If you're a contractor in Texas (or any state), you're probably familiar with mechanics' liens. Although your state constitution may guarantee such liens (as in Texas and California), they typically have complex statutory schemes. If those complex procedures are not followed precisely, it can be fatal to your lien claim.
However, Texas allows for some self-executing liens in specific, limited circumstances. These are called constitutional mechanic's liens, and they are a critical fallback claim if your statutory claim is defective.
Note: If you aren't familiar with the basics of mechanics' liens, see this post for Texas liens (for contracts entered on or after January 1, 2022) and this post for California liens.
What is it?
The constitutional mechanic's lien is a self-executing mechanic's lien. That is, when certain circumstances are satisfied, a contractor only has to perform pursuant to their contract with the owner to have a right to this type of lien. The lien attaches to the property simply by the contractor's performance.
The Texas Constitution states that "Mechanics, artisans and material men, of every class, shall have a lien upon the buildings and articles made or repaired by them for the value of their labor done thereon, or material furnished therefor; and the Legislature shall provide by law for the speedy and efficient enforcement of said liens." Tex. Const., Art. XVI, section 37 (emphasis added).
This section is the basis for the constitutional lien, and the basis of the legislature's authority for guaranteeing the statutory lien (See Prop. Code, Chapter 53).
What work qualifies?
The constitutional lien covers work performed directly "upon the buildings and articles made or repaired," which limits the scope of qualifying work. Tex. Const., Art. XVI, section 37. Those who supply materials that are not incorporated into the project are not entitled to the constitutional lien.
Who can get one?
A direct contractor performing under a written contract with the property owner or purported original contractor (explained below) has the right to the Texas constitutional lien.
Subcontractors do not have the right to a constitutional lien; only those who are in direct contractual privity with the owner or purported owner have the right to a constitutional lien.
What do I have to record?
From a legal standpoint, you do not have to record anything to have a constitutional mechanic's lien: that is what is meant by self-executing. However, if the owner sells the property to a good faith purchaser (someone who buys for value and who did not know about the claim), then you cannot enforce the lien against that purchaser.
For that reason, it is important that you file an affidavit of lien in the county records. The good faith purchaser cannot claim not to have known if the affidavit has been filed, because the filing gives all potential purchasers constructive notice (a court will infer that the purchaser knows about the lien).
Do I still have to file a lawsuit, and how long do I have to file?
If you want to enforce your lien rights, you will need to file a lawsuit. Texas law isn't explicit as to the statute of limitations for constitutional liens, but case law suggests that the period is four years. However, Texas law is explicit that statutory lien claims have a one year statute of limitations (which can be extended one time to two years). For best practices, you may want to file your affidavit in conformity with the requirements of Chapter 53, and to file suit within that one year period.
Bear in mind that Texas case law suggests that courts apply substantial compliance only to the information in the affidavit, not to deadlines.
Why not just comply with Chapter 53?
I agree. Try to conform your internal lien procedures to Chapter 53, and do not rely on the procedures set forth here. The constitutional lien should be considered a fallback position if and when you discover that your statutory lien claim is invalid for some reason (e.g., missed deadline, did not satisfy all required statutory formalities, etc.).
It is also important that you record a lien affidavit. If you fail to do so, then you will lose your right to this lien if the owner sells the property to a good faith purchaser.
Does it matter if the property is a homestead?
Yes. Although constitutional liens are allowed against both residential and non-residential property, the requirements for constitutional liens against a homestead are stricter. Tex. Const., Art. XVI, section 50(a)(5).
For purposes of this type of lien, the baseline is that the homestead is protected from constitutional liens. However, a constitutional lien may attach for work and material used in constructing new improvements on the homestead. The Texas Constitution further requires that the work and material be contracted for in writing, or that the work and material used to repair or renovate existing improvements on the homestead, and:
The work and material are contracted for in writing, with the consent of both spouses, in the case of a family homestead, given in the same manner as is required in making a sale and conveyance of the homestead;
The contract for the work and material is not executed by the owner or the owner's spouse before the fifth day after the owner makes written application for any extension of credit for the work and material, unless the work and material are necessary to complete immediate repairs to conditions on the homestead property that materially affect the health or safety of the owner or person residing in the homestead and the owner of the homestead acknowledges such in writing;
The contract for the work and material expressly provides that the owner may rescind the contract without penalty or charge within three days after the execution of the contract by all parties, unless the work and material are necessary to complete immediate repairs to conditions on the homestead property that materially affect the health or safety of the owner or person residing in the homestead and the owner of the homestead acknowledges such in writing; and
The contract for the work and material is executed by the owner and the owner's spouse only at the office of a third-party lender making an extension of credit for the work and material, an attorney at law, or a title company.
Clearly the requirements are far more stringent if it is homestead property.
What if I contracted with someone other than the owner?
You might still have a right to a constitutional lien via the "sham contract" doctrine (which I discussed briefly in this post). In general, direct contractors must have a contract with the owner. However, if a contractor was actually a "purported original contractor," then the contractor might still have a constitutional lien claim. A "purported original contractor" is one "who can effectively control the owner" or "is effectively controlled by the owner" by common ownership, directorship, etc., or who was hired by the owner "without a good faith intention of the parties that the purported original contractor was to perform under the contract." Tex. Prop. Code section 53.001(7-a), section 53.026.
Consider an example: the property is owned by Ownership Group, LLC. Ownership Group, LLC contracts with Ownership Contractors, LLC for the work of improvement, who in turn hires Small Electrical, LLC. Small Electrical, LLC is a subcontractor, and thus not entitled to a constitutional lien. However, during the course of performance, Small Electrical, LLC discovers that Ownership Contractors, LLC has one manager: Ownership Group, LLC. By this "sham contract" doctrine, Small Electrical, LLC is treated as though it were an original contractor for purposes of the constitutional lien.
Conclusion
Texas constitutional mechanics' liens are an important tool for enforcing payment. They are self-executing, and important for those contractors who make some mistake in satisfying the requirements of Chapter 53's statutory liens. However, these should be used as a fallback, and not relied upon because they are only available to original contractors for a narrow scope of work and, in the case of residential projects, in even more limited circumstances.
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