I don’t think there is anything earth shattering in the article, but it is good to see some actual numbers on Mechanic’s Liens being filed.  First, you should probably take into account this is for Houston, so for other parts of the country the trend probably doesn’t apply.  I would think it’s a pretty good representation for the Dallas area though.

Update: This was actually a reprint from the Louisville area.  There is a Jefferson county near Houston and was reading it out of the Houston Journal so assumed it was about the Houston area…missed the part about it being a reprint.

Fewer filings of mechanic’s liens is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

Here are three of the reasons he gives in his article:

- “Without a mechanics lien, you can only sue the party you contracted with. With a lien, you can sue the property owner, those up the contracting chain from you, and the surety bonding the project.

- A mechanics lien can prevent a property from being sold, transferred or refinanced.

- Without a mechanics lien, you have no security when you file suit on your breach of contract claim. With a lien, your claim has the property as security.”

I would probably add that a Mechanic’s Lien can survive Bankruptcy in some circumstances.  Since it’s tied to the property, not the person, unlike a lawsuit or judgment.

Why You File Mechanics Liens is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

In order to answer this question and how it was able to work out for my client, you have to know something about the recording process in Texas.  All deeds, liens, releases, and property records are filed in the records department of the county in which your property is located.  Most counties try to cross reference all document recordings through a Grantor, Grantee, and Property index.  What this means is that the document has a filer (which is the Grantor), a person to whom the record is being filed against (which is the Grantee), and attaches to a particular property through legal description and/or address.  In the mechanic’s lien context, the person filing the lien is the Grantor and the person or company to whom the lien attaches (who owns the property) is the Grantee.

Next, it is important to know how documents that have been filed are removed.  First of all, they are never really “removed.”  You can always see what was filed throughout the history of the property.  However, there are various instruments that can be filed to “release” a lien, “waive” rights to a claim, “cancel” a deed of trust, or “order” a lien to be invalid.  So, the question remains “What happens when you file a lien on a property which is not resolved through payment or release and which was never foreclosed upon?”

Throughout time, many people have given their legal opinion on this.  Legally, you have a deadline to file for foreclosure of your lien.  If you fail to foreclose, your lien is oftentimes considered “invalid.”  But is it truly “invalid?”  What happens if a first lien holder forecloses before you?  The law says that your lien is “foreclosed” out.  But does the lien go away?

The answer is that the only way to clear the title and “remove” the lien is to file a document removing such lien.  If you fail to timely foreclose on your lien, your lien document is still on file and is still attached to that property.  If a bank forecloses its’ superior lien, your lien technically is supposed to be foreclosed out, yet it is still on file in the county records and attached to that property.

So, as you can see, this is very complicated in practice.  What the law says is not necessarily what happens in reality.  The county clerk’s office does not have someone pulling liens that are no longer considered valid or that have been foreclosed out.

So, where does this leave you?  Many times, it leaves you with some bargaining power down the line.  Often times, I will have a title company contact me asking for a payoff amount for a lien I filed years before.  In this situation, there is rarely an argument as to whether the lien is still valid just how much my client will accept to release its lien.  This was the situation for the client I mentioned earlier in the post.

Other times, a bank will call us.  They foreclosed on their lien but there is still a cloud on the title which they need to remove (i.e. my client’s lien).  At that point, we enter into negotiations on how much it will take for my client to release the lien.

There are also those times where a demand is made upon you to remove your lien because you have failed to foreclose and the statute of limitations have passed.  In those situations, the lien claimant often times removes their lien without being paid.

Every situation is different.  There are some wins and some losses.  However, by understanding the filing process it helps mechanic’s lien holders understand that there are options past foreclosure.

Didn’t foreclose on your Mechanic’s Lien? What should you do now? is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

I’m going to focus on properties that don’t have bonds, since those really don’t involve Mechanic’s Liens.  The intent of the law is to allow a way for contractors and suppliers to secure a method of payment if they are not paid by the GC.  So if everything goes according to plan, when the construction is substantially complete, the title to the property is clouded and the owner and/or builder or general contractor must work out a payment with the mechanic’s lien holder to remove the cloud of title.  So what happens if the stars don’t line up and that doesn’t happen?

If for some reason this doesn’t work and you don’t get paid or the payment does not come quickly, you can also institute a suit to foreclose on your mechanic’s lien.  Just like how a bank can foreclose their lien if they don’t get paid, you can institute a lawsuit to obtain an order from a District Court foreclosing (or allowing you to sell at the county’s monthly foreclosure sale) the property subject to your lien.  In addition to, or in the alternative, you can seek an Order from the Court allowing you to enter the property and remove a “removable” from the Property to help compensate you for the amount owed to you.  Generally, you file a Petition in court alleging non-payment and proving that you have filed a valid lien affidavit.  There are many rules and timelines that go into the process; however, there are a few that you should be specifically aware:

Non-Residential – You have 2 years after last day you could have filed the lien affidavit or 1 year after completion, termination, or abandonment of the work under the original contract under which the lien is claimed, whichever is later.

Residential (but not homestead) – You have 1 year after last day claimant could have filed lien affidavit or 1 year after completion, termination, or abandonment of the work under the original contract under which the lien is claimed, whichever is later.

Homestead – you are unable to foreclose on a homestead but you are able to seek an order from the court to remove any “removable” that can be removed to help satisfy the debt.

A Removable – this is generally something you provided for the project that can be removed with little or no damage.  The Texas courts have held that items such as these are considered removable:

• Garbage disposals and dishwashers,
• Air conditioning and heating system equipment such as furnaces, air conditioning coil, compressor, thermostat, and condensing unit,
• Windows and doors,
• Lighting fixtures, cabinets, chimes, buttons, mail boxes and lamps, and
• Pumps fastened to beds of concrete.

Here are some examples that the Courts have considered to be non-removable:

• Concrete roof tiles,
• Window frames, and
• Cabinets.

If you decide to go through the process of foreclosure you really need to look at this like any other business decision.  This is a real lawsuit and could be potentially costly if there is a dispute or if the facts aren’t straight forward, in some situations, if your lien is not for a large enough amount, equity would indicate that it is not financially worth your while to pursue your lien through a foreclosure.

Next time I will continue this discussion to discuss what happens if you fail to foreclose on your mechanic’s lien within the time provided for by law

Foreclosure of Your Mechanic’s Lien is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

• 1st notice letter to the GC is timely for work done any time after April 1, 2010.
• 2nd notice letter to the GC & Owner is timely for work done any time after March 1, 2010.
• Your mechanic’s lien is timely for work done any time after February 1, 2010.

Residential – 2nd Tier Commercial – Specially Fabricated Claimants:

• Notice letter to the GC & Owner is timely for work done any time after April 1, 2010.
• Your mechanic’s lien is timely for work done any time after March 1, 2010.

June 15th – Texas Mechanic’s Lien Deadlines is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

• 1st notice letter to the GC is timely for work done any time after March 1, 2010.
• 2nd notice letter to the GC & Owner is timely for work done any time after February 1, 2010.
• Your mechanic’s lien is timely for work done any time after January 1, 2010.

Residential – 2nd Tier Commercial – Specially Fabricated Claimants:

• Notice letter to the GC & Owner is timely for work done any time after March 1, 2010.
• Your mechanic’s lien is timely for work done any time after February 1, 2010.

May 15th – Texas Mechanic’s Lien Deadlines is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

Obviously, any attorney would tell you that all contracts should be in writing. However, it is possible in Texas, even though it is more difficult, to enforce a lien based on an oral agreement. However, if the property involves a homestead, a lien is not enforceable unless a written agreement is signed by both the husband and wife and filed in the appropriate property records department where the property is located.

So, if you happen to have not been paid on a project which involved an oral contract or agreement, don’t give up all hope of being paid. The best bet is to contact your attorney to see whether or not this property is considered a “homestead” in accordance with the Texas Property Code and whether you meet the other requirements for a valid lien.

Oral Versus Written Contracts is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

A constitutional lien is the foundation of Texas lien law and arises from the Texas Constitution, Texas Property Code, and Texas Government Code. However, its scope is limited. The Texas Constitution states that mechanics, artisans and materialmen of every class, shall have a lien upon the buildings and articles made or repaired by them for the value of their labor done thereon, or material furnished thereof; and the Legislature shall provide by law for the speedy and efficient enforcement of the liens.

The constitutional lien applies to original contractors, not to subcontractors or derivative contractors.

• It is self-executing and acts independently of any legislative act.
• To avail oneself of the constitutional lien, you must have a direct contractual relationship with the owner.
• You can assert a constitutional lien by filing a form similar to the statutory lien affidavit.
• If you have a contract with the owner, you may desire to assert a constitutional lien if the filing time period for the statutory lien has expired.
• A constitutional lien may be filed under the applicable two- or four-year statute of limitations.
• A constitutional lien is only binding on an article or building that has been made or repaired by the claimant

There is no constitutional lien on public works, buildings or projects. The real benefit of Constitutional Liens is that you are not required to send a notice letter prior to filing the lien, you don’t have the stringent deadlines, and they are much more difficult to dispute if you truly qualify.

Texas Constitutional Liens – What are they? is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

Being an Attorney for many clients in the construction industry I get a broader industry perspective than the lone sole contractor, sub-contractor or supplier.  For instance, I usually know if residential construction projects are having more payment problems than commercial projects or vice versa.  I know what bond companies are easy to work with and which are not.

So the other day I was talking to a client about one matter when he just mentioned that he ‘may’ have another one for me.  I inquired more about it and when he was done, I told him that his ‘may’ was actually a ‘sure thing’.  His potential matter related to a specific General Contractor building an anchor store in Houston.  He was ‘promised’ that he would get paid and to just give it a month (which would have put him past his lien deadline).  What he didn’t know is the previous week I had filed a lawsuit to foreclose on a property in Dallas that the same General Contractor had built for the same retail chain.   So the odds that he would give up his lien rights and not get paid were actually pretty high.

So, yes, people can try and do liens themselves or use a online service to preserve their rights, but they give up something important (beyond probably not doing it right).  When you go to a law firm, experienced in the area of construction litigation and commercial collections, you have the added benefit of a wealth of knowledge regarding the financial viability of particular projects and General Contractors, Builders, Subcontractors and Suppliers in and around the DFW area and even in some cases, throughout the State of Texas.   Many times, we know who is paying, who is not, what jobs are having funding problems, which parties are known to be “slow pays,” “no pays,” or even continuously in litigation.  To most clients, this information is almost invaluable and is a benefit you can get from your law firm without having to spend any additional money.

Are You Going to Get Paid? Ask a Construction Lawyer is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

If your company is already set up as a legal entity, you have taken the first step to protect yourself and your assets personally in the event of a lawsuit. However, many business owners believe that forming a Corporation or LLC guarantees protection from that point forward, if you only spent $150 online I’m still talking to you too. On the contrary, maintaining your company as a separate entity, including exercising proper formalities, such as regular corporate meetings with corresponding minutes, is essential to personal liability protection.

Another common misconception I hear from business owners is that a small business, or a businesses with sole ownership, doesn’t need a corporate entity.  All businesses, regardless of size, have the potential for legal liability. It may be through contracts with customers or vendors, or being accused of a wrongful act. Regardless of the size of the business, defending against a lawsuit can create hardship on the company. However, it can be devastating for the owners personally if there is not proper liability protection, because the person suing you can go after not only your business and its assets, but you personal assets and property as well. Additionally, you can personally be liable for your business’s debts.

Do you fall under one of these  scenarios?  Do you have a corporation but don’t know what a corporate book is?  Don’t know what corporate minutes are?  Know about them but haven’t done them for 10 years?  Or have you never registered your company as a formal Inc or LLC with the Texas Secretary of State?  Perhaps you ordered your corporation online and they sent you some documents or a corporate book to fill out but you either didn’t do it or don’t know if you filled it out properly.

Surely you would agree that it is not wise to not have health insurance or automobile insurance, right?  Then why would you own a company in which the liability of owning the company could devastate your family for countless years simply because you failed to understand and follow simple guidelines to protect your business.  Don’t let this happen to you!

Here is a document that contains some of the reasons that you could Lose Corporate Protection

Online Corporate Formation – You Get What You Pay For! is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney