Be Smart — Whether You Are The Hunter Or The Hunted

M&M Liens - Texas Property Code

A. Lewis Ward assists small business contractors with debt collections enabled by M&M Liens

The recent experience of two clients illustrates the advantage of having and the disadvantage of not having a mechanic’s and materialman’s lien (M&M Lien).

Subcontractor Who Benefits From An M&M Lien

A gentleman came to me having completed work as a subcontractor on a commercial project, yet he was unable to get paid. As a first step toward securing payment, A. Lewis Ward & Associates prepared and delivered to the general contractor and to the property owner, in accordance with Chapter 53 of the Texas Property Code, Subchapters A-E, notice that the unpaid balance was due but not paid. Due to a disagreement with the general contractor, the property owner retained the funds and would not pay my client directly. Why?

If the owner paid either the general contractor or my subcontractor client directly, he would be exposed to a lawsuit from the other.

The next step to secure payment for my subcontractor client will be to file suit against the owner to foreclose on my client’s M&M Lien and against the general contractor for breach of contract. At that point, the owner will likely tender the funds into the court’s registry, which will make those funds available to pay my client for the judgment I expect to obtain against the general contractor. Thus, we avoid chasing a general contractor who has no assets, and the lengthy process of foreclosing on a high-priced piece of real estate.

Contractor Who Suffers From Lack Of An M&M Lien

The flip side of this coin is exemplified by another client who came to me for help in collecting funds due for residential roofing work. This contactor’s contract did not comply with the Texas Property Code, and thus, did not support a viable M&M Lien.

The homeowner refuses to pay and, now, the contractor must sue the homeowner in a standard breach of contract action without the benefit of an M&M Lien.
Had our client’s contract been properly prepared and the transaction handled as required by Chapter 53 of the Texas Property Code, our client would have a valid, enforceable lien. As a result, there is a good chance that the mere threat of foreclosure of the lien would have motivated the homeowner to pay the amount due, without a lengthy and costly court case.

Property Owners Be Aware

Contractors who furnish labor or materials to improve real property are protected under Texas business law by the provision known as a mechanic’s and materialman’s lien, which protects contractors, trade workers and suppliers with the ability to foreclose on real estate if there is compliance with the Texas Property Code.

Whether you are the hunter or the hunted, be aware of your rights and obligations under the Texas Property Code – it can save you money and a great deal of time!