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Compared to prime (general) contractors, it is much more difficult for subcontractors to perfect lien and bond claims on private projects.  Subcontractors must give timely notice of non-payment to the owner.  If the subcontractor claimant does not have an agreement with the prime contractor, notice must also be given to the prime contractor.  Failure to comply with the pre-lien notice requirements is fatal to a subcontractor’s lien claim

Prime contractors, on the other hand, are not burdened with pre-lien notice requirements.  They can still claim a lien (even if no affidavit is recorded) and the value of their lien claim is not affected by retainage.

The reasons for this disparate treatment stems from the fact that a general contractor’s lien rights derive from the Texas Constitution, common-law, contract and statute.  Subcontractors’ lien rights are derived solely from statute and are totally dependent upon compliance with these statutes. This system creates many obstacles and pitfalls for subcontractors that properly provide labor and materials.
Continue Reading Sham Contracts and the Constitutional Mechanic’s Lien

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Do you know any criminals? 

If you have worked in the construction industry for very long then the likely answer is, “Yes”!  I’m not talking about folks that you believe are cheats, scoundrels and liars.  Nope.  Instead, I’m talking about contractors, subcontractors and owners that misapply funds for construction projects received for the benefit of those that furnish labor and materials.  It is rare (in fact, I don’t know of a similar statute) to find a serious crime located outside of the Texas Penal Code.  However, Chapter 162 of the Texas Property Code, commonly referred to as the “Texas Trust Fund Statute,” makes the misapplication of $500 or more a Class A misdemeanor.  If a person
Continue Reading Criminals in the Construction Industry – Texas’ Trust Fund Statute

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Don’t lose downstream claims correcting construction defects.

Your project did not go well. Subcontractors performed poorly, the architect was impossible and delivery occurred late.  You were lucky to break even and glad to be finished.  A couple of years pass and the phone rings.  It’s the owner.  The project is now leaking and merchandise is being ruined.  Your investigation confirms construction defects and the owner is threatening a lawsuit if you don’t immediately begin repairs.  What’s the next step?

What is your plan?

Suppose you no longer work with the responsible subcontractor?  Do you self perform the work? Hire a replacement?  How do you appease the owner?  If you plan to sue the derelict sub or his insurance company for the repair work or the owner’s damages, it is imperative to consider how rushing to perform repair work now will impact your future claims.
Continue Reading Avoid Being Bitten by Spoliation