Subchapter K of Chapter 53 of the Texas Property Code (Sections 53.251 through 53.260) is a newly added Subchapter which deals exclusively with residential construction projects. It incorporates the provisions of former Section 53.059 (now repealed), and also adds several new requirements that a contractor must follow in order to perfect a lien on a residential construction project.
In order to have a valid lien against a homestead, the contract must be in writing and signed by both the owner and the contractor before any work commences or material is furnished, and the contract must be recorded with the county clerk of the county in which the homestead is located. Texas Property Code §53.254. If the owner of the homestead is married, the contract must be signed by both spouses. Id. Additionally, the contract must contain a disclosure statement "substantially similar" to that which is provided in Texas Property Code §53.255(b), which is a two-page, detailed statement of a homeowner's rights, liabilities, and obligations regarding residential construction. The suggested disclosure statement also includes a list of suggestions for the homeowner to follow during the residential construction process. The disclosure statement is substantial, and you are advised to duplicate the required language verbatim. Note, however, that Section 53.255(c) states that failure of a contractor to comply with Section 53.255(b) does not invalidate a lien under Chapter 53 of the Property Code, a contract lien, or a deed of trust. It is not yet clear under Texas law, then, what effect there would be, if any, if the contractor failed to include the disclosure statement in its contract with a homeowner.
Additionally, pursuant to Texas Property Code §41.007(a), a contract with the homeowner must also contain the following warning, conspicuously printed, stamped, or typed in a size equal to at least 10-point bold type, next to the owner's signature line on the contract:
IMPORTANT NOTICE: You and your contractor are responsible for meeting the terms and conditions of this contract. If you sign this contract and you fail to meet the terms and conditions of this contract, you may lose your legal ownership rights in your home. KNOW YOUR RIGHTS AND DUTIES UNDER THE LAW.
A contractor's failure to include this notice constitutes a false, misleading, or deceptive act or practice under Section 17.46 of the DTPA. Texas Property Code §41.007(b).
A contractor must also attach to the disclosure statement required by Section 53.255, or furnish to the owner before the commencement of construction, a written list that identifies by name, address, and telephone number each subcontractor and supplier the contractor intends to use and the work to be performed. Texas Property Code §53.256. The contractor is also required to provide the owner with an updated list of subcontractors and suppliers not later than the fifteenth (15) day after the date on which a subcontractor or supplier is added or deleted. Id. The subcontractor/disclosure list must also have the following notice:
NOTICE: THIS LIST OF SUBCONTRACTORS AND SUPPLIERS MAY NOT BE A FINAL LISTING. THE CONTRACTOR IS REQUIRED BY LAW TO SUPPLY UPDATED INFORMATION, AS THE INFORMATION BECOMES AVAILABLE, FOR EACH SUBCONTRACTOR OR SUPPLIER USED IN THE WORK PERFORMED ON YOUR RESIDENCE.
Texas Property Code §53.256(b). As with the disclosure statement required by Section 53.255(b), the failure of a contractor to provide the subcontractor/supplier disclosure list in Section 53.256(b) does not invalidate a lien under Chapter 53 of the Texas Property Code, a contract lien, or a deed of trust. Texas Property Code §53.256(c).
Furthermore, under a residential construction contract, the original contractor must provide to the owner a signed periodic statement which lists the bills or expenses that the original contractor represents will be paid or that have been paid for which the original contractor is requesting payment. Texas Property Code §53.258(a). The contractor is not required to include in the statement the bills or expenses for which the contractor has obtained a valid lien release or waiver from the subcontractor or supplier to whom the bills or expenses are owed if the statement includes a written representation that the balance of any funds that are not itemized in this statement will be paid to either (1)the subcontractor or supplier who provided the lien release or waiver; or (2)the original contractor as reimbursement for expenses incurred, profit, or overhead. Id.
As a condition of final payment under a residential construction contract, the original contractor, at the time final payment is tendered, must execute and deliver to the owner an affidavit stating that the contractor has paid each person in full for all labor and materials used in the construction of improvements on the real property. If the contractor has not paid each person in full, the contractor must state in the affidavit the amount owed and the name and, if known, the address and telephone number of each person to whom a payment is owed. Texas Property Code §53.259(a).
A contractor may not require an owner of real property to convey the real property to the contractor, or an entity controlled by the contractor, as a condition to the performance of the residential construction contract. Texas Property Code §53.260.
A lien affidavit relating to a homestead must meet the requirements of Section 53.254(f) of the Property Code. The affidavit must contain a notice "conspicuously printed, stamped, or typed in a size equal to at least 10-point boldface or computer equivalent, at the top of the page," as follows:
"NOTICE: THIS IS NOT A LIEN. THIS
IS ONLY AN AFFIDAVIT
CLAIMING A LIEN"
Texas Property Code §53.254(f). The affidavit must be filed by a person claiming a lien on a residential construction project not later than the fifteenth (15) day of the third (3d) calendar month after the day on which the indebtedness "accrues." Texas Property Code §53.052(b).
The Property Code also requires that, for a lien on a homestead to be valid, the notice required under other sections to be given to the owner must include a statement which advises the owner of his or her obligations to withhold ten percent (10%) of the contract price or value of the work for thirty (30) days after completion of the construction, and that if the owner withholds the retainage and an amount sufficient to cover any written notice of claim and has paid that amount, if any, to the claimant, any lien claim filed against the homestead by a subcontractor or supplier who does not contract directly with the owner will not be a valid lien. Texas Property Code §53.254(g). This notice provision is expressly set out in Section 53.254(g) of the Property Code, and you are advised to duplicate the required language exactly.
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