Isabella Carter
A constitutional lien in Texas is a legal claim on a property that is derived from the Texas Constitution and is not subject to the notice statutes of the Texas Property Code. It is available to original contractors with a direct contractual relationship with the property owner, and in some cases, to first-tier subcontractors if the direct contract is a sham contract. The constitutional lien is a tool for contractors at risk of not being paid for their work, allowing them to bypass the pre-lien notice requirement and directly file a lien. While the filing process is similar to that of a statutory lien, there are specific requirements and complexities that must be considered when filing a constitutional lien.
| Characteristics | Values |
|---|---|
| Type of lien | Constitutional lien |
| Who can file it? | Original contractors with a direct contract with the property owner |
| Who cannot file it? | Subcontractors, except in the case of a "sham contract" |
| What is it used for? | Protecting contractors at risk of not being paid for their work |
| What is the process? | File an affidavit of lien with the county clerk where the property is located |
| What is the time limit? | N/A – constitutional liens are self-executing |
| What is the cost? | N/A |
| Are there any requirements? | Yes, Section 50(a) of Article 16 of the Texas Constitution sets out the requirements that must be met to trigger a constitutional lien |
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What You'll Learn
Who can file a constitutional lien in Texas?
In Texas, two types of lien protection are available: a statutory lien and a Texas constitutional mechanics lien.
Texas constitutional liens are "self-executing", meaning they arise automatically. However, they are only available for original contractors, i.e. those with a direct contractual relationship with the property owner. If you are an original contractor who improved a non-residential building or article and have not been paid in full for your work, you have a constitutional lien on the project and can file an action to foreclose on it.
There is one circumstance where someone without a direct contract with the owner can still have constitutional lien rights: if the direct contractor's contract is a "sham contract", a first-tier subcontractor may have these lien rights. A sham contract is when an owner can effectively control the prime contractor or vice versa through ownership, directorship, or otherwise.
To file a constitutional lien, you must file a constitutional lien affidavit with the county clerk where the property is located. This acts as notice to any potential purchasers of the real estate.
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What is the process for filing a constitutional lien?
In Texas, there are two types of mechanics liens: a statutory lien and a constitutional lien. A constitutional lien is a legal claim placed on a person's or entity's property and is derived from the Texas Constitution and laws of a particular jurisdiction. It is available only to original contractors with a direct contractual relationship with the property owner. However, if the direct contractor's contract is a "sham contract", a 1st-tier subcontractor may have these lien rights. A sham contract is when an owner can effectively control the prime contractor or vice versa through ownership, directorship, or other means.
The process for filing a constitutional lien in Texas is as follows:
- The original contractor must have a contract with the owner and have improved a non-residential building or article that has not been paid in full for their work.
- The contractor must file a constitutional lien affidavit with the county clerk where the property is located. This acts as notice to any potential purchasers of the real estate.
- The contractor may then file an action to foreclose on the lien.
It is important to note that the statutory lien process is complex and has stringent deadlines that must be met to secure lien rights. Failure to comply with the state's pre-lien notice requirements can impact a contractor's ability to file a valid lien. Therefore, it is recommended to consult with a legal professional familiar with Texas lien laws before initiating the filing process.
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What is the difference between a statutory lien and a constitutional lien?
In the state of Texas, there are two types of lien protection: a statutory lien and a constitutional lien.
A statutory lien is a type of lien that is created by state law and provides contractors, subcontractors, and suppliers with a legal claim to the property they worked on or supplied materials to. In the construction industry, these are also known as mechanic's liens. Statutory liens are automatic and do not require the consent of both parties. They are typically used to secure payment for work and materials, even if the property owner fails to pay. To properly file a statutory lien claim, there are several requirements that must be met. These include filing an affidavit with the county clerk, identifying the claimant, property owner, property, and labour, services, and/or materials that support the lien affidavit, and mailing a notice to the owner within a specified timeframe.
On the other hand, constitutional liens are typically used in situations where statutory lien laws do not apply or do not provide adequate protection for contractors, subcontractors, or suppliers. In Texas, constitutional liens are only available for "original contractors," who have a direct contractual relationship with the property owner. However, there is an exception where a subcontractor can become an original contractor if the contract between the owner and the direct contractor is deemed a "sham contract." This means that the owner has control over the contractor or vice versa, and the subcontractor will be considered to have a direct contractual relationship with the owner, thus gaining lien rights. Constitutional liens are self-executing, meaning they arise automatically, and there are no monthly notice requirements or deadlines to secure lien rights.
While a constitutional lien affidavit is not required, it is recommended to file one to protect your interests. If you are an original contractor who has improved a non-residential building or article and has not been paid in full, you can file a constitutional lien and take action to foreclose on it.
In summary, the main differences between statutory and constitutional liens lie in their creation, availability, requirements, and enforcement procedures.
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What is a sham contract?
In the state of Texas, there are two types of lien protection: a statutory lien and a Texas constitutional mechanics lien. While the former is more common, the latter is only available for original contractors with a direct contractual relationship with the property owner. However, an exception is made for "sham contracts".
A sham contract is when an owner can exert control over the prime contractor or vice versa, through ownership, directorship, or other means. This type of contract is considered a sham because it is an attempt by the owner to misrepresent or disguise an employment relationship as an independent contracting arrangement. In other words, the owner is treating someone as an independent contractor when they are, in reality, an employee. This misrepresentation allows the owner to avoid fulfilling employee entitlement responsibilities, such as minimum rates of pay and leave entitlements.
Sham contracting is prohibited by the Fair Work Act, and employers can face fines and other consequences for engaging in this practice. To determine whether a person is an employee or an independent contractor, the law has developed a number of tests. For example, having an ABN or issuing invoices does not automatically make one an independent contractor, despite being a common misconception.
In the context of Texas constitutional liens, the inclusion of the ""sham contracts" exception is intended to protect against owners or prime contractors attempting to circumvent the constitutional lien rights of subcontractors. By recognising the potential for sham contracts, Texas law ensures that subcontractors are not deprived of their lien rights, even if they do not have a direct contract with the owner.
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What to do if you are a homeowner and a constitutional lien has been filed against your property?
If you are a homeowner in Texas and a constitutional lien has been filed against your property, it is important to act promptly and take the necessary steps to protect your rights. Here is a guide on what to do in such a situation:
First, it is crucial to understand what a constitutional lien is and how it differs from a statutory lien. In Texas, a constitutional lien is a type of mechanic's lien that is available specifically to original contractors who have a direct contractual relationship with the property owner. This type of lien is self-executing, which means it arises automatically without the need for monthly notices or strict deadlines typically associated with statutory liens.
However, for a constitutional lien to be valid, certain requirements must be met. These requirements are outlined in Section 50(a) of Article 16 of the Texas Constitution. As a homeowner, you should carefully review these requirements and determine if they have all been satisfied. If any of the requirements have not been met, the constitutional lien may have been improperly filed, and you can take steps to have it removed.
To remove an invalid or unenforceable lien, you can file a motion under Section 53.160 of the Texas Property Code. This section provides an expedited procedure for removing such liens from real property, whether it is a homestead or not. Some of the grounds for removal include lack of proper notice, non-compliance with affidavit requirements, and full payment of funds owed before the lien was filed.
It is important to act quickly and seek legal advice if necessary. While constitutional liens can be more difficult to challenge than statutory liens, they are not impossible to dispute if they have been improperly filed. Additionally, if the debt associated with the lien is paid or settled, ensure that a release is recorded with the county clerk to clear the lien from the property.
Lastly, keep in mind that subcontractors or suppliers without a direct contract with the property owner typically do not have constitutional lien rights. However, there is an exception for "sham contracts," where an owner has control over the prime contractor, in which case first-tier subcontractors may have lien rights.
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Frequently asked questions
A constitutional lien in Texas is a legal claim placed on a person's or entity's property. It is derived from the Texas Constitution and laws of a particular jurisdiction and is not subject to the notice statutes of the Texas Property Code.
In Texas, constitutional liens are technically only available for original contractors with a direct contractual relationship with the property owner. However, there is an exception where a first-tier subcontractor may have lien rights if the direct contract is a ""sham contract", where the owner has control over the prime contractor.
The requirements to file a constitutional lien in Texas are outlined in Section 50(a) of Article 16 of the Texas Constitution. One key requirement is that the original contractor must have improved a non-residential building or article and has not been paid in full for their work.
To file a constitutional lien in Texas, you must file a constitutional lien affidavit with the county clerk where the property is located. This acts as a notice to any potential purchasers of the real estate. It is recommended to consult with a legal professional familiar with Texas lien laws to ensure compliance with all requirements.
