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Where’s the Line Between a Demand Letter and Extortion? Part 2

The line between a demand letter and extortion can become hazy for contractors who are desperate to secure payment on a project that they have dedicated themselves to. In part one, we discussed what constitutes extortion and the penalties that can be expected for committing it. Below, a Houston contractor attorney will discuss how you can write an effective and persuasive demand letter while avoiding the use of threatening language that can get you in trouble. For assistance with all construction-related legal matters, including drafting demand letters, reviewing contracts, and filing mechanic’s liens, consult our Houston contractor attorneys at Cotney Law. 

Threatening Language to Avoid 

When drafting a demand letter, it is imperative that you check your emotions at the door. If you are faced with the pressures of paying for subcontractors, materials, and your own crew, it’s only natural to become angry when an owner refuses payment, but you must not let that cloud your judgment. 

Your demand letter cannot threaten an owner’s safety, family, friends, or reputation. You cannot threaten repercussions from a government agency, you can only present them with evidence of what you are owed and the deadline for when it is due. As far as threats go, you can only threaten future litigation. 

Writing an Effective Demand Letter Without Resorting to Threatening Language

Remember, your goal is to get paid. Everything included in your demand letter should work towards this outcome. Your demand letter should be typed and appear professional in every regard. It should clearly state the owed amount, the dates it was incurred, and the date it should be paid by. Include invoices and any pertinent documents that backup your claim. 

The most effective demand letters instill in the reader the reality that litigation will occur unless payment is received. Usually, a demand letter with a legal letterhead from a law office is enough to bring an owner to their senses and resolve matters without the need to go to court. 

Have an Attorney Draft Your Demand Letters 

The only way to guarantee that your demand letter is effective and non-threatening is to have it drafted by an experienced attorney. It is simply too easy for firm language to turn threatening, especially when your livelihood is on the line. And, as we discussed in part one, the penalties for committing extortion range from hefty fines to time in prison. Having your demand letter drafted by one of our Houston contractor attorneys is your best chance of securing payment while avoiding the pitfalls that have ensnared other contractors. 

If an owner has withheld payment, don’t allow them to get the upper hand. Partner with the team of attorneys at Cotney Law for legal counsel that will fight to secure your payment with a skillfully crafted demand letter.

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.

You may be thinking that the “demand” part of “demand letter” entails a strongly worded argument. But while your demand letter should be clear regarding impending legal action, it should never be threatening in any other way. Even when the other party is in the wrong, contractors can find themselves unintentionally committing a felony if they write a demand letter that is too strongly worded. 

This line between a firm demand letter and extortion isn’t always clear cut. In this two-part article, we will be discussing this distinction in detail. For aid in drafting demand letters and moving forward with subsequent legal action, consult a Houston construction lawyer from Cotney Law. 

What is Considered Extortion? 

Extortion is defined as the practice of obtaining money by threat of violence, damage to property or reputation, or unfavorable government action. Essentially, extortion is theft that threatens future consequences. While the injured party is not placed in immediate danger, an implied threat can target their personal safety, family, property, or reputation. Extortion doesn’t have to be committed in person. Telephone calls, emails, social media messages, and demand letters can be avenues for committing extortion. 

Furthermore, what can be considered extortion is far more nuanced than a threat of violence. In some cases, just accusing someone of a crime in a demand letter can be considered extortion. If you accuse an owner of committing a crime and threaten to embarrass or expose them, you may be committing extortion. 

What Are the Penalties for Committing Extortion in Texas? 

While extortion is illegal all throughout America, the penalties for it vary from state to state. In the State of Texas, the severity of the penalty for extortion depends on the amount stolen. The penalties for committing extortion in Texas are as follows: 

  • Third-degree felony: Between $30,000 and $150,000 stolen. A fine of up to $10,000 and a prison sentence of up to five years. 
  • Second-degree felony: Between $150,000 and $300,000. A fine of up to $10,000 and a prison sentence of up to 20 years. 
  • First-degree felony: Greater than $300,000 stolen. A fine of up to $10,000 and a prison sentence of up to 99 years. 

As evidenced above, going over the top and accidentally committing extortion can be an easy and costly mistake for contractors to make. As we continue this discussion in part two, we will discuss how contractors can avoid threatening language and write an effective demand letter. To ensure that your demand letters are clear, professional, and non-threatening, partner with the team of Houston construction lawyers 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.

Construction professionals who fail to review the contents of a lien waiver are not only signing away their mechanic’s lien rights but also putting their very livelihoods on the line. If they signed an unconditional lien waiver, there’s very little that can be done in the event that only partial payment is received. Conditional lien waivers do away with this problem entirely. 

In part one, we discussed unconditional lien waivers. Below, a Houston construction lien attorney will discuss conditional lien waivers as well as the rights of contractors, subcontractors, and material suppliers that are faced with signing either type of lien waiver. To ensure that your lien rights are protected and properly exercised to secure full payment, partner with the team of Houston construction lien attorneys at Cotney Law. 

What Is a Conditional Lien Waiver? 

A conditional lien waiver becomes effective only when payment has been received in full from either the owner or general contractor. Unlike an unconditional lien waiver, you are being paid upfront. For this reason, it is always in your best interest to sign only conditional lien waivers.

Know Your Rights

Fortunately, Texas is one of only twelve states to have statutory lien waiver forms and laws in place to define their validity. Texas Property Code Sec. 53.281 states that a conditional waiver is only effective if there is evidence of payment. Additionally, Texas Property Code Sec. 53.283 states that a person may not require you to sign an unconditional lien waiver until you’ve received either full or partial payment. Failure for an owner or contractor to abide by these laws could result in a lien waiver becoming invalid. If you believe a lien waiver you signed is invalid and you would like to dispute it, consult with one of our Houston construction lien attorneys

Bottom line: only sign a lien waiver if you’ve received the exact amount stipulated in the waiver. We further recommend that you only sign conditional lien waivers to ensure that you are paid in full for the services you provide. 

Consult an Attorney

In a perfect world, a lien waiver would simply be a receipt of payment. You do the job, and you get paid. Unfortunately, payment disputes are a common occurrence. And while Texas has passed laws to protect the rights of those in the construction industry, there will always come a time when contractors and subcontractors must preserve and exercise their lien rights. For aid in protecting your lien rights, reviewing and disputing lien waivers, and filing mechanic’s liens, partner with the experienced Houston construction lien attorneys at Cotney Law. 

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 mechanic’s lien is perhaps the most powerful tool that a contractor, subcontractor, or material supplier can employ to receive payment. However, signing a lien waiver and forfeiting lien rights is often the cost of doing business in the construction industry. In the event that full payment is not received on a project, a contractor’s options will be determined by which one of the two types of lien waivers they signed: conditional or unconditional. 

In this two-part article, we will discuss the difference between a conditional and unconditional lien waiver. Before you sign anything, consult with a Houston construction attorney from Cotney Law to ensure that you aren’t signing away your right to payment. 

What’s a Lien Waiver? 

A lien waiver is often described as a receipt for project payment, but it’s much more than that. It’s a legal document that effectively forfeits the mechanic’s lien rights of those that sign it. In signing this document, you are signing over your lien rights. Ideally, you’ll receive payment in full at the same time that you sign a lien waiver. But that’s not always the case. In those instances, you’ll be faced with signing an unconditional lien waiver, a waiver that you are not required to sign under Texas law unless you’ve received at least partial payment. 

What’s an Unconditional Lien Waiver? 

While both lien waivers forfeit your lien rights, an unconditional lien waiver does so immediately, regardless of whether or not you’ve received full payment. If you have not received full payment, you will be unable to file a mechanic’s lien in the future if there is a payment discrepancy. Remember, nonpayment can occur for any number of reasons ranging from bankruptcy to intentional refusal. For this reason, you should only sign an unconditional lien waiver not only upon receiving a check but also once it clears the bank. Additionally, you should only ever sign an unconditional lien waiver after reviewing its contents to ensure that the payment amount and the date in which labor is performed are accurate.  

We will continue to highlight the differences between conditional and unconditional lien waivers in part two. As we will cover, the type of waiver you sign can mean the difference between receiving full and partial payment. Consult with a Houston construction attorney from Cotney Law to ensure that you know what you’re signing and what you’re signing over. 

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.

Filing an improper or fraudulent mechanic’s lien can often bring on harsh consequences. In these instances, a contractor would have been better off not filing at all. But a contractor that has lien rights and fails to file may not be able to afford to stay in business. As a Texas contractor, you shouldn’t be afraid of exercising their lien rights, which is why we’re here to better explain the process. 

In part one of this article, a Houston construction lien attorney at Cotney Law discussed the key differences between an invalid and a fraudulent mechanic’s lien. Now, we will be discussing the consequences of improperly filing a mechanic’s lien and the steps you can take to protect your lien rights. 

Penalties and Consequences

After investing thousands of dollars defending your lien rights, the last thing you want to hear is that your lien is invalid. While no laws have been broken, contractors that file invalid liens are leaving themselves exposed and could end up paying damages to undeserving owners. 

A fraudulent lien, on the other hand, comes with a slew of legal penalties. Those that file a fraudulent lien are liable to injured parties for the following: 

  • The greater of $10,000 or actual damages
  • Court fees
  • Attorney fees
  • Additional damages to be determined by the court 

In addition, failing to release a fraudulent lien is a Class A misdemeanor in the State of Texas. If found guilty, an offender can be fined $4,000 and receive a prison sentence of up to one year. 

Consult a Lien Attorney 

What’s the difference between an invalid lien and a fraudulent lien? The consequences for filing an invalid lien can hinder your career, while the penalties for filing a fraudulent lien can end your career. It is imperative that contractors follow Texas lien law to the letter. This requires you to know not only how to exercise your lien rights but also when you actually have lien rights. 

Knowing when and how to properly file a mechanic’s lien can be done with the aid of a Houston construction lien attorney at our Texas law office. Only then can you guarantee that deadlines are being adhered to and notifications are being submitted accordingly. To ensure that your mechanic’s liens are filed properly and that your lien rights are secured, partner with our team of experienced and aggressive Houston construction lien attorneys at Cotney Law. 

If you would like to speak with one of our Houston construction lien 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.

The responsibility for properly filing a mechanic’s lien in Texas rests squarely on the shoulders of contractors. In trying to secure payment from an irresponsible owner, a contractor can find themselves in the wrong by filing an invalid or fraudulent mechanic’s lien. But what is the difference between an invalid and a fraudulent mechanic’s lien? 

In this two-part article, a Houston construction attorney at Cotney Law will be discussing not only the differences between these two undesirable liens, but also how to avoid filing them. As we’ve covered previously, Texas has some of the most complex lien laws in the United States. For help in successfully navigating through the lien process, consult with the Houston construction attorneys at Cotney Law. 

An Invalid Mechanic’s Lien

Given the Lone Star State’s complex lien laws, it’s all too easy for a contractor to incorrectly file a mechanic’s lien. Failure to abide by the state’s stringent laws can result in a lien being invalidated even when a contractor, subcontractor, or material supplier has lien rights. A lien may be found to be invalid for the following reasons: 

  • Preliminary notices were not sent
  • Deadlines were not adhered to
  • A faulty lien affidavit was filed
  • The lien was filed on a homestead property 

Even if a lien affidavit is correctly filed, a lien may still be invalid if a notice of lien affidavit was not provided to the owner or general contractor. The Texas lien process consists of strict deadlines, required notices, and obtuse legal jargon. Given these circumstances, innocent mistakes can lead to a contractor submitting an invalid lien. Speaking of innocent mistakes, that’s exactly what separates an invalid lien from a fraudulent lien. 

A Fraudulent Mechanic’s Lien 

The filing of a fraudulent mechanic’s lien occurs when a contractor knows that a lien is invalid and files anyway. The Fraudulent Lien Act states that “a person may not make, present, or use a document or other record with”: 

  • The knowledge that the lien is fraudulent
  • The intent that the lien be given the same legal effect as a valid lien
  • The intent to cause physical injury, financial injury, mental anguish, or emotional distress to another person  

There is a clear distinction between an invalid and a fraudulent lien. The penalties and financial risks of filing one or the other are also distinct. As we continue this article in part two, we’ll be discussing these differences further and advising contractors on how they can file a valid mechanic’s lien in the State of Texas. 

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’s no end to the issues that can lead to a stalled construction project. Many of these issues are sure to be beyond your control. However, many more can be mitigated with proper planning, expert contract drafting, and legal aid. We’re picking up where we left off in part one with our discussion on the causes of a stalled construction project. All of the below causes can be avoided with a clear, concise contract drafted by a Houston contractor attorney from Cotney Law. 

Cash Flow Issues  

It’s not abnormal for contractors to invest large sums of money into a project before seeing a profit. Contractors can leave themselves spread thin by essentially gambling on a project’s success. When a general contractor experiences cash flow issues, it can trickle down the construction hierarchy and stall subcontractors beneath them. In order to avoid cash flow issues, it is imperative that contractors accurately bid on projects. Failure to do so could result in your company being bound to an erroneous bid amount. In which case, you’ll require the aid of a Houston contractor attorney

Runaway Projects 

Any number of reasons can lead to project costs growing beyond what an owner and project manager envisioned. Either initial estimates were inaccurate or the scope of work gradually grew and changed as the project proceeded. If the scope of work has been altered, it could be because the owner requested alterations or unforeseen circumstances caused delays. An owner may try to pull the plug on a project they deem to be growing out of control. This is why contract drafting is the most important stage of a construction project. A properly drafted contract can outline goals and costs and temper expectations before a legal dispute erupts. Contact us if you wish to have your contracts reviewed by a Houston contractor attorney

Financing Runs Out

We’ve arrived at the main reason why construction projects stall. There’s very little that can be done if an owner runs out of money. However, there are reliable ways to mitigate the risk of owner bankruptcy. To begin with, no owner intentionally signs up for a project they believe to be outside their price range. For this reason, communication must be maintained throughout the construction process to inform the owner of any unexpected expenses or delays. As with the above topic, the best way to mitigate this issue is to have the project adequately outlined in the contract. But this can only be guaranteed with the aid of an attorney. 

Keep an Experienced Attorney Involved 

Throughout this series, we’ve brought up numerous reasons why a construction project may stall. While some of them may seem beyond your control, you can lessen the impact if not outright avoid many of them by properly drafting and reviewing contracts. To ensure that your company is consistently in the best position to succeed, we recommend looking at our subscription plans. From conception to project completion and beyond, you can rest easy knowing that your contracts have the seal of approval from the Houston contractor attorneys at 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.

A stalled construction project could mean bankruptcy for any construction company, even those that have been in business for decades. Whether by contractor error, owner error, or outside forces, there are a myriad of reasons why construction projects fail, and we’re here to tell you how to avoid them. 

In this two-part series, we will be discussing what causes a stalled construction project. 

Below, we will be discussing the causes that may be beyond your control. In part two, we will be discussing the causes that can be mitigated with a properly drafted contract. In all cases, you can help prevent construction delays by partnering with the team of Houston construction lawyers at Cotney Law. 

Material Shortages 

As you’ll see throughout this series, every component of the construction hierarchy must be operational to avoid a stalled construction project, and material suppliers are no exception. Poor material procurement, poor inventory management, or a breakdown in negotiations with manufacturers can bring construction to a standstill. 

While this cause is short lived and easily remedied, it’s becoming increasingly difficult to find fairly priced materials due to the current U.S. trade war and resulting industrial tariffs. Be sure to review your current policies to ensure that you know where suppliers for your next project are coming from. 

Acts of Nature 

Acts of nature, such as hurricanes, sinkholes, flooding, and lightning, always seem to strike construction sites at the worst possible moment. Even heavy rains can cause severe delays if project managers fail to alter schedules accordingly. Worst case scenario: a worker is gravely injured during a disaster. In this case, a contractor may be held responsible if workers were placed in hazardous conditions. To ensure that your workforce is operating in compliance with all state and federal laws, consult with a Houston construction lawyer

A Lack of Skilled Workers

We’ve previously covered how construction companies are failing to retain skilled workers. An unfortunate truth is that many construction companies failed to invest in training a new generation of skilled workers to replace an aging generation of workers. As a result, companies are struggling to keep up with labor demands, and many attempt to poach skilled workers from competing firms. To exacerbate the problem, having a workforce of inexperienced and unreliable workers can lead to delays, injuries, and construction defects. If you’ve experienced any of these issues on your project, you are in need of a Houston construction lawyer

For more information on stalled construction projects, read part two.

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.

Contractors, subcontractors, and material suppliers in the Lone Star State have their work cut out for them when it comes to filing a mechanic’s lien. This is due, in part, to the state’s complex rules regarding the deadline for filing a lien, which varies depending on which of the above three roles you fall into. In this brief article, a Houston construction lien attorney at Cotney Law will be discussing the various deadlines for filing a mechanic’s lien in Texas and how they apply to you.

General Contractors

If you contract directly with the owner or their agent, you are known as the general contractor. For general contractors, the deadline is triggered with the filing of a lien affidavit, which must be sent by the 15th day of the fourth month after the lien trigger, which is the last day of the last month that the project was completed, finally settled, terminated, or abandoned. The lien must be filed by the end of this four-month period.

Subcontractors and Suppliers

The deadlines laid out above also apply to subcontractors and suppliers, with a few caveats. General contractors only have one notice to send, the lien affidavit. Subcontractors have to send out a notice to the owner and general contractor every month that they don’t receive payment. Suppliers will need to send a Specially Manufactured Materials Notice by the 15th day of the second month from the date that the materials were supplied.

Residential Properties

The deadlines described above apply to liens filed against commercial projects. While all of the steps are the same, the deadline is a bit different to file a lien on a residential property. Mainly, the lien affidavit must be sent by the 15th day of the third month, which shaves a full month off the time you have to file a mechanic’s lien.

When you account for the additional notices, statements, and affidavits that may also need to be submitted, it’s clear that it’s not feasible to file a mechanic’s lien in the State of Texas without the aid of an attorney. Navigate the veritable maze that is filing a mechanic’s lien with the help of a Houston construction lien attorney at Cotney Law.

If you would like to speak with one of our Houston construction lien 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.

A little foresight in the construction industry can go a long way towards avoiding disputes and maintaining owner-contractor relationships. While you can’t see the future, you can take steps to secure a project’s success by planning for potential conflicts in the contract drafting phase. Construction allowances are one of these potential sources of conflict.

Throughout this series, we’ve covered what allowances are and the considerations that must be taken to ensure that they are properly defined in a contract. The Houston contractor attorneys at Cotney Law will conclude this series by discussing why construction allowances should be altogether avoided and what to do when they can’t be.

Allowances Should Be Avoided

As a rule, contractors should avoid any project unknowns. While allowances may not seem inherently bad, they have the potential to cause a legal dispute. For this reason, allowances should be avoided when possible and kept at a minimum when unavoidable. Material and labor costs should be decided and agreed upon by owners and contractors prior to signing a contract.

When Allowances Can’t Be Avoided  

When you absolutely must include allowances in your contracts, be sure that they are within reason. If you expect project costs to be in the hundreds of thousands of dollars, you wouldn’t want an allowance that’s a small fraction of that. Don’t set yourself up for failure. A poorly estimated allowance may result in a contractor paying out of pocket for additional costs.

When material and labor costs do change, as is common, have a Houston contractor attorney draft a change order immediately. Simply discussing changes with a seemingly easygoing owner will not suffice. Conflict is sure to surface when changes pile up and you have no way to prove the source of rising costs. As always, we recommend improved document control, not just to eliminate confusion, but to also protect yourself in the event that you are faced with explaining your actions in a court of law.

Partner with an Attorney

Allowances are only one of the countless and ever-changing variables that can lead to conflict on a construction project. When the scope of work is altered and contract limits are tested, contractors are often burdened with defending their interests both on and off the project site. Keeping a lawyer on retainer is the only sure way to protect yourself in an industry beset by rising material costs and litigious owners. To ensure that your rights are vigorously defended from year to year, partner with our team of Houston contractor attorneys at Cotney Law.

To catch up on this series, read parts one and two.

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.