Lien, Subcontractor

Back to the Basics: Lien Notice Deadlines for First and Second-Tier Subcontractors

Texas Property Code Section 53.056(a)-(c) details the notice requirement deadlines that subcontractors must comply with to perfect a statutory lien on a private, commercial project in Texas. Simply put, the statute sets forth separate notice deadlines dependent on whether the claimant is a second-tier (and lower) subcontractor[1] or a first-tier subcontractor:

Second-tier (and lower) subcontractors are required to (1) send written notice of any unpaid claim to the original contractor by the 15th day of the second month after each month the second-tier subcontractor provided labor or materials to the project; and (2) send the same written notice of the unpaid claim to the owner and original contractor by the 15th day of the third month after each month the second-tier subcontractor provided labor or materials to the project.[2]

First-tier subcontractors are required to send written notice of any unpaid claim to the owner and original contractor by the 15th day of the third month after each month the first-tier subcontractor provided labor or materials to the project.

So why doesn’t the statute just say that? This blog seeks to break down the confusing wording of Section 53.056(b)-(c) by discussing case law to support the statutory interpretation.  The actual text of the statute provides:

Sec. 53.056.  DERIVATIVE CLAIMANT:  NOTICE TO OWNER OR ORIGINAL CONTRACTOR.

(a)  Except as provided by Subchapter K, a claimant other than an original contractor must give the notice prescribed by this section for the lien to be valid.

(b)  If the lien claim arises from a debt incurred by a subcontractor, the claimant must give to the original contractor written notice of the unpaid balance.  The claimant must give the notice 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 or reputed owner 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 or specially fabricated material was delivered.

(c)  If the lien claim arises from a debt incurred by the original contractor, the claimant must give notice to the owner or reputed owner, with a copy to the original contractor, in accordance with Subsection (b).

Which Subsection Applies to Which Subcontractor?

The distinction between first-tier and second-tier subcontractors is supplied by the statutory language describing the entity that incurred the debt. For example, 53.056(b) applies only “[i]f the lien claim arises from a debt incurred by a subcontractor.” Comparatively, 53.056(c) applies only “[i]f the lien claim arises from a debt incurred by the original contractor.” Therefore, subsection (b) applies when the claimant is a second-tier (and lower) subcontractor claiming a debt owed by another subcontractor, whereas subsection (c) applies when the claimant is a first-tier subcontractor claiming a debt owed by the original contractor.

First-Tier Subcontractor: What’s my Deadline?

Subsection (c) provides that the first-tier subcontractor need only send notice to the owner with a copy to the original contractor, but it fails to state the deadline for sending the notice. Instead, subsection (c) simply refers to the notice deadline requirements set forth in subsection (b). Does that mean the notice needs to be sent by the 15th day of the second month, or by the 15th day of the third month? The statute is not abundantly clear; however, because (1) the only notice required to be sent to both the owner and original contractor described in subsection (b) is the third month notice and (2) the case law discussed below, it is safe to conclude that the statute was intended to require first-tier subcontractors to comply with the third month deadline.

Texas Case Law

Despite the lack of clarity of 53.056(b) and (c), only a handful of Texas cases interpret these subsections and apply them to first-tier and second-tier (and lower) subcontractors.

In Pavecon, Inc. v. R-Com, Inc., Pavcon was a first-tier concrete subcontractor under a contract with R-Com, the original contractor on the project.[3] R-Com’s bond required a claimant to provide notice to the surety in accordance with the notice deadlines set forth under 53.056 of the Texas Property Code.[4] Therefore, the court held that Pavecon was obligated to provide written notice of its claim to the surety by the 15th day of the third month after Pavcon performed labor and supplied materials.[5] The court makes no mention of a second month deadline.

In another Texas case, Raymond v. Rahme, the court also applied the third month notice requirement to a first-tier subcontractor.[6] In Raymond, Raymond was a first-tier concrete subcontractor under an oral contract with the general contractor.[7] One of the issues addressed in the opinion was whether Raymond properly perfected his statutory lien on the owner, Rahme’s, property. In the court’s analysis, the court states that Raymond was required to provide the owner with notice of his claim by the 15th day of the third month after Raymond performed his work.[8] The court makes no mention of a second month deadline.

These two cases can be compared with cases like Moore v. Brenham Ready Mix, Inc. where a concrete supplier, Brenham Ready Mix, contracted with a subcontractor to provide concrete materials.[9] The Moore court analyzed Brenham Ready Mix’s notices pursuant to the second month and third month deadlines because Brenham was a second-tier subcontractor.[10] While none of these cases directly address the comparison between the deadlines imposed on first-tier and second-tier subcontractors, the courts’ application of the statutory deadlines illustrate that Texas courts interpret 53.056(b) and (c) to require first-tier subcontractors to comply with the third month deadline while second-tier subcontractors must comply with both, the second and third month, deadlines.

 

 

[1] For purposes of this blog, the term “subcontractor” includes subcontractors, materialmen, suppliers and vendors.
[2] Second-tier (and lower) subcontractors may also provide a combined notice to the owner and original contractor by the 15th day of the second month after the work was performed or materials delivered to comply with the notice requirements. This avoids the added burden of remembering to send two separate notices.
[3] Pavecon, Inc. v. R-Com, Inc., 159 S.W.3d 219, 221 (Tex. App.—Fort Worth 2005, no pet.).
[4] See id. at 223.
[5] Id. at 223–24.
[6] Raymond v. Rahme, 78 S.W.3d 552 (Tex. App.—Austin 2002, no pet.).
[7] Id. at 555.
[8] Id. at 560.
[9] Moore v. Brenham Ready Mix, Inc. 463 S.W.3d 109, 111 (Tex. App.—Houston [1st Dist.] 2015, no pet.).
[10] Id. at 115–16.

 

 

 

 

 

 

 

Emily Pendleton is an associate in the litigation practice group of Porter Hedges. Her practice focuses on all types of business, commercial and construction litigation. To read Emily’s full bio, click here.