Time moves fast when you are in the Construction industry. This is true for Owners, Developers, GCs, Contractors and Suppliers.
Each certainly have their own reasons, but in the end, time is money in commercial and residential real estate. Common issues like the need for ROI, cash flow, lender requirements, contractual deadlines, funding and progress payment releases, regulatory deadlines, service and supplier payments, all are time sensitive.
It is in times like this that two topics come to mind.
First, Texas has very specific lien perfection rules. They are governed by the Texas Property Code and ___
This is important for GCs, Subcontractors and Suppliers alike.
In Texas, all contractors and suppliers must file an Affidavit of Mechanic’s Lien by a certain deadline in order to protect their right to file a lien claim. The deadlines are strictly enforced, and failure to comply can result in a waiver of the lien.
For general contractors, the lien affidavit deadline is the 15th day of the fourth month after the lien trigger – which is the last day of the last month that the project was completed, finally settled, terminated, or abandoned.
The deadlines above also apply to subcontractors and suppliers, with a few additions. Subcontractors and some suppliers also have to send out a notice to the owner and general contractor every month that they don’t receive payment. These notices have deadlines prior to the lien affidavit filing deadline. This preliminary notice is usually called a Notice of Intent to Lien. This monthly notice is served to let a Property Owner and/or a General Contractor know that payment has not been received for a given month.
For Subcontractors/Material Suppliers, the deadline to file a Lien depends upon: (1) whether the unpaid amount is a “progress payment” or withheld “contractual retainage”; and (2) whether you want the Lien to attach to the statutory retainage withheld by the Property Owner from the General Contractor (which you do).
If you were hired by the General Contractor, a Subcontractor, or a Material Supplier, then at the very latest, your deadline to file a Lien Affidavit for unpaid progress payments (or anything other than withheld contractual retainage), is by no later than the 15th day of the third month from when you last provide labor or materials to the Project, excluding warranty work. See Section 53.052 of the Texas Property Code to learn more.
A residential property lien affidavit must be filed no later than the 15th day of the 3rd month following completion of the contract. For example, if the work was completed on June 1st, the lien must be filed by September 15th. If the work was completed on June 30th, the lien still must be filed by September 15th. Commercial property liens get one extra month.
The deadline to file a lien is not extended if the 15th falls on a Saturday, Sunday, or legal holiday. For example, if September 15th falls on a Sunday, the lien affidavit must be filed by Friday, September 13th.
In certain cases, there may also be a notice requirement. Such notices will also have deadlines prior to the lien affidavit filing deadline.
If not careful, these lien rights can be easily waived. These are separate from legal filing limitations, or deadlines.
Second, when unexpected major events occur, one should look to their contracts for what is commonly referred to as a Force Majeure clause.
Generally, a Force Majeure event refers to the occurrence of an event which is outside the reasonable control of a party and which prevents that party from performing its obligations under a contract. CITE
In contracts _____.
Contracts such as Purchase and Sale Agreements, development agreements, Construction related contracts, all may contain these.
What events trigger a Force Majeure is a good, and very case specific, question. You won’t find that answer here, or that it is the same for everyone.
What can be said
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As a business attorney with significant experience in real estate, development and construction disputes, both in Courts throughout Texas and Arbitration Proceedings, _____. Taking smart steps to protect your lien and other legal claim rights is important. Be diligent and protect them, or lose them forever.
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