Both the Texas Property Code AND the Texas Constitution set certain requirements that Texas contractors must meet to have a valid lien against homestead. Read on to see what you need to do, one very job, to make sure you can file a lien against homestead. At the end, we’ll tell you what you can do if you can’t file a homestead lien.
I. The Requirements
New Construction
Contractors on new construction jobs have it pretty easy, at least when it comes to homestead liens. Pursuant to the Texas Constitution, Article 16, and the Texas Property Code, Sec. 53.254, you must:
- Have a written contract;
- If married, both spouses must sign;
- File your contract with the county clerk in the county where you performed the job; and,
- Include a disclosure statement pursuant to the Texas Property Code, Sec. 53.255.
Pro tip: If you forget to do Numbers 3 and 4, don’t worry. Number 3, filing with the county clerk, can be done by your attorney handling your lien affidavit, and Number 4, failing to include the disclosure statement, won’t invalidate your lien.
Remodel/Renovate Existing Property: Requirements Under Texas Constitution and Property Code Section 53
Contractors handling existing renovations have a lot more hoops to jump through to establish a lien against homestead. Pursuant to the Texas Constitution, Article 16, and the Texas Property Code, Section 53, you must:
- Comply with Numbers 1-4 listed above, PLUS follow the additional below requirements;
- The contract must be signed 5 days or more after any application for credit by the owner (unless emergency repairs);
- The contract must give owner an option to rescind within 3 days after execution without penalty (unless emergency repairs); and,
- The contract can only be signed at: (i) a lender’s office making the extension of credit for the work or materials, (ii) an attorney’s office, or (iii) a title company.
Remodel/Renovate Existing Property: Additional Requirements Under Property Code Section 41
While not required to have a valid homestead lien, the Texas Property Code, Section 41.007, imposes even more requirements for residential remodeling construction.
The contract must contain:
- The contractor’s certificate of registration with Texas Residential Construction Commission, if contractor is required to register as a builder;
- The address and phone for homeowner to file complaint with TRCC (if the contractor is required to register); and,
- A warning pursuant to Texas Property Code Section 41.007(3).
So, what happens if you don’t comply with Section 41.007? While failure to comply won’t invalidate your lien, it can constitute be considered a “false, misleading, or deceptive act” and put you at risk for suit under the Deceptive Trade Practices-Consumer Protection Act.
II. What Should Contractors Do?
It goes without saying, contractors should follow the above requirements on every job — it’s the only way to have a valid lien against Texas homestead property. Our flowchart (previewed above) gives you step-by-step guidance to ensure you can file a homestead lien. Want your own copy? Head on over to our Instagram or Facebook pages to get it.
What happens when you don’t comply?
- Sue for Breach of Contract
First, you can still potentially sue the customer for breach of contract. Your best option is to discuss this with a litigation attorney. At Texas Liens, PLLC, we have referral relationships with construction litigation attorneys, and, even if we can’t file a lien for you, we can refer you to great litigation counsel.
- Change Your Company Procedures To Secure Future Lien Rights
Second, you should change your company procedures going forward, to make sure you can file a mechanics lien in the future. (Need a refresher on why mechanics liens are so important? Check out our other post Can’t I Just Sue Them?)
The best way to do this? Have an attorney do a comprehensive review of your current contracts and procedures. At Texas Liens PLLC, we offer a construction contract service. We will draft you a custom contract that includes all of the necessary requirements and disclosures for fixing a lien against homestead. We’ll even give you a checklist your employees can use on every job, to make sure you stay compliant.
