House Bill 2237

House Bill 2237, which the Texas Legislature passed in 2021, changes the way mechanic’s liens and bond claims are perfected on private projects in Texas. However, the new law only applies to projects where the prime contract was executed on or after January 1, 2022. Projects where the prime contract was executed before January 1, 2022 are still governed by prior law, and lien and bond claims will continue to be perfected the same way as before on those projects. The bill also only applies to private construction projects; it did not make any changes to the statutes that govern bond claims on public projects.

What's New with the Mechanic's Lien Statute

The second month notice and specially fabricated materials notice have been eliminated

Under prior law, in addition to a third-month notice letter (discussed below), claimants who do not have a contract with the prime contractor are required to send a second month notice letter (due by the 15th day of the second month after the labor was performed or materials were furnished). In addition, a special second month notice letter is required to perfect a lien or bond claim for specially fabricated materials that for one reason or another were never delivered to the job site. Both notices have been eliminated and by virtue of the amended statute a claimant is only required to send the third-month trapping notice to preserve a claim for progress payments. (additional notice is still required for retainage).

Statutory form now required for third-month notice for unpaid progress payments

A claimant other than an original contractor must still send a third-month notice letter (due by the 15th day of the third month after the labor was performed or materials were furnished) for each month for which labor or materials are unpaid. However, the new law requires that a statutory form be used. The form may be found in Texas Property Code Section 53.056(a-2).

Statutory form now required for retainage notice letters

A claimant other than an original contractor is also still required under the new law to send a notice letter to preserve a lien or claim for the retainage withheld from the claimant. And the deadline to send that notice is still the earlier of (1) the 30th day after the date the claimant ’s contract is completed, terminated, or abandoned; or (2) the 30th day after the date the original contract is terminated or abandoned. However, the new law requires that a statutory form be used. The form may be found in Texas Property Code Section 53.057(a-2).

Providing a statutory form for claimants to use can be beneficial. However, the language of this particular form is problematic. Instead of simply requiring that the claimant give the owner notice of the existence of a retainage provision in its subcontract, under the new law the “notice” has been changed to a “claim for unpaid retainage,” and the claimant must insert the amount of the unpaid retainage in the claim form.

Further, the form contains a “warning” that “the Owner’s property may be subject to a lien if sufficient funds are not withheld from future payments to the original contractor to cover this debt.” But the owner should already be withholding 10% retainage from the original contractor as mandated by the statute. So, the warning language could cause some concern and confusion on the part of owners, which could lead to delays in payment or withholding of additional funds by the owner.

The time to file a lien for unpaid retainage has been shortened

Under the old law the deadline to file a lien for retainage is the 15th day of the 4th month after completion of all work under the original contract. The new law shortens that deadline to the 15th day of the 3rd month after completion of all work under the original contract.

The time to file suit to foreclose a mechanic’s lien has been shortened

The prior statute provided that suits to foreclose a mechanic’s lien had to be filed within two years after the claimant’s deadline to file the lien (unless a payment bond was on file before the filing of the lien). The new statute reduces that period to one year.

Deadlines extended for weekends and holidays

If a notice letter or lien filing deadline falls on a weekend or a legal holiday, the new law extends the deadline to the next day that is not a weekend day or legal holiday.

FedEx and UPS delivery now permitted

FedEx, UPS, and any other “traceable” service “that can confirm proof of receipt” may now be used to send any notice required by the statute. Under prior law, all notices have to be sent by registered or certified mail.

IMPORTANT REMINDER: All of the changes in the law discussed above apply ONLY on projects where the prime contract was executed on or after January 1, 2022. Projects where the prime contract was executed prior to January 1, 2022 are still governed by prior law, and lien and bond claims will continue to be perfected the same way as before on those projects.