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.
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.
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.
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.