were paid for in February, you’ll never need to send a notice. If they were not paid for, however, you’ll need to send a notice before March 15th and April 15th. There is no reason why you cannot put these two notices together.
If you furnished again in February, you would have the same notice requirements – meaning that, yes, if you didn’t get paid and the deadlines started coming along, you’d need to send notices for the February work and materials as well. And then again in March, and in April, and so on.
Texas Construction Notices: How To Keep Track
How can you possibly keep track of these Texas notice requirements? The answer is that you absolutely need some type of system to help you track this stuff. It can’t be done with memory or paper, especially when you’re juggling multiple projects in the state.
Here is a screenshot of the zlien systems Texas mechanics lien and construction notice calculation system. As you can see, you can enter multiple dates for when you furnished unpaid materials or labor, and our system will keep track of all of your notice requirements based thereupon.
Learn more about the LienPilot and how zlien can help you calculate Texas construction notice deadlines and requirements.