In Texas, valid mechanic’s liens allow contractors to enforce their right to payment against the underlying property. A mechanic’s lien is valid if it complies with Chapter 53 of the Texas Property Code, Subchapter C. Subchapter C encompasses claim notice requirements and additional requirements intended to put third parties on notice of the lien claim. It additionally requires lien claimants to file an affidavit claiming the lien. The affidavit must substantially comply with the requirements set out in Texas Property Code § 53.052-53.055. This includes:
Tex. Prop. Code § 53.054.
Failure to comply with the affidavit requirements alone can invalidate the mechanic’s lien which can result in forfeiture of your lien rights. Moreover, pursuing a foreclosure action upon an invalid lien could be fraudulent. But what constitutes as substantial compliance of the affidavit requirements? The answer is unclear; however, the following caselaw offers some guidance.
The Houston First Court of Appeals affirmed the lower court’s ruling that an affidavit substantially complied although the legal description on the mechanic’s lien affidavit was incorrect. Shojai v. Morrell Masonry, No. 01-18-00204-CV, 2020 WL 5552622, at *1 (Tex. App.—Houston [1st Dist.] 2020, no pet.). The owner alleged that the lien did not attach to the property at 1632 Potomac because the description of the property in the Lien Affidavit began as “Lot 1 with following….” and, as designated by him when he platted the land, Lot 1 is 1628 Potomac. Id. at 2.
The contractor argued that the lien attached to 1632 Potomac because the description of the property substantially complied with statutory requirements and specifically identified the property by the correct street address: 1632 Potomac. Id. The court found the affidavit to be in substantial compliance. The court’s rationale for finding substantial compliance is that property descriptions are liberally construed and a correct physical address provides a “nucleus of description” sufficient to “identify the land claimed … with reasonable certainty.” Id. at 4 (quoting AMS Const. Co., Inc. v. Warm Springs Rehab. Found., Inc. 94 S.W.3d 152, 163 (Tex. App.—Corpus Christi 2002, no pet.).
It can be inferred that the court may have found no substantial compliance if the property description was correct, but the physical address was not.
The Dallas Court of Appeals held that a lien affidavit which states more than the amount owed does not invalidate the lien. Gill Sav. Asso. v. International Supply Co., 759 S.W.2d 697 (Tex. App.—Dallas 1988, writ denied). The lien claimant filed an affidavit on June 21, 1985 in the amount $75,986.00 Id. at 700. The affidavit failed to consider a credit that was issued in May 1985. Id. The credit was not applied to the account until August 1985. Id.
The affidavit signer admitted the affidavit amount was incorrect; however, he testified that the account had since been reconciled and the owing amount is $57,365.32. Id. The court found the affidavit to be in substantial compliance. The court’s rationale was the discrepancy did not harm the defendant and the defendant is in a better position because the lien is less than the amount he believed. Id.
We can infer that the court may have found no substantial compliance if the amount owed was more than stated in the affidavit because it would place the defendant in a worse position than he believed.
The Austin Court of Appeals held that a lien affidavit substantially complied although the affidavit failed to include a statement identifying the date each notice of the claim was sent to the owner and the method by which the notice was sent. Mustang Tractor & Equipment Co. v. Hartford Acc. and Indem. Co., 263 S.W.3d 437 (Tex. App.—Austin 2008, pet. denied).
The court cited, “Courts that have addressed substantial-compliance issues have distinguished between mere technical defects, which can be excused, and those defects that are more substantive in nature and, if overlooked, would read a provision out of the statute or prejudice another party.” Id. at 441 (quoting First Nat’l Bank in Graham v. Sledge, 653 S.W.2d 283, 287 (Tex. 1983). Further, the Legislature did not intend the materialman should lose his lien through technicalities of a warning. Id. at 442.
The outcome would have probably been different if the error was more than a mere technical defect.
Mechanic’s lien statutes are liberally construed to protect laborers and materialmen. Courts are more likely to rule that a mechanic’s lien affidavit is valid if it is free of prejudice and substantive errors. However, contractors should still proceed with caution to avoid the risk of forfeiting lien rights and to avoid an unnecessary legal battle.
Anam provides legal counsel with respect to construction law and commercial litigation issues. She routinely represents residential and commercial construction clients throughout the litigation and arbitration processes. Anam’s experience covers a variety of disputes involving construction defects, breach of contract claims, payment disputes, liens, negligence, insurance coverage, and personal injury issues.
Anam has successfully represented general contractors, subcontractors, manufacturers, insurance companies, owners, and individuals in litigation matters.
Contingent payment clauses, known as Pay-if-paid provisions, are often found in contracts between general contractors and subcontractors....
What you don’t know about retainage, and the recent changes to retainage by the Texas legislature, could be a problem. West Mermis examin...