Texas’s HB 2237, an extensive overhaul of the state’s lien system, recently went into effect at the beginning of this month (January 1, 2022). It reforms, and in many cases simplifies, the complex requirements of lien perfection under Texas law. The bill, signed by Gov. Abbott in June, revises Chapter 53 of the Texas Property Code. While the overall effect of these changes is to simplify the process, lien claimants will need to be familiar with the old and new system depending on the date the original contract was executed.
What date matters?
The changes to Chapter 53 took effect at the beginning of the year, but the changes only apply to an original construction contract (one where the project owner is a party). So, if the original contract is entered into on or after January 1, 2022, the new changes apply. This means that for ongoing projects entered into in or before 2021, the old lien rules will continue to apply, likely for the life of the project.
Simplified notice requirements
HB 2237 brought a significant overhaul to § 53.056 of the Property Code. The old version of the rule requires two separate rounds of notice for claimants who are not the original contractor. The old rules require a claimant to give notice to the original contractor not later than the 15th day of the second month following each month in which the claimant labored or delivered materials. But if the debt was not subsequently paid, the claimant had to give a second notice, this time to both the project owner and the original contract, and on a date not later than the 15th day of the third month following each such month.
The revisions to § 53.056 streamline the process. When commercial construction projects are involved, the claimant does not have to give statutory notice in two separate months for the same unpaid work or materials. Rather, a claimant only must give notice to the owner and original contractor not later than the 15th day of the third month after each month in which the unpaid labor or materials were provided. Tex. Prop. Code § 53.056(a-1)(1)(A).
For residential construction projects, the same notice must be given not later than the 15th day of the second month after the month during which unpaid labor or materials were provided. Tex. Prop. Code § 53.056(a-1)(1)(B).
Statute of limitations changes
Under the old version of § 53.158, a claimant was required to file an action on the lien within the later of two years after the last day it could file an affidavit for a lien or within one year after the completion, termination, or abandonment of the work under the original contract. The new rules, however, require that a suit for foreclosure of a lien be filed by the first anniversary of the last day on which a claimant could have timely filed its affidavit for lien.
The one one-year limitation applies to all types of construction projects (including residential projects). The legislature even repealed a separate section of the code dealing with the lien foreclosure process in residential projects. However, a claimant and then-current owner of record may agree to extend the one-year limitation with a recorded writing, up to one additional year.
Conclusion
In sum, the updates to the Texas lien law passed in HB 2237 should ease the notice burden on claimants. However, claimants will want to be familiar with both regimes for the near future, as new subcontracts may be governed by the old rules for some time to come. Additionally, claimants should be aware of the shortening of the period during which they can foreclose on liens, and act accordingly.
Joshua’s practice focuses on the representation of general contractors, subcontractors and suppliers in construction disputes. As a litigator, Joshua prioritizes the business needs of his clients to achieve their goals in an efficient and cost-effective manner.
