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Mechanic’s and Materialman’s Lien

If you have worked as a contractor or subcontractor very long, you have most likely encountered a customer who would not pay for your services. You are not alone. This occurs quite frequently in Texas; so much so that the legislature enacted lien laws to assist you in the collection of your past due invoices. These laws are found in the Texas Property Code.

Who May File A Lien In Texas – Section 53.021 states that the following individuals or entities are entitled to file a lien: a person who labors, specially fabricates material, or furnishes labor or materials for construction or repair of a house, building, improvement, levee, embankment or a railroad, under a contract with the owner or a contractor or subcontractor. In addition, an architect, engineer or surveyor is able to file a lien. And lastly, a landscaper is also able to file a lien.

Property Covered By The Lien – Section 53.022 states that the lien extends to the house, building, fixtures, or improvements on the entire lot where the labor was performed or the materials were supplied. A lien outside of a city or town extends up to 50 acres.

Amounts Covered By The Lien – Section 53.024 states that the amount due and subject to the lien includes the past due amounts plus reasonable overhead cost and profit margins.

Procedure To Perfect A Lien – Section 53.051 begins a long list of sections that must be complied with to “perfect” your lien. Simply filing an affidavit claiming lien by the correct deadline does NOT mean that you have an enforceable lien. A synopsis of the very complex and complicated lien deadlines and other requirements to perfect a lien will be listed here, but this synopsis is not meant to take the place of competent legal counsel in this regard. Generally speaking, the person claiming a lien must file an affidavit with the county clerk in the county where the property is located, no later than the 15th day of the fourth calendar month after the day on which the indebtedness accrued. A person claiming a lien on a residential property must file an affidavit not later than the 15th day of the third calendar month after the day on which the indebtedness accrued.

Accrual of Indebtedness – Section 53.053 states that indebtedness to an original contractor accrues on the last day of the month that the contract has been completed, finally settled, abandoned or terminated. Indebtedness to a subcontractor who has furnished labor or material to an original contractor or to another subcontractor accrues on the last day of the last month in which the labor was performed or material furnished. A claim for retainage accrues on the last day of the month in which all work called for under the contract between the owner and the original contractor has been completed, finally settled, or abandoned.

Notice of Filed Affidavit – Section 53.055 states that a copy of the lien affidavit must be sent by registered or certified mail to the owner of the business or residence not later than five (5) days after the lien affidavit was filed with the county clerk. If the person claiming the lien is not the original contractor, a copy of the lien affidavit must also be sent to the original contractor not later than five (5) days after the lien affidavit was filed with the county clerk.

Additional Notice Requirements For Subcontractors – Section 53.056 states that a subcontractor must give written notice to the original contractor of the unpaid balance. This is different than the notice provided to the original contractor of the lien affidavit. This notice must be given not later than the 15th day of the second month following each month in which all or part of the claimant’s labor was performed or material delivered. The claimant must give the same notice to the owner of the property and the original contractor not later than the 15th day of the third month following each month in which all or part of the claimant’s labor was performed or material delivered.

In summary, the Texas Property Code does offer assistance to contractors and subcontractors, but the notice requirements before and after filing of the lien affidavit must be strictly complied with or the contractor risks losing its lien rights. When faced with a customer who will not pay timely, it is best to contact one of our attorneys to guide you through this maze.

 

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Dissolving a business entity in Texas

Dissolving a business entity in Texas is described in the Texas Business Organizations code. It is not a difficult process, although it does take some time.

The first step is to have a formal meeting with the members of the LLC or the shareholders of the corporation. A vote must occur, and since this is considered a “fundamental action,” at least 2/3 of the members or shareholders must vote in favor of the dissolution. Once the vote occurs, regular business operations can cease. It’s a good idea to prepare an inventory of all assets that exist as of that date. Assets will include everything such as office furniture, computers, inventory, even supplies. A list of all known or potential creditors must be compiled. Those people or entities are entitled to advance written notice of your intent to dissolve the business. It is recommended that such notice be mailed via certified mail, so you have proof it was sent.

The notice of intent to dissolve gives each creditor a deadline by which they must submit any claims. Between the sending of the notice letter and the deadline, the assets must be liquidated. It is best to try to get as close to the fair market value as possible. Any money obtained from the sale of assets needs to be set aside and not spent.

Once the deadline for submitting claims passes, the money from the liquidated assets is distributed to those creditors who submitted claims. If there is not enough money to cover all the claims, the claims are paid on a pro-rata basis. Once the money is distributed to creditors, then a certificate of dissolution can be filed with the secretary of state. This requires a certificate of good standing from the State Comptrollers office, stating that all state taxes are current. There is a two year statute of limitations on suing a dissolved business entity.

So if your business is insolvent, it is best to get it dissolved sooner rather than later. Call Bailey and Galyen’s Business Law team for assistance in dissolving your business. Packages are available to receive a discount on personal bankruptcy in addition to the dissolution of your business.