Pushback on Texas House Bill Gets Pre-Lien Language Dropped

A seemingly innocuous Texas House bill turned contentious after the state House of Representatives' Business & Industry Committee considered a revised version that required subcontractors to send pre-lien notices at the start of each new project.

The bill as originally drafted would not have created a lot of problems for NACM members, said Perrin Fourmy, senior associate at Bell Nunnally and Martin LLP.

However, Rep. Andrew Murr (R), the author of HB2621, gave the committee a revised bill, Fourmy added. "In that bill, he had added a requirement of pre-work notice from all subcontractors."

The angst was short-lived, however. "We realized we needed to alert [NACM Southwest] membership and also make Rep. Murr aware of the concerns," he explained. "Fortunately, we were able to engage with Rep. Murr and remove that language requiring a pre-work notice."

As currently drafted, Texas HB2621 would amend Section 53.024 of property code title 5, "Exempt Property and Liens," to limit the amount of a subcontractor's lien for labor or materials. Under the proposed guidelines, a subcontractor's lien could not exceed:

  • An amount equal to the total subcontract price including labor, materials, overhead costs and other expenses minus the sum of previous payments received by the claimant on the subcontract.
  • The contract price minus previous payments received by the original contractor and the claimant on the subcontract.

In essence, this legislation would ensure that a lien is not greater than the contract price between the owner and the original contractor, Fourmy said. "While it intends to limit the amount of a lien claim, it is practical that an owner would not typically expect a lien for greater than an original contract value. We don't think this will affect the number of liens filed and shouldn't substantially affect the relationships between original contractors, subcontractors and suppliers going forward."

The proposed legislation "appears to be largely designed to address a very rare circumstance where a subcontractor charged more than the original contract was worth," he added. In the normal course of business, "this shouldn't come up … because an original contractor wouldn't agree to pay a subcontractor more than his contract value with the owner; if so, he would be guaranteed to be underwater on a project."

The bill came to NACM Southwest's attention during a public hearing for Texas HB2237, which would change mechanic's lien notice requirements and deadlines. Both bills are currently pending in committee. Read more about Texas HB 2237. 

-Bryan Mason, editorial associate

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Wednesday, 22 September 2021

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