In this video, Attorney Shea Krauskopf talks about the complex rules for recording M&M liens in Texas. The M&M abbreviation refers to Materialmen’s and Mechanic’s liens.
Summary of Recording M&M Liens in Texas
Hi, my name is Shea Krauskopf. I’m an attorney with the law firm of Wadler, Perches, Hundl & Kerlick, and I’m here today to discuss Materialmen’s and Mechanic’s Liens. They’re often referred to as M&M liens. And that’s how I’ll refer to them throughout this video.
So before we get too far, it’s important to note that you’re not recording an M&M lien on the individual general contractor. Instead, you’re recording the lien on the property of the owner. So it’s important to keep that in mind before recording these liens. And frequently, that’s a misconception with general contractors and subcontractors.
So as I said, we’re going to discuss several key considerations. The first thing to consider is what type of project you’re working on. There are big differences in the rules that govern residential properties versus commercial properties. So it’s very important to know which type of project it is before the start of the project.
We’ll Cover Recording Liens for Commercial Properties
For today’s video, we’re going to stick to commercial properties, and we’re going to discuss the considerations involved in recording an M&M lien on a commercial property. So the first big thing to consider after you’ve determined whether the property is commercial or residential is to consider what level of contractor you are. That will greatly impact your filing dates and your notice provision dates. So it’s important before you even start the project that you understand what level of contractor you are.
Recording Your M&M Lien Depends on Which Level of Contractor You Are
There are generally three levels in Texas: the original contractor, a subcontractor, and a sub-subcontractor. The original contractor will have a contract directly with the owner of the property. They’re going to be the person communicating with the property owner and then hiring subcontractors underneath them.
A subcontractor will have a contract directly with the original contractor and not the property owner. And after that, a sub-subcontractor will have a contract with a subcontractor and not the owner of the property or the original contractor. So it’s vital to determine before you start the project what level of contractor you are because this next part will be greatly dependent on what level of contractor you are.
Recording M&M Liens as the Original Contractor
So the original contractor certainly has it the easiest when recording an M&M lien. Unlike a sub-contractor or a sub-subcontractor, the original contractor simply has to record the lien affidavit and is not required to send any additional notice provisions except after the lien is recorded. So the original contractor has merely to record the lien affidavit by the 15th day of the fourth month after the project or after the debt accrues.
Generally speaking, the debt begins to accrue when the project is completed, or the contract is terminated. So by way of example, if you’re the general contractor on a project and you haven’t been paid for the month of March, you’ll have to record your lien affidavit with the county clerk of the county in which the project is located by July 15th. It’s also super important to remember that there is a notice provision after you recorded the lien affidavit. And that is, you have to provide the owner of the property notice that you’ve recorded the lien within five days of recording the lien. So it’s super important that that’s taken care of as well.
Recording Liens as the Subcontractor
So moving forward, if you’re the subcontractor on the project, you will have an additional notice provision that the original contractor is not burdened by. If you have a contract with the original contractor and not the owner, you first have to give the owner and the original contractor your written notice of an unpaid claim by the 15th day of the third calendar month following each month in which you performed labor or delivering materials in which you haven’t been paid for.
As a practice tip, it’s also important to send these notices via certified mail return receipt requested. That way, you can prove that the original contractor or owner actually received the notices. So, for example, as you performed work or delivered materials in March, and you’ve not been paid for that month, you must send notice to the owner and general contractor by June 15th. Also, keep in mind that if you’re not paid for multiple months, you will also have to send these notices for each following month that you haven’t been paid for. So, for example, if you were not paid for April as well, you’ll have to send another notice to the owner and original contractor by July 15th.
If you still aren’t paid after you’ve sent your notices, you’ll then have to record your lien affidavit by the 15th day of the fourth month after the last month in which labor was performed, or materials were last furnished. So again, by way of example, after you sent your notices of the last month to perform work in was April, you’ll have to record your lien affidavit by August 15th.
Also, keep in mind that you again have to comply with the five-day rule. So you have to provide the owner notice that you’ve recorded a lien within five days after recording that lien at the county clerk’s office, within the county in which the project was completed.
Recording Liens as the Sub-Subcontractor
So finally, moving on to the sub-subcontractor, and this is where it gets a little bit more complicated. And for a warning as a sub-subcontractor, you really got to be on top of this because your notice provisions are very tight. So if you have a contract with a subcontractor and not the owner or original contractor, your deadlines are even tighter.
So to start, you’ll have to give written notice to the original contractor not later than the 15th day of the second month following each month in which you performed labor or provided materials. So by way of example, if you’ve not been paid for the month of March, you must send notice to the general contractor by May 15th. As a practice, you should always send these notices certified mail return receipt requested as well. Also, another practice tip, even though you’re only required to send this first notice to the general contractor, you might as well go ahead and send this notice to the subcontractor that you were hired underneath as well.
Next, if you still haven’t been paid, you have to send a second notice to the general contractor and the project owner by the 15th day of the third calendar month for which work was performed and you were not paid. Again by way of example, if you haven’t been paid for March, you’ll have to send your first notice to the original contractor by May 15th and your second notice to the original contractor and owner by June 15th.
Finally, if you still haven’t been paid after you’ve sent both of your notices as the sub-subcontractor. You can go ahead and record your lien, but it has to be recorded. Your lien affidavit has to be recorded by July 15th.
Your Lien Will Probably Not be Valid if You Miss a Deadline
So as you can see, recording M&M liens can be complicated, and there are very strict notice deadlines that you have to comply with. These statutes are interpreted very strictly by the courts, and unfortunately, your lien will probably not be valid if you miss a deadline.
So, therefore, it’s super important to contact an attorney who has experience recording these liens to assist you through this process. So again, my name is Shea Krauskopf. I’m with the law firm Wadler, Perches, Hundl & Kerlick, and I thank you for watching.
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