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What? You are Foreclosing? A Mechanic’s Lien Nightmare!

Mon, 12/18/2017 - 10:00 -- admin25

by Tracey L. Williams

You just built and moved into your dream home and you receive a letter demanding payment for labor and/or material used in your home’s construction and enclosing a copy of a Mechanic’s and Materialman’s Lien Affidavit filed against your property. The letter threatens foreclosure of the lien if the debt is not paid. You are taken aback because you paid all of your bills. What do you do?

Threat of foreclosure is scary. First, know that a mechanic’s lien may not be foreclosed without a court order authorizing foreclosure. A lien claimant is not entitled to foreclosure unless and until they prove their lien is valid and enforceable. Moreover, because of the statutory and constitutional protections relating to homesteads, the procedure for perfecting a lien against a homestead is stringent.

The requirements for perfecting mechanic’s liens in Texas are quite cumbersome and often trip up less sophisticated laborers even when not related to residential homesteads. In order to enforce a mechanic’s and materialman’s lien against a homestead, the work must be the subject of a written agreement signed by the homeowner, both husband and wife if married, and the agreement must be signed before work is done. Additionally, the agreement must be filed with the county clerk in the county where the property is located. If the homeowner entered into an agreement with a builder that complies with these requirements, then any of the builder’s subcontractors may rely on the builder’s agreement. They must, however, still comply with the other pre-requisites to perfecting their lien, such as timely filing the lien affidavit with the county clerk and timely sending any statutory notices concerning the claim. Residential lien deadlines are mostly shorter than commercial lien deadlines.

If the claimant contracted directly with the homeowner, the claimant may be entitled to a constitutional lien. The Texas Constitution protects homesteads from forced sale. Consequently, no constitutional lien arises in connection with new construction on a homestead if the work was not contracted for in writing. Additional requirements apply to renovations or repairs, but are not discussed herein.

So, you are convinced the lien is improper—what are your options? Sometimes the quickest way to get a lien removed is to reason with the lien claimant (or threaten to file a fraudulent lien action). Assuming cooler heads do not prevail, the lien could be discharged by the filing of a bond to indemnify. Under Texas law, a purchaser, title insurer, or lender may rely on the record of the bond and notice to the same extent as a recorded lien release. Alternatively, suit may be filed to remove cloud on title, for a determination that the lien is invalid or unenforceable and, if applicable, for damages incurred as a result of fraudulent lien filing.

If suit is filed, the fastest way to remove an invalid and unenforceable lien is through the summary lien removal procedure found in the mechanic’s lien statute. The summary procedure is available with respect to homesteads if no contract was executed or filed as required, or if the required statutory warnings are not included in the lien affidavit or notice of claim. At least 21 days’ notice of the hearing on the motion to remove the lien must be given. If the Court determines the motion should be granted, then the court must enter an order removing the lien, which is not subject to interlocutory appeal.

The order to remove the lien must set the amount of security required by the lien claimant to stay removal of the lien and may not exceed the amount of the lien claim. The lien claimant has 30 days from the date of the order to file a bond or other security to stay the lien. If they fail to do so, the owner may file a copy of the order of removal with the county clerk, together with a certificate from the court clerk stating that no bond was filed and no order staying the order to remove the lien was entered. Once filed, the claim or lien is removed and extinguished as to a creditor or subsequent purchaser for value who obtains an interest in the property. The removal of the lien does not, however, constitute a release of liability of the owner to the claimant, if any exists. However, the threat of foreclosure is gone.

Tracey L. Williams is an Associate at Peckar & Abramson, P.C. She can be reached at twilliams@pecklaw.com.

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