Hammer Time: Monthly Newsletter by National Lien Services (Jan 2024)

The Importance of Parcel ID on Your Project

Unlocking the Key to Project Success: Why Investigating Property Ownership is Essential for Contractors". It is my hope with this article that you will take a few minutes to investigate the real property where you’ll be working to help provide a baseline of information on your next project.

When starting a new project or considering a new project to bid on, some of the most important risk assessment you can do is to first look to the property you’ll be improving.

Contractors frequently work with developers or 'owners' but fail to verify the actual legal owner of the property. Searching for an owner of record (owner on title) is oftentimes very straightforward; yes, there are times it can be a bit more of a challenge.

In an overwhelming number of cases, simply visiting the assessor’s (appraisal district - Texas) office and entering in the address of where your project is located will result in a slew of information that is incredibly eye-opening. The property title will tell you who the owner of record is, their mailing address, the value of the property, the location of the property, and, in some cases, will tell you if a government entity is involved.

When you find the property title (property card) for the parcel, you will have a clear idea of who you should notify to secure and enforce your lien rights in the event of nonpayment for your work or materials.

If you’d like to learn more about this topic with a walk thru of how to effectively search, what you’re looking for, and how it can impact your lien rights, please click here and we’ll follow up with you and work on scheduling a webinar on just this topic.

Proactive v Reactive States: The Importance of Education Can Save You Thousands of Dollars

One of the things you never want to do, is share a client’s VERY recent experience and loss on a large project without following the state’s lien law or statutory requirements - anonymously, of course.

Project Background:Client was a supplier to a general contractor for the City of Houston. The general contractor (let’s call them “ABC General Contracting”), following Texas Public Work Statutes, took out a Payment and Performance Bond to protect their subcontractors and suppliers. While on this project, ABC General Contracting files for bankruptcy.

The supplier (let’s call them “XYZ Supplier Co”), had dutifully invoiced this client throughout the project. XYZ Supplier Co submitted several invoices without receiving payment other than a single payment at the beginning of the project. XYZ Supplier Co is now owed upward of $200,000.00 for their materials and are then notified of their client’s bankruptcy.

Demanding Payment:XYZ Supplier Co (based out of California) then filed for a claim against ABC General Contracting’s bond in an attempt to get some payment for their work. Herein lies the hiccup: XYZ Supplier Co failed to notice the General Contractor, Owner Entity, and the Surety to establish their right to claim against the Payment and Performance bond. Texas’ Government Code 2253 (in particular 2253.01 and 2253.048 which clearly states the contractor’s obligation to notify before requesting a bond claim; hence, XYZ Supplier Co was informed by the surety that, “your claim does not comply with the abovereferenced statutory guidelines and respectfully denied in its entirety.”

The Lesson: Each state will have different requirements of their subcontractors and suppliers to establish the right to lien or claim against a bond. In some states, subcontractors directly contracted with the general contractor on a public project doesn’t need to do any kind of notification; and, in some states, you are still required to send notice of your right.

Each state will have different requirements, documents, and statutes that must be complied with if your company intends to leverage the lien and bond statutes in the event of non-payment.

The Advice: The moment your company entertains the thought of working outside your home state, learn the lien law. Learn the requirements, differences in lien waivers, and dates that you will need to follow in order to have a clear avenue to leverage these statutes.

Proactive v Reactive Definition:

Proactive states will have you serve a notice to the general contractor, owner, and/or your direct contractor at the beginning of the project in order to secure your future right to lien or claim against a bond.

Reactive states will have you serve a notice after you have provided labor or materials to a project.

In our example above, Texas would be classified as a reactive state. You would have to notice the general contractor and/or owner before the 15th day of the third month after an unpaid invoice in order to have a valid bond claim.

If you would like a list of the states and whether they have proactive or reactive statutory practices, we are happy to provide it to you. Simply click on the email icon above and put “Proactive v Reactive List” in the subject line and we’ll get that you as soon as possible.