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Can I File a Mechanic’s Lien Against a Leased Property?

Filing a mechanic’s lien in the State of Texas is already a confusing process. As we’ve covered previously, contractors have to carefully consider notices, deadlines, and tiers in order to preserve their lien rights. But what we didn’t cover was what contractors should do if an improvement is done without an owner’s consent — what happens when you only worked with a tenant? 

In this article, an attorney with Cotney Law will walk you through the mechanic’s lien process and discuss whether or not you can file a lien against a leased property. The mechanic’s lien is an incredible tool for securing payment for services or materials provided, but like any tool, it must be employed with precision. For assistance filing a mechanic’s lien in accordance with Texas law, consult the Houston construction attorneys from Cotney Law.

The Reach of a Mechanic’s Lien 

Fortunately, this is a situation that shouldn’t occur too often. After all, owners are usually the only parties that benefit from an improvement. But there are occasions when a tenant, usually a business, leases space from an owner and subsequently hires contractors for an improvement. What gives a mechanic’s lien its teeth is its ability to apply to real property, meaning that it stays with the property and usually prevents an owner from selling until the lien is removed. 

Related: Invalid and Fraudulent Mechanic’s Liens: What’s the Difference?

As you may already know, you are unable to file a lien in Texas without a written contract. If you’re reading this, it’s a safe bet that you have a contract with a tenant and that the owner denies responsibility for the improvement. Unfortunately, this means that you can’t file a lien against the real property; however, you can file one against the tenant’s “leasehold” interest. Essentially, the lien is against the lease, not the property. As Houston construction lien attorneys, we understand that this probably isn’t what you wanted to hear, but it doesn’t mean the end in your fight for owed payment. 

Related: Texas Cracks Down on Lien Waivers 

Filing Against “Leasehold” Interest 

Just because you can’t file against real property doesn’t mean you are powerless in the pursuit of payment. There remain several benefits to filing against leasehold interests. To begin, many tenants, especially large commercial tenants, are desperate to maintain their leases. Once they realize that a lien will likely put them in danger of defaulting on their lease agreement, tenants are much more willing to forfeit owed payment. Second, there is what’s known as a tenant improvement allowance (TIA) that is often agreed upon during commercial lease negotiation. A lien against a leasehold interest will help to ensure that an owner refuses to release a TIA until the debt is paid and the lien is removed. Of note, all of this will depend on the contents of the tenant’s lease. 

Related: How to Confirm Eligibility for Texas’ Complicated Mechanic’s Lien System

Filing in Texas 

Once you’ve decided to move forward with a mechanic’s lien against a leasehold interest, the steps are the same as if you were filing against real property (you will need to alter the contents of a mechanic’s lien accordingly). Among numerous requirements, you will need to be mindful of deadlines pertaining to preliminary notices and the filing and enforcement of the mechanic’s lien. These deadlines and requirements will vary depending on your tier: general contractor, subcontractor, or material provider. Before you take on this daunting process, we always recommend consulting one of our Houston construction lien attorneys, if for nothing else than to find out if there’s a possibility of filing a mechanic’s lien against the owner’s interest in the property. 

You may be able to file a lien against the real property if you are able to prove that the tenant was acting as an agent or general contractor for the owner. Proving that an owner had some degree of control over a project won’t be easy, but if that’s the route you want to take, we suggest consulting a Houston construction lien attorney from Cotney Law. 

If you would like to speak with a Houston construction attorney, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

We’ve said it before and we’ll say it again: Texas has some of the most complex mechanic’s lien laws in the nation. Contractors working out of the Lone Star State need to stay in the know regarding any and all regulations that pertain to payment. Retainage, also known as “retention,” is just one of many factors that affect when a contractor or subcontractor gets paid and whether or not they have to resort to a mechanic’s lien. 

Below, one of our Houston construction lien attorneys discusses retainage laws in the State of Texas and how you can reclaim retained funds when an owner refuses to pay you for completed work. As always, the attorneys from Cotney Law are here to defend contractors and ensure that they receive what is rightfully theirs. 

Retainage: A Safeguard or Problem? 

Retainage is the amount of money that an owner or general contractor is able to withhold from a contractor or subcontractor to ensure that work on a project is completed in a quality and timely manner. Ideally, this amount would prevent a contractor from skipping out on work once they received payment. However, we find that retainage usually creates more problems than it solves, especially in an industry already struggling with cash flow issues. 

Related: 5 Common Sense Ways to Improve Your Bottom Line

Retainage on Private and Public Projects 

For private projects, Texas law states that an owner must retain 10 percent of the contract amount on work in which a mechanic’s lien can be claimed. Public projects are a little different; there is no specified maximum retainage amount. However, with few exceptions, retainage amounts over 5 percent must be placed in an interest-bearing account. We always recommend sending a Notice of Retainage/Request for Information to an owner prior to beginning work on a project. 

Generally, owners are required to release retainage funds 30 days after the work is completed; however, this isn’t always the case. Consult a Houston construction lawyer in any instance in which an owner can retain funds for longer than 30 days. In a perfect world, you would receive payment the moment work is completed. Unfortunately, in the construction world, owners unjustly withhold retainage all the time. When an owner refuses to release retainage on a project you’ve completed work on, you must abide by the below provisions in order to protect your lien rights and receive payment. 

In order to be eligible to file a mechanic’s lien, you must first send a Notice of Contractual Retainage to the owner by certified mail no later than the earlier of: 

  • 30th day after the date your work is completed on the project, or the
  • 30th day after the date your contract was terminated or abandoned 

Of note, if you’re a subcontractor, you must also give this notice to the original contractor in accordance with the above deadlines. While these deadlines may be confusing, this is the only preliminary notice that you have to send in order to file a lien on retained funds, and there’s no reason that you have to wait until the deadline is about to expire to give notice. 

Related: The Deadline for Filing a Texas Mechanic’s Lien 

Filing a Mechanic’s Lien on a Retained Amount 

Once you have given the above notice, your next step in the lien process is to file a lien affidavit. The deadlines for subcontractors to file a lien affidavit are as follows: 

  • 15th day after the fourth month following work being completed 
  • 15th day after the third month following work being completed on a residential project
  • 40th day after the date of completion stated in the owner’s affidavit of completion
  • 30th day after the date the owner sent notice of a demand for you to file a lien affidavit

General contractors who contract directly with the owner only have the lien affidavit to worry about when filing a lien affidavit. The deadline for them is the 15th day of the fourth month following work being completed. However, a general contractor has additional steps to take when filing a lien, which we cover in the series below. 

Related: The Intricacies of Filing a Mechanic’s Lien in Texas

What we’ve now gone over is a very broad outline of the mechanic’s lien process. In order to protect your lien rights and claim unpaid retainage, you’ll need a legal ally who is familiar with every aspect of the Texas lien process. At Cotney Law, we have helped countless contractors, subcontractors, and material providers retrieve payments they were rightfully owed. We are advocates for an industry that seldom receives the recognition and financing it deserves. If you are interested in filing a lien on retained funds, consult a Houston construction lien attorney from Cotney Law. 

If you would like to speak with one of our Houston construction lawyers, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

In the construction industry, it’s not a matter of “if” but “when” the next dispute will emerge. Contractors are faced with a myriad of project concerns — demanding working conditions, inclement weather, cash flow issues — all of which can result in a dispute. However, none of these are the number one cause of construction disputes in the world. Below, a Houston contractor attorney with Cotney Law discusses scope of work changes and, most importantly, how contractors can prevent these unforeseen hurdles from leading to costly legal disputes. 

A Universal Problem 

As Construction Dive reports, the 2019 “CRUX Insight: A Global Sector Market Analysis” details disputes and their causation factors. In this report, over 4,000 causes are identified across 700 projects around the world. It concludes that the leading cause of construction disputes was a lack of control over scope of work. While it’s easy to point at “scope of work” as the culprit, there were other causes brought up that should not be ignored: poor contract drafting, skills gaps, language gaps, and overinflated claims. All of these causes can compound and cause serious issues for even the most experienced contractors. 

Related: What Causes a Stalled Construction Project? 

How Can Contractors Adapt? 

The above findings highlight a serious issue: the industry is struggling to adapt to delays, disruptions, and growing costs. While construction software and data analysis can be an incredible boon for contractors, the report itself states that they can do little to prevent disputes that result from human error. Your best bet for mitigating disputes is to negotiate how scope of work changes are to be handled when it matters the most: the construction contract. Scope of work, project timelines, and payment schedules are all things that should be laid out in your contract. 

Related: What to Consider Before Signing a Construction Contract 

Facing the Inevitable 

As mentioned above, construction disputes are inevitable, regardless of the amount of foresight, planning, technology, and expertise brought to the table. When a dispute does emerge, your contract should again stipulate how it will be resolved. Hopefully, an alternative dispute resolution (ADR) clause is already included. If not, our Houston contractor attorneys are standing by to assist you. 

At Cotney Law, our attorneys routinely assist contractors, subcontractors, architects, suppliers, and other industry professionals with contract drafting, reviewing, and negotiating. We also provide representation during litigation or ADR processes. For a legal professional who will work tirelessly to prevent disputes and fiercely defend you during a dispute, partner with a Houston contractor attorney from Cotney Law. 

If you would like to speak with one of our Houston contractor attorneys, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

Here at Cotney Law, we’ve seen all manner of construction litigation. From payment disputes to defect claims, we’ve represented professionals from every corner of the construction industry. So often the outcome of these disputes hinges on what is stated in the construction contract, but rarely are legal proceedings influenced by a simple grammatical error. Below, one of our Houston construction attorneys discusses a bizarre case in which an omitted apostrophe nearly tipped the scales in a construction legal dispute. 

Subcontractors vs. Subcontractor’s 

In the case of Regency Midland Construction, Inc. v. Legendary Structures Inc., the general contractor, Regency, hired a subcontractor, Legendary, to perform work on a new apartment building. Legendary failed to complete construction on the project, and another subcontractor was soon brought on to complete the task. Because Legendary failed to uphold their responsibilities as stated in the contract, Regency refused to pay a withheld “retention” amount equal to 10 percent of the subcontractor’s contract amount. 

Related: What to Consider Before Signing a Construction Contract 

This was the cause of the dispute. The subcontractor either refused or was unable to perform work. Therefore, they are not entitled to any withheld payment, right? Take a look at the following contract language: “Ten percent (10%) of Subcontractor’s contract amount shall be withheld and will be released 35 days after completion of subcontractors work.” Legendary argued that the word “subcontractors” must refer to all subcontractors because it does not contain an apostrophe. By this interpretation, Legendary is entitled to the withheld amount because another subcontractor completed the work. 

Regency countered with the argument that the purpose of the retention clause was to ensure that Legendary, in particular, completed work, and the court agreed. Although a missing apostrophe wasn’t enough to sway the court’s decision, it highlights the importance of accurate contract drafting and reviewing.

Related: Why You Should Have an Attorney Review Your Construction Contracts 

Texas Retainage Laws 

While the above dispute took place in California, Houston contractors must contend with similar retainage laws. Under Texas law, the amount of retainage that can be withheld from a contractor is 10 percent. Generally, retainage must be paid within 30 days of work being completed. This should all be reflected in your construction contracts. As we’ve said time and time again, your contracts are the most important tool for preventing disputes and subsequent litigation. If you’d like to have your contracts reviewed to ensure that they are free of any and all errors, consult the team of Houston construction attorneys from Cotney Law. 

If you would like to speak with a Houston construction attorney, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

There have been rumblings of a recession for some time now, and contractors are doing everything they can to prepare for an economic downturn. During a recession, it’s all too common for a construction company to face bankruptcy. But contractors must always be mindful of the financial stability of the owners they contract with in addition to their own. 

Below, we discuss the possibility of a recession and what it could mean for contractors trying to secure payment on future projects. As our economy wanes, you will continue to encounter bankruptcy in the industry and the need to file a mechanic’s lien. For a legal ally who will see you through all legal challenges, partner with the Houston construction lawyers from Cotney Law. 

The Flip of a Coin 

There’s a 50 percent chance that a recession will hit in 2020. A coin flip. That’s what economists say it will come down to. “We’re at the tipping point now,” said economist Robert Shiller in an interview with Fox Business. “But it reminds me uncomfortably of 2005 when we were in the same circumstance — home prices were going up and the talk was changing.” What’s lead us to the doorstep of yet another recession? It’s hard to say, but housing slowdown and trade tensions are definitely contributing factors to the current economic downturn. 

If a recession does hit, its impact will be felt throughout the construction industry. The last time the industry dealt with a recession, the number of construction firms in operation dropped drastically and skilled workers left the industry in pursuit of stable careers. With a potential recession on the horizon, owners will be less willing to fund projects and less capable of seeing projects through to completion. 

Bottom line: A recession in 2020 will mean bankruptcy for scores of project owners. When bankruptcy does inevitably hit and an owner begins missing payments, you’ll need to know how to employ your most powerful tool for securing payment: the mechanic’s lien.

Two Types of Mechanic’s Liens in Texas 

As we’ve covered previously, Texas has some of the most complex lien laws in the nation. This process only becomes more convoluted once bankruptcy is brought into the picture. Fortunately, our Houston construction lien attorneys are here to clear things up. 

Related: Confirming Mechanic’s Lien Eligibility 

Constitutional Liens

“Mechanics, artisans and material men, of every class, shall have a lien upon the buildings and articles made or repaired by them for the value of their labor done thereon, or material furnished therefor; and the Legislature shall provide by law for the speedy and efficient enforcement of said liens.” 

These Texas laws pertaining to constitutional liens stipulate that a contractor who contracts directly with the owner is entitled to payment by virtue of providing work or materials. Under normal circumstances, a general contractor would be able to perfect their lien and secure payment. However, this is bankruptcy we’re talking about, and you’ll need to work even harder to get what you are owed, especially if you’re a subcontractor or materials provider. 

Statutory Liens 

In order to perfect a statutory lien, you will need to complete and submit an affidavit including, among other information, the claim amount, a description of the work/materials provided, and a description of the property to the county clerk in the county where the property is located. We’ve covered notice requirements and deadlines in a previous article and encourage you to follow the link below to learn more about the mechanic’s lien process.

Related: The Intricacies of Filing a Mechanic’s Lien in Texas 

If filing a statutory lien is so complicated, why do it? First, only those who have contracted directly with the owner can benefit from a constitutional lien. Second, a statutory lien has the teeth to ensure that you receive payment from a bankrupt owner. 

Mechanic’s Liens vs Bankruptcy  

It all comes down to power. Owners who file for bankruptcy are given “strong-arm” powers that protect them from creditors. Essentially, they are allowed to avoid transfers under applicable state law. Section 544 of the Bankruptcy Code states that

(a) The trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by—

(3)  a bona fide purchaser of real property, other than fixtures, from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser and has perfected such transfer at the time of the commencement of the case, whether or not such a purchaser exists.

Lucky for contractors, a statutory lien circumvents these strong-arm powers by being recorded in the county’s real property records. Without a statutory lien, contractors are no different than other creditors made powerless when an owner declares bankruptcy and is given the rights of a lien creditor. 

Related: Mechanic’s Lien Deadlines

A Loyal Ally to Protect Your Business 

The best thing you can do to protect your company in the coming years is to partner with a Houston construction lien attorney who can properly file liens on your behalf and ensure that your lien rights are always defended and enforced. With Cotney Law, you can be sure that nothing, not even bankruptcy, will get in the way of retrieving your owed payment. For a loyal ally who will stick with you through hell or high water, partner with the team of Houston construction lien attorneys from Cotney Law. 

If you would like to speak with a Houston construction lawyer, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

Liquidated damages are a predetermined sum agreed upon by owners and contractors to deter either party from breaching the contract. Once agreed upon, this amount is cemented in a liquidated damages clause in the all-important construction contract. Knowing what makes a liquidated damages clause valid in your state is critical for safeguarding your bottom line and protecting your business. 

In this brief article, we discuss if liquidated damages are enforceable in the Lone Star State. If you are faced with challenging a liquidated damages clause, you are going to need a Houston construction attorney in your corner who knows Texas law inside and out. 

What Are Liquidated Damages? 

Liquidated damages are meant to be an estimate of the damages that would be actually incurred if there was a breach of contract — usually resulting from the failure for a contractor or subcontractor to complete work on time. In a contract, liquidated damages clauses are usually written as a sort of formula. For example, a contractor may end up only getting the (Contract Value) – (Number of Days Late) x (Cost).

Related: Common Misunderstood Contract Clauses 

Are They Enforceable? 

If you expected a clear cut answer to whether or not these clauses are enforceable, you’re in for a big surprise. This is Texas, home to some of the most complex construction laws in the United States. However, to answer your question, yes, liquidated damages are enforceable in Texas under certain circumstances

For a liquidated damages clause to be enforceable, it must satisfy two points:

  • The harm caused by the breach of contract is difficult to estimate
  • The liquidated damages are a reasonable compensation (not a penalty) 

If liquidated damages don’t align with the actual damages, recovery may be limited to actual damages. 

How Contractors Can Protect Themselves 

Make no mistake, the burden of proving a penalty defense is on you. It will be up to you to either prove that the liquidated damages were not an actual approximation of the actual damages or that you were not responsible for a breach of contract. Only with the aid of a Houston construction attorney can you build your case and mount an effective defense. However, that’s not the only way that an attorney can help you. 

Related: The Cost of Litigation 

The contents of a liquidated damages clause are determined by you and the owner during the contract drafting phase. It’s during this time that you must fight for what is in you and your company’s best interest and try to limit adverse contract language that may end up harming your company down the road. For a legal team that can draft, review, and negotiate contracts on your behalf, partner with the Houston construction attorneys from Cotney Law. 

If you would like to speak with one of our Houston construction attorneys, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

We’ve said it before and we’ll say it again: the construction contract is king. Nothing has more influence on how disputes are settled and whether or not disputes occur in the first place. At Cotney Law, we’ve dedicated ourselves to ensuring that contractors in the Lone Star State are always in the know when it comes to their contracts. 

In this brief article, we discuss three disclosures required in Texas construction contracts. If you are ever concerned with the contents of your construction contracts, or the lack thereof, consult a Houston contractor attorney from Cotney Law for contract drafting and reviewing services. 

Required Contract Disclosures

The following are just a few disclosures that must be included in your construction contracts. For a comprehensive list, consult the Houston contractor attorneys from Cotney Law. 

1. The Disclaimer

Texas requires contractors to provide a two-page disclaimer with their construction contracts. These disclaimers generally contain boilerplate that is easy for a Houston contractor attorney to include. The oft-forgotten disclaimer is easy to overlook and may not seem like a big deal now, but like all other items on this list, failure to include a disclaimer could result in costly damages. 

Related: What to Consider Before Signing

2. Right to Repair 

Less than a couple of dozen states have right to repair laws allowing contractors a way to avoid costly construction defect disputes. Texas is one of them (Texas contractors actually just secured a huge victory with the passing of HB 1999, which allows contractors to inspect and repair defects on public projects). With your residential construction contracts, you must include a statement regarding the right to repair. However, that’s not the only disclosure that must be included for residential contracts. 

Related: Why You Should Have an Attorney Review Your Contracts 

3. Residential Disclosure Statement 

General contractors aren’t usually required to give preliminary notice; however, a residential disclosure statement must be included in the contract for residential projects. This statement informs the owner of their rights as well as your rights as a contractor. Essentially, it ensures that everyone is on the same page. This disclosure can be found under § 53.255 of the Texas Property Code. With few exceptions, you are also required to furnish a list of subcontractors and suppliers as stipulated by § 53.256

If you would like to speak with one of our Houston contractor attorneys, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

With bankruptcy as common as it is in the construction industry, construction companies need to use every trick in the book to ensure that they turn a profit on their projects. In this article, a Houston construction lawyer with Cotney Law discusses five common sense ways you can improve your bottom line. Taken at face value, these tips may seem like little more than picking up a penny from off the street. However, it’s not uncommon for contractors to take a closer look at their operations only to discover that they have been hemorrhaging tens of thousands of dollars. For an experienced expert that can safeguard your company from threats to its bottom line, partner with the Houston construction lawyers from Cotney Law. 

1. Manage Your Inventory 

Your company can’t afford to make mistakes when it comes to managing inventory, especially as the cost of materials continues to rise. It’s no secret that the current trade war is taking its toll on construction companies across the nation. The problem is that while material costs account for only a fraction of a project’s total value, they have an incredible impact on virtually every aspect of the project. 

For example, when materials become scarce on a project site, it leaves crews with little to do, which only further drives up the cost of labor and the project as a whole. Properly managing your inventory is a surefire way to combat rising material costs and improve your bottom line. We recommend investing in construction management software that can not only track orders and costs but also take the guesswork out of numerous other aspects of your operations. 

2. Invest in Your Workforce 

The hard truth is that the construction industry as a whole is facing a massive labor shortage. If you don’t take steps to ensure that your crew members are satisfied in their positions and rewarded for their efforts, another employer will. When you lose workers, you’re not only losing a skilled worker to a competitor but facing the challenging prospect of replacing them. By investing in your workforce, you’re investing in your projects and ensuring that they finish on time and under budget.

You may be thinking that a bonus or increase in pay is enough, but that may not be the case. Time and again, it’s been shown that higher wages alone are not enough to attract millennials to the industry. We recommend an attractive paid time off (PTO) policy to ensure that your workers feel appreciated, spend needed time with friends and family, and are refreshed when they step back onto the project site. The added bonus is that a well-rested workforce will be more efficient, less prone to errors, and less likely to succumb to injury. 

3. Be Present on Site in Some Form 

Considering that labor, not materials, is the main cause of rising construction costs, your workers should be expected to work when they aren’t enjoying PTO. First, ensure that you aren’t wasting a skilled laborer’s time on a menial task. Second, ensure that your workers aren’t skipping out on their duties. For example, a surprisingly costly problem in the construction industry is the prevalence of smoking. A report published by Emerald Group found that, on average, construction workers waste about 73 minutes a shift on smoke breaks, accounting for a 15.2 percent loss in productivity. 

Of course, there are delays that are beyond your workers’ control. Due to the number of subcontractors and sub-subcontractors that come and go on a construction project, it’s not uncommon for work to stall as everyone higher up in the job hierarchy waits for a smaller project to be completed before they can move in. Even if you aren’t present in the field, be sure that you have trustworthy managers in place to track your workers and ensure that everything is running smoothly. 

4. Measure Twice, Cut Once 

With projects commonly being awarded to the lowest bidder, it’s all too common for a construction company to submit a low bid and commit themselves to a mammoth undertaking that will be next to impossible to profit off of. In order to avoid this dilemma, your company must make accurate estimates before commencing work. 

Remember, you can always track how well your company does, even on projects where the scope of work is difficult to define. In order to make accurate estimates, it is imperative that you take what you’ve learned across all projects and apply them to your current ones. You can do this by conducting a post-mortem meeting with your team after every project to spotlight cost-saving solutions and issues that caused you to go over budget. And we can’t recommend this enough; hire a Houston construction lawyer to draft and review your contracts to ensure that the scope of work is clearly defined. Otherwise, you could be setting yourself up for failure. 

5. Partner With a Houston Construction lawyer 

Throughout this article, we’ve discussed rising material costs, labor shortages, loss of productivity, and inaccurate estimates. What do all these issues have in common? They inevitably lead to delays and legal disputes. When that happens, you’ll find your bottom line shrinking as the possibility of reaching substantial completion on time and under budget diminishes. When you inevitably face a legal dispute in the construction industry, turn to a Houston contractor attorney from Cotney Law. 

At Cotney Law, our team of attorneys is dedicated to helping construction companies in all aspects of construction litigation, including contract disputes and payment disputes. If you’re looking for a common sense way to improve your bottom line, partner with the attorneys who will dedicate themselves to protecting you, your workers, and your business. Partner with the Houston contractor attorneys from Cotney Law. 

If you would like to speak with a Houston contractor attorney, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

We are picking up where we left off with our discussion of the most commonly misunderstood construction contract clauses. In part one, we talked about two types of contract provisions that can stump even the most experienced of contractors and lead to a costly payment dispute: incorporation clauses and contingent payment clauses. 

Below, we will be discussing indemnity clauses and clauses that contain mechanic’s lien terms. While the state of Texas has enacted laws to protect contractors and subcontractors from potentially harmful clauses like these, you are no less responsible for understanding the contract clauses you are bound by. If you are caught up in a payment dispute as a result of vague contract clauses, consult a Houston construction lien attorney from Cotney Law to discuss your next steps. 

Indemnity Clauses 

Indemnity clauses require that a contractor or subcontractor indemnify, or hold harmless or defend, another party against their own negligence. Essentially, if a contractor or owner is responsible for damages, this clause shifts liability and requires another party to pay for those damages. 

Doesn’t seem fair, does it? Fortunately for construction professionals operating out of the Lone Star State, anti-indemnity statutes came in to effect in 2012 to make indemnity clauses unenforceable. Texas law states that “a provision in a construction contract, or in an agreement collateral to or affecting a construction contract, is void and unenforceable as against public policy to the extent that it requires an indemnitor to indemnify, hold harmless, or defend a party.” However, these laws do not apply to residential projects, public works projects, or damages resulting from injury or death. 

Mechanic’s Liens 

As we’ve covered previously, Texas has by far the most complex and intricate mechanic’s lien laws in the country. Filing a mechanic’s lien without the assistance of an attorney is a grueling process that is sure to put contractors up against tough lien deadlines and notice requirements. So, it’s appropriate that mechanic’s lien provisions in contracts are equally as misunderstood. 

Fortunately, Texas has recently cracked down on lien waivers, essentially making provisions that waive your lien rights invalid unless you’ve already received payment. However, similar to indemnity clauses, there are possible exceptions, and a contractor could find their lien rights threatened if they don’t review the contents of their contracts. To ensure that you understand every clause in the contracts you sign and that your lien rights are absolutely protected, your only option is to turn to a Houston construction lien attorney that is dedicated solely to representing the construction industry. 

If you would like to speak with a Houston construction lien attorney, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

The construction contract is without a doubt the most important indicator of how a project will turn out. It is a document capable of both leading to and resolving conflict. But despite its importance, many industry professionals struggle to understand the various components of a contract and how they will impact their projects. In this two-part article, a Houston construction attorney from Cotney Law will discuss the most commonly misunderstood construction contract clauses to look out for. Before you sign on the dotted line, be sure to have an experienced attorney review your contracts for accuracy and transparency. 

Incorporation Clauses

Incorporation clauses are provisions that make other unattached documents a part of the contract. Simply put, they’re a stand-in for other documents that are not currently provided. This is common on large projects with numerous subcontractors whom all have contracts that must refer back to the original contract between the general contractor and owner. Make no mistake, as long as a contract clearly describes the incorporated document, those who sign are legally bound by its contents, including extra terms that you add to a contract yourself. 

For this reason, it’s best to simply forgo incorporation clauses and have all relevant documents included. However, because that is not always possible, you should have a Houston construction attorney ready to review these clauses and all incorporated documents. 

Contingent Payment Clauses

There’s a lot of confusion surrounding pay-if-paid and pay-when-paid clauses. These are essentially timing mechanisms that state when a contractor is entitled to payment. Pay-when-paid clauses state that a subcontractor is entitled to payment once a contractor has been paid by an owner. Pay-if-paid clauses, on the other hand, state that a contractor is under no obligation to pay a subcontractor if they themselves haven’t received payment. If an owner refuses to pay or goes bankrupt, oh well. 

Like so many clauses, pay-if-paid clauses are designed to shift responsibility downstream to subcontractors and sub-subcontractors. While many states prohibit the inclusion of contingent payment clauses, they are enforceable in Texas as long as the language used throughout is clear. There are additional instances in which a contingent payment clause can become unenforceable, including if a subcontractor objected to its inclusion. Again, we recommend forgoing contingent payment clauses, especially those that are not in your favor. However, if such a clause must be included, be sure to consult our experienced Houston construction attorneys from Cotney Law to ensure that you are prepared for all possible outcomes. 

For more information on commonly misunderstood construction contract clauses, read part two

If you would like to speak with one of our Houston construction attorneys, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.