Current Edition - Construction Lending News

VOLUME 39, 2013
M&M: CRE Capital Markets
Remain Active
By Michael Tucker1
Commercial real estate capital markets remain
active despite volatility from Europe's financial crisis,
uncertainty about the U.S. fiscal cliff and other
concerns, said Marcus & Millichap, Calabasas, Calif.
“The stabilization, and even appreciation,
of commercial real estate values has supported
increased credit availability and now extends to
creditworthy properties in secondary markets,” said
Hessam Nadji, managing director of research and
advisory services with Marcus & Millichap.
Nadji said the strength of commercial mortgage
originations for retail and hotel properties drove
a 25 percent increase in overall lending volume
between the secoʼnd and third quarters last year.
Retail lending jumped 56 percent and hotel lending
increased 22 percent. Multifamily lending increased
19 percent and office lending increased 15 percent in
the same time period. Only industrial property loans
decreased, falling 5 percent.
"Portfolio lenders have
expanded their allocation
to real estate and
increased their market
share of loan originations”
“Portfolio lenders have expanded their allocation
to real estate and increased their market share
of loan originations,” Nadji said. “They compete
effectively with conduit lenders on rates and tend
to attract the best-in-class properties, but remain
more conservative on the loan-to-value ratio and
geography.”
'Modest Growth' in
Construction Predicted
for 2013
By Michael Tucker2
U.S. construction starts
will likely increase 6 percent
next year to $483.7 billion,
the 2013 Dodge Construction
Outlook reported.
New construction starts
edged up 2 percent in
2010, followed by another 1
percent gain in 2011, and 2012's expected 5 percent
increase will take the annual figure to $458 billion,
the report said.
"This still leaves the volume of total construction
starts 32 percent below the 2005 peak on a currentdollar basis and down about 50 percent when
viewed on a constant-dollar basis," said Robert
Murray, McGraw-Hill Construction's vice president of
economic affairs. McGraw-Hill Construction publishes
the industry forecast.
"The modest gains experienced during the past two
years have in effect produced an extended bottom for
construction starts, in which the process of recovery
is being stretched out," Murray said.
continued on page 2
2
Printed with permission by MBA Commercial/Multifamily NewsLink.
In this issue:
•
M&M: CRE Capital Markets Remain
Active
•
'Modest Growth' in Construction
Predicted for 2013
•
Texas Mechanicsʼ Lien Law
•
Builder Confidence Rises in
December
•
Thank You For Attending the Area
51: Out of This World Party!
continued on page 6
1
Printed with permission by MBA Commercial/Multifamily NewsLink.
The Granite Companies, 10770 E. Briarwood Ave., Suite 280, Centennial, CO 80112 866.710.4087
The information and opinions expressed by contributing authors and advertisers within the Construction Lending News do not necessarily reflect those of Granite Loan Management, LLC
or its affiliates or their respective employees (“Granite”) and should not be considered as endorsed or recommended by Granite.
'Modest Growth' in Construction
Predicted for 2013 (continued)
The report said multifamily housing could rise 16
percent (in dollar terms; 14 percent in unit terms)
next year, marking healthy percentage gains but
slower growth than 2011 and 2012. "Improved market
fundamentals will help to justify new construction,
and this structure type continues to be viewed
favorably by the real estate finance community," the
report said.
Commercial building could increase 12 percent,
the report predicted, slightly faster than the 5 percent
gain estimated for full-year 2012. The report said
both warehouses and hotels will benefit from lower
vacancy rates, while retail store construction will
feature more upgrades to existing space.
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"The increase for office construction will be
modest, as new privately financed projects continue
to be scrutinized carefully by lenders," the report
said. It predicted that next year's level of commercial
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building will fall more than 40 percent below the 2007
peak when measured in current dollars.
Murray said the looming "fiscal cliff" scenario of
proposed federal budget cuts and tax increases
scheduled to take effect on Jan. 2 poses a "significant
downside risk to the near-term prospects for the U.S.
economy and the construction industry."
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But Murray noted that if efforts to cushion the
full extent of the fiscal cliff work, "keeping the U.S.
economy from sliding back into recession, then there
are several positive factors to benefit construction,
including low interest rates and improving market
fundamentals for several project types."
www.constructionlendingnews.com
2
Texas Mechanicsʼ Lien Law
(a) A claimant may give notice under this section
instead of or in addition to notice under Section
53.056 or 53.252 if the claimant is to labor, furnish
labor or materials, or specially fabricate materials, or
has labored, furnished labor or materials, or specially
fabricated materials, under an agreement with an
original contractor or a subcontractor providing for
retainage.
By Steven E. Kennedy, Esq.3
Steven Kennedy
The 2011 Legislative Session
brought a number of changes to
the Texas mechanics lien statute,
Property Code Chapter 53. The
changes deal primarily with timing for
a notice for a lien on retainage and
forms required to secure a release of
lien. These changes are effective for
contracts entered after September 1,
2011 and are summarized below:
(b) The claimant must give the owner or reputed
owner notice of thecontractual retainage agreement
not later than the 15th day of the second month
following the delivery of materials or the performance
of labor by the claimant that first occursearlier of:
Retainge Notices – Texas Property Code §
53.057 – Derivative Claimant: Notice for Contractual
Retainage Claim
(1) the 30th day after the date the claimant has
agreed to the contractual's agreement providing for
retainage is completed, terminated, or abandoned;
or
The requirements for perfection of a lien on
contractual retainage for a subcontractor or supplier
have been rewritten. The former Tex. Prop. Code
§ 53.057 required claimants to give notice of a
retainage agreement to the owner by the fifteenth
of the second month following the first delivery
of materials or performance of the work under an
agreement including retainage. Because of this
early notice requirement, many subcontractors and
suppliers failed to send a retainage notice. Even if
a notice was sent under the prior statute, claimants
were still faced with the challenge of actually filing
the lien on or before thirty days after final completion,
which often caused an owner’s title to be clouded
by a lien before an owner was obligated to pay the
prime contractor its retainage under their contract.
Changes to Tex. Prop. Code § 53.057 attempt to cure
these problems by changing the notice requirement
trigger to completion of the subcontract work or the
prime contract. This eliminates the early notice
requirement, but places on the owner a greater risk of
claimants perfecting a lien for retainage at the end of
the project. The full text of the revised § 53.057 is set
forth below, with the changes indicated. Note that the
deadlines for filing the claimant’s lien for retainage
have also been revised. Because of the complexity,
and breadth of the changes, it is recommended that
all parties involved in a construction project review
the new notice provisions and lien deadlines in detail.
(2) the 30th day after the date the original
contract is terminated or abandoned.
(b-1) If thean agreement for contractual retainage
is with a subcontractor, the claimant must also give
the notice within that timeof contractual retainage to
the original contractor within the period prescribed by
Subsection (b).
(c) The notice must generally state the existence
of a requirement for retainage and contain:
(1) the sum to be retained; the name and
address of the claimant; and
(2) the due date or dates, if known; and(3) a
general indication of the nature of the agreement is
with a subcontractor, the name and address of the
subcontractor.
continued on page 4
§ 53.057. Derivative Claimant: Notice for
Contractual Retainage Claim
Steven E. Kennedy is an attorney practicing in Dallas, Texas, as well as licensed
architect. Mr. Kennedy’s practice is concentrated in the area of construction law, contract
disputes, and commercial litigation and arbitration. He is a Shareholder and Director of
the firm of McGuire, Craddock & Strother, P.C.
3
3
Texas Mechanicsʼ Lien Law
of the real property on which the improvement is
located;
(continued)
(2) must state that the claimant must file the lien
affidavit not later than the 30th day after the date
the demand is sent; and
(d) The notice must be sent by registered or
certified mail to the last known business or residence
address of the owner or reputed owner or the original
contractor, as applicable.
(3) is effective only for the amount of contractual
retainage earned by the claimant as of the day the
demand was sent.
(e) If a claimant gives notice under this section
and Section 53.055 or, if the claim relates to a
residential construction project, under this section
and Section 53.252, the claimant is not required to
give any other notice as to the retainage.
[END OF STATUTE]
Note also that Tex. Prop. Code § 53.103 has
been modified to reference an exception for claims
as allowed under the new revised § 53.057(f),
above. Section 53.103 is the section that limits an
owner’s liability for retainage and trapped funds.
Because the new provisions in §53.057(f) will affect
(if not eliminate) the owner’s former thirty day after
completion “safe harbor” for release of retainage,
owners are cautioned to review the new lien filing
deadlines for retainage under § 53.057(f) to determine
their safe date for release of retainage.
(f) A claimant has a lien on, and the owner is
personally liable to the claimant for, the retained
funds under Subchapter E if the claimant:
(1) gives notice in accordance with this section
and:
(A) complies with Subchapter E; or
(B) files an affidavit claiming a lien not later than
the earliest of:
Lien Releases
(i) the date required for filing an affidavit
under Section 53.052;
Perhaps the biggest change from the 2011
Legislature is the new Tex. Prop. Code Chapter 53,
Subchapter L, which provides mandatory forms for
waiver and release of lien and bond claims. The new
sections are set forth below in their entirety. See
additional commentary following the statutory text
below.
(ii) the 40th day after the date stated in an
affidavit of completion as the date of completion
of the work under the original contract, if the
owner sent the claimant notice of an affidavit
of completion in the time and manner required;
continued on page 6
(iii) the 40th day after the date of termination
or abandonment of the original contract, if
the owner sent the claimant a notice of such
termination or abandonment in the time and
manner required; or
Construction-at-a-Glance
Oct. 11
Total Monthly Housing Starts* 630
439
One Unit
Multifamily
191
444
YTD Permits-Single Family*
YTD Permits-Multifamily*
223
314
Monthly New Home Sales*
Unemployment Rate
9.0%
(iv) the 30th day after the date the owner
sent to the claimant to the claimant's address
provided in the notice for contractual retainage,
as required under Subsection (c), a written
notice of demand for the claimant to file the
affidavit claiming a lien; and
(2) gives the notice of the filed affidavit as
required by Section 53.055.
(g) The written demand under Subsection (f)(1)
(B)(iv):
Oct. 12
894
594
300
562
304
368
7.9%
*Thousands of Units
(1) must contain the owner's name and address
and a description, legally sufficient for identification,
Source: U.S. Bureau of the Census, Construction Reports, Series C-20,
Housing Starts. U.S. Bureau of Labor Statistics.
4
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M&M: CRE Capital Markets
Remain Active (continued)
Texas Mechanicsʼ Lien Law
Commercial mortgage-backed securities remain
a key source for financing commercial real estate.
2012's issuance volume, expected to approach $50
billion, significantly outpaced 2011's $32.7 billion
volume. “Conduit lenders suggest a healthy real
estate market requires closer to $60 billion in CMBS
issuance, and the market will likely achieve these
levels in 2013,” Nadji said.
Chapter 53. Mechanic's, Contractor's, or
Materialman's Lien
(continued)
Subchapter L. Waiver and Release of Lien or
Payment Bond Claim
§ 53.281. Waiver and Release of Lien or Payment
Bond Claim
<Text of section effective Jan. 1, 2012>
"Conduit lenders suggest a
healthy real estate market
requires closer to $60 billion
in CMBS issuance, and the
market will likely achieve
these levels in 2013"
(a) Any waiver and release of a lien or payment
bond claim under this chapter is unenforceable unless
a waiver and release is executed and delivered in
accordance with this subchapter.
(b) A waiver and release is effective to release the
owner, the owner's property, the contractor, and the
surety on a payment bond from claims and liens only
if:
(1) the waiver and release substantially complies
with one of the forms prescribed by Section 53.284;
(2) the waiver and release is signed by the
claimant or the claimant's authorized agent and
notarized; and
Government-sponsored enterprises Fannie
Mae and Freddie Mac expanded their volume of
multifamily loans by 50 percent with an estimated
2012 year-end volume of $45 billion. Nadji said
Fannie Mae and Freddie Mac underwrote a full 85
percent of multifamily loans during the credit cycle’s
low point in 2008. “[But,] life companies and national
banks now aggressively seek multifamily deals,
increasing respective market shares while eroding
the GSEs' share to 60 percent, a ratio reflective of a
more normal credit environment.”
(3) in the case of a conditional release, evidence
of payment to the claimant exists.
§ 53.282. Conditions for Waiver, Release, or
Impairment of Lien or Payment Bond Claim
<Text of section effective Jan. 1, 2012>
(a) A statement purporting to waive, release, or
otherwise adversely affect a lien or payment bond
claim is not enforceable and does not create an
estoppel or impairment of a lien or payment bond
claim unless:
(1) the statement is in writing and substantially
complies with a form prescribed by Section 53.284;
(2) the claimant has actually received payment
in good and sufficient funds in full for the lien or
payment bond claim; or
(3) the statement is:
continued on page 7
6
Texas Mechanicsʼ Lien Law
Granite is a service provider to
(continued)
(A) in a written original contract or subcontract for
the construction, remodel, or repair of a single-family
house, townhouse, or duplex or for land development
related to a single-family house, townhouse, or
duplex; and
(B) made before labor or materials are provided
under the original contract or subcontract.
(b) The filing of a lien rendered unenforceable
by a lien waiver under Subsection (a)(3) does
not violate Section 12.002, Civil Practice and
Remedies Code, unless:
www.renovationready.com
(1) an owner or original contractor sends a
written explanation of the basis for nonpayment,
evidence of the contractual waiver of lien rights,
and a notice of request for release of the lien to
the claimant at the claimant's address stated in the
lien affidavit; and
(b) If a claimant or potential claimant is
required to execute a waiver and release in
exchange for or to induce the payment of a
progress payment and is not paid in exchange
for the waiver and release or if a single payee
check or joint payee check is given in exchange
for the waiver and release, the waiver and
release must read:
(2) the lien claimant does not release the filed
lien affidavit on or before the 14th day after the
date the owner or the original contractor sends the
items required by Subdivision (1).
(c) Subsection (a)(3) does not apply to a
person who supplies only material, and not
labor, for the construction, remodel, or repair of
a single-family house, townhouse, or duplex or
for land development related to a single-family
house, townhouse, or duplex.
“CONDITIONAL WAIVER AND RELEASE
ON PROGRESS PAYMENT
§ 53.283. Unconditional Waiver and Release:
Payment Required
“On receipt by the signer of this document
of a check from ________________ (maker of
check) in the sum of $__________ payable to
_____________________ (payee or payees of
check) and when the check has been properly
endorsed and has been paid by the bank on
which it is drawn, this document becomes
effective to release any mechanic's lien right,
any right arising from a payment bond that
complies with a state or federal statute, any
common law payment bond right, any claim
for payment, and any rights under any similar
ordinance, rule, or statute related to claim
or payment rights for persons in the signer's
position that the signer has on the property
of ________________ (owner) located at
______________________ (location) to the
following extent: ______________________
(job description).
“Project ___________________
“Job No. __________________
<Text of section effective Jan. 1, 2012>
A person may not require a claimant or potential
claimant to execute an unconditional waiver and
release for a progress payment or final payment
amount unless the claimant or potential claimant
received payment in that amount in good and
sufficient funds.
§ 53.284. Forms for Waiver and Release of Lien
or Payment Bond Claim
<Text of section effective Jan. 1, 2012>
(a) A waiver and release given by a claimant
or potential claimant is unenforceable unless it
substantially complies with the applicable form
described by Subsections (b)-(e).
continued on page 8
7
Texas Mechanicsʼ Lien Law
(2) below the notice, read:
“UNCONDITIONAL WAIVER AND RELEASE
ON PROGRESS PAYMENT
(continued)
“This release covers a progress payment for all
labor, services, equipment, or materials furnished
to the property or to __________________
(person with whom signer contracted) as
indicated in the attached statement(s) or
progress payment request(s), except for unpaid
retention, pending modifications and changes,
or other items furnished.
“Project ___________________
“Job No. ___________________
“The signer of this document has been paid
and has received a progress payment in the
sum of $___________ for all labor, services,
equipment, or materials furnished to the property
or to _____________________ (person with
whom signer contracted) on the property of
_______________________ (owner) located
at ______________________ (location) to the
following extent: ______________________ (job
description). The signer therefore waives and
releases any mechanic's lien right, any right arising
from a payment bond that complies with a state or
federal statute, any common law payment bond
right, any claim for payment, and any rights under
any similar ordinance, rule, or statute related
to claim or payment rights for persons in the
signer's position that the signer has on the above
referenced project to the following extent:
“Before any recipient of this document relies
on this document, the recipient should verify
evidence of payment to the signer.
“The signer warrants that the signer has
already paid or will use the funds received
from this progress payment to promptly pay in
full all of the signer's laborers, subcontractors,
materialmen, and suppliers for all work,
materials, equipment, or services provided for
or to the above referenced project in regard to
the attached statement(s) or progress payment
request(s).
“Date ____________________________
“This release covers a progress payment for all
labor, services, equipment, or materials furnished
to the property or to __________________ (person
with whom signer contracted) as indicated in
the attached statement(s) or progress payment
request(s), except for unpaid retention, pending
modifications and changes, or other items
furnished.
“_____________________ (Company name)
“By ________________________ (Signature)
“______________________________ (Title)”
(c) If a claimant or potential claimant is
required to execute an unconditional waiver
and release to prove the receipt of good and
sufficient funds for a progress payment and
the claimant or potential claimant asserts in the
waiver and release that the claimant or potential
claimant has been paid the progress payment,
the waiver and release must:
“The signer warrants that the signer has already
paid or will use the funds received from this
progress payment to promptly pay in full all of the
signer's laborers, subcontractors, materialmen,
and suppliers for all work, materials, equipment, or
services provided for or to the above referenced
project in regard to the attached statement(s) or
progress payment request(s).
(1) contain a notice at the top of the document,
printed in bold type at least as large as the largest
type used in the document, but not smaller than
10-point type, that reads:
“Date ____________________________
“_________________________ (Company name)
“NOTICE:
“This document waives rights unconditionally
and states that you have been paid for giving up
those rights. It is prohibited for a person to require
you to sign this document if you have not been paid
the payment amount set forth below. If you have
not been paid, use a conditional release form.”; and
continued on page 9
8
Texas Mechanicsʼ Lien Law
Builder Confidence Rises in
December
(continued)
By Carla Hill4
“By ____________________________ (Signature)
“_________________________________ (Title)”
Builder confidence rose in December according to
the National Association of Home Builders. This is the
third straight month of improved confidence.
(d) If a claimant or potential claimant is
required to execute a waiver and release in
exchange for or to induce the payment of a final
payment and is not paid in good and sufficient
funds in exchange for the waiver and release or
if a single payee check or joint payee check is
given in exchange for the waiver and release,
the waiver and release must read:
The National Association of Home Builders/Wells
Fargo Housing Market Index (HMI) indicates this is
the highest level the market has seen since May
2010.
"This is the first time that builder confidence has
improved for three consecutive months since mid2009, which signifies a legitimate though slowly
emerging upward trend," said NAHB Chief Economist
David Crowe. "While large inventories of foreclosed
properties continue to plague the most distressed
markets and consumer worries about job security
and the challenges of selling an existing home
remain significant factors, builders are reporting more
inquiries and more interest among potential buyers
than they have seen in previous months."
“CONDITIONAL WAIVER AND RELEASE
ON FINAL PAYMENT
“Project ___________________
“Job No. ___________________
“On receipt by the signer of this document
of a check from ________________ (maker of
check) in the sum of $____________ payable to
_____________________ (payee or payees of
check) and when the check has been properly
endorsed and has been paid by the bank on
which it is drawn, this document becomes
effective to release any mechanic's lien right,
any right arising from a payment bond that
complies with a state or federal statute, any
common law payment bond right, any claim
for payment, and any rights under any similar
ordinance, rule, or statute related to claim
or payment rights for persons in the signer's
position that the signer has on the property
of _____________________ (owner) located
at ______________________ (location) to the
following extent: ______________________
(job description).
This rise was calculated by looking at builder
perceptions of what single-family home sales look
like now and where builders think they'll be in the
next six months.
On the topic of current sales, builder confidence
rose two points on the HMI scale. Expectations for
sales over the next six months rose one point. The
largest rise was seen in builders' reports on traffic of
prospective buyers, which was up three points to the
highest levels since May 2008.
Real estate is a largely local commodity. Regionally,
the largest rise in builder confidence for December
was seen in the South, which posted a 4-point gain.
The West saw a one point gain. The Midwest was
unchanged and the Northeast slid down the scale by
one point.
“This release covers the final payment to
the signer for all labor, services, equipment,
or materials furnished to the property or to
__________________ (person with whom
signer contracted).
How does a rise in builder confidence affect
today's buyers and sellers? For starters, builders
have indicated that buyers are placing more inquiries.
Home permits have "spiked" according to CNN.
Consumer confidence may be returning on the
“Before any recipient of this document relies
on this document, the recipient should verify
evidence of payment to the signer.
continued on page 10
“The signer warrants that the signer has
already paid or will use the funds received
3
continued on page 10
Reprinted with permission from the Realty Times January 2013.
Copyright 2012 Realty Times. All rights reserved. www.realtytimes.com
9
Texas Mechanicsʼ Lien Law
Builder Confidence Rises in
December (continued)
(continued)
from this final payment to promptly pay in full
all of the signer's laborers, subcontractors,
materialmen, and suppliers for all work,
materials, equipment, or services provided for
or to the above referenced project up to the date
of this waiver and release.
heels of a drop in the unemployment rate. This
renewed confidence fosters growth in buyer and
seller communities, hopefully raising the value or
homes and offering new jobs.
The question is mostly, however, about how the
confidence and actions of today's buyers and sellers
affects today's builders. Builders have had a tough
time since the housing bust several years ago.
Many smaller builders found their market of eager
homebuyers shrink as the recession hit and wouldbe buyers decided to wait out the market or fell on
hard times. Other builders have had difficult times
procuring credit for projects. Discount pricing on
distressed properties have caused many builders to
sell new homes at cost. Construction workers lost
over a million jobs during the recession, a number
that has yet to rebound.
“Date ____________________________
“_____________________ (Company name)
“By ________________________ (Signature)
“______________________________ (Title)”
(e) If a claimant or potential claimant is
required to execute an unconditional waiver
and release to prove the receipt of good and
sufficient funds for a final payment and the
claimant or potential claimant asserts in the
waiver and release that the claimant or potential
claimant has been paid the final payment, the
waiver and release must:
Confidence is still fighting an uphill battle against
tightened lending, high unemployment, and a
continued debt crisis in the U.S. and in Europe.
"While builder confidence remains low, the
consistent gains registered over the past several
months are an indication that pockets of recovery
are slowly starting to emerge in scattered housing
markets," said Bob Nielsen, chairman of the National
Association of Home Builders (NAHB) and a home
builder from Reno, Nev. "However, the difficulties
that both builders and buyers continue to experience
in accessing credit for new homes are holding
back potential sales even in areas where economic
conditions are improving."
(1) contain a notice at the top of the document,
printed in bold type at least as large as the largest
type used in the document, but not smaller than
10-point type, that reads:
“NOTICE:
“This document waives rights unconditionally
and states that you have been paid for giving up
those rights. It is prohibited for a person to require
you to sign this document if you have not been paid
the payment amount set forth below. If you have
not been paid, use a conditional release form.”; and
Markets are improving all across the country.
Many have seen consistent improvements in home
sales, home prices, and employment over the last six
months. If this trend continues, builder confidence
should return with even more gusto.
(2) below the notice, read:
“UNCONDITIONAL WAIVER AND RELEASE ON
FINAL PAYMENT
“Project___________________
“Job No.___________________
“The signer of this document has been paid in
full for all labor, services, equipment, or materials
furnished to the property or to ___________________
continued on page 11
10
Texas Mechanicsʼ Lien Law
Be a Part of Nacl!
(continued)
(person with whom signer contracted) on the property
of ______________________ (owner) located at
______________________ (location) to the following
extent: ______________________ (job description).
The signer therefore waives and releases any
mechanic's lien right, any right arising from a payment
bond that complies with a state or federal statute,
any common law payment bond right, any claim for
payment, and any rights under any similar ordinance,
rule, or statute related to claim or payment rights for
persons in the signer's position.
NACL is a nonprofit national trade
association representing financial
service providers in the construction
industry. The Mission is to provide
education, information, policy
development, development of
standards & practices for the benefit
of consumers, lenders, investors and
others in the construction community.
For additional information on NACL
contact:
“The signer warrants that the signer has already
paid or will use the funds received from this final
payment to promptly pay in full all of the signer's
laborers, subcontractors, materialmen, and suppliers
for all work, materials, equipment, or services
provided for or to the above referenced project up to
the date of this waiver and release.
“Date ____________________________
“_________________________(Company name)
NACL
“By ___________________________ (Signature)
“_________________________________ (Title)”
email: info@narcl.org
§ 53.285. Attempted Compliance
www.narcl.org
<Text of section effective Jan. 1, 2012. This section
expires pursuant to its own terms Aug. 31, 2012.>
(a) A waiver or release shall be construed to
comply with this subchapter and is enforceable in
the same manner as a waiver and release under this
subchapter if the waiver or release:
(1) is furnished in attempted compliance with this
subchapter; or
(2) evidences by its terms intent to comply with
this subchapter.
(b) Any provision in any waiver or release
furnished in attempted compliance with this
subchapter that expands or restricts the rights
or liabilities provided under this subchapter
shall be disregarded and the provisions of this
subchapter shall be read into that waiver or
release.
continued on page 12
11
Texas Mechanicsʼ Lien Law
in the second paragraph of both of the Progress
Payment Release forms, states that the release
covers a progress payment for all labor, services,
equipment, or materials…“except for unpaid
retention, pending modifications and changes, or
other items furnished (emphasis mine).” Prior to
the mandated statutory forms, many release forms
allowed for a “carve out” of retainage and other
pending claims. In the author’s opinion, including “or
other items furnished” in the new progress payment
release introduces an ambiguity as to the scope of
the release. From releasing party’s perspective, the
carve out recognizes the reality that change order
work is frequently performed prior to being formally
approved for inclusion in a monthly pay application.
But, most owners and, for subcontractor draws,
contractors, would prefer that any exclusions from the
scope of a progress payment release be specifically
stated so as to avoid claims later on. It is not clear
whether an owner or contractor is now prohibited
from adding language to the release that provides
certainty as to the scope of the work for which the
payment is made and what claims are not released.
(continued)
(c) This section expires August 31, 2012.
§ 53.286. Public Policy
<Text of section effective Jan. 1, 2012>
Notwithstanding any other law and except as
provided by Section 53.282, any contract, agreement,
or understanding purporting to waive the right to
file or enforce any lien or claim created under this
chapter is void as against public policy.
§ 53.287. Certain Agreements Exempt
<Text of section effective Jan. 1, 2012>
This subchapter does not apply to a written
agreement to subordinate, release, waive, or satisfy
all or part of a lien or bond claim in:
(1) an accord and satisfaction of an identified
dispute;
Note that the new Tex. Prop. Code § 53.281 states
the release is effective when “notarized.” A simple
acknowledgement may be “notarized.” But, to have
the benefit of Tex. Prop. Code § 53.085, (requiring
a bills paid “affidavit”) or its companion provision for
residential construction, Property Code § 53.259, the
statement must be in the form of an “affidavit.” These
Property Code sections provide for personal liability
for false statements in a bills paid “affidavit.” Thus,
the signature line should include a jurat, not just an
acknowledgement.
(2) an agreement concerning an action pending
in any court or arbitration proceeding; or
(3) an agreement that is executed after an
affidavit claiming the lien has been filed or the bond
claim has been made.
[END OF STATUTE]
Although §§ 53.281 and 53.282 are somewhat
self-explanatory, the lien forms required under
§ 53.284 present some drafting issues. The four
statutory forms include a blank in or at the end of the
first paragraph following the words “to the following
extent,” which is then followed by “(job description).”
It is not clear why “the extent” to which the lien is
released is followed by the cue to fill in the “job
description” in this blank. Without guidance from the
legislature, the author would suggest the claimant
fill in this blank with a general description of the
labor and materials furnished for which the release
is provided and the date, in the case of a progress
payment release, through which the release is to be
effective. From this author’s perspective, something
like “to the extent of all labor and materials furnished
in connection with [repeat description of scope of
work][and, if applicable, through the last day of
payment period]” would be likely to work.
Note also that the new statutory forms do not
contain an indemnity paragraph. Nor, do the new
statutory forms include any representation or
warranty that the claimant has not assigned and
will not assign its accounts receivable in connection
with the claim. Since the new statutory forms are
mandatory, practitioners are cautioned against
adding these types of additional paragraphs into
the new forms. To the extent that a contractor or
owner would prefer to have an additional indemnity
available in connection with payments made, or
wants an additional representation and warranty
that the account has not been assigned, it is
suggested that these warranties and representations
be contained in a separate document signed by the
claimant at the time of payment.
Note that the scope of the release, which is defined
12
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