Texas lien law: What you need to know

Lien and bond rights are essential tools for protecting payments in the construction industry. Whether you’re a general contractor (GC), subcontractor or material supplier, these legal rights provide leverage when payments are delayed or withheld. However, these rights and the processes to enforce them vary significantly from state to state. 

For the state of Texas, lien laws changed significantly effective January 1, 2022, for projects with original contracts signed on or after this date, primarily streamlining the process for subcontractors and suppliers on private, non-residential projects. 

Why it matters: Credit professionals who understand their lien and bond rights and stay up to date with lien law changes are better able to protect their payment rights and ensure timely collection. 

Texas Lien Law Basics 
Under Chapter 53 of the Texas Property Code, a mechanic’s and materialman’s lien grants a lien claimant a security interest in the title to property (or a leasehold interest) that arises after making an improvement to a property. “This can be anywhere from furnishing materials, labor or construction plans,” said Jason Walker, shareholder and director of construction litigation at Andrews Myers, during the NACM webinar, Texas Tough: Mastering Notice & Lien Rights in the Lone Star State. “That being said, if you supply materials or provide labor on any type of construction project in Texas, you’re going to have lien rights. If you sign a contract that says you must waive your lien rights in Texas, that contract is not enforceable.” 

In Texas, the deadline to file a lawsuit to foreclose on a mechanic’s lien is generally one year from the first anniversary of the last day a claimant could have filed the lien affidavit, shortened from the prior two-year period. However, this deadline may be extended to two years from the date the lien is filed, if there is a written agreement with the property owner to extend the period, and that agreement is recorded with the county clerk. For a residential property, the deadline is also one year, but it can be extended if the claimant and owner agree in writing. 

Legislation Changes for Texas 
House Bill 2237, passed in 2021, introduced specific statutory forms for pre-lien notices related to progress payments and contractual retainage. The standardization ensures that claimants provide all necessary information and that these notices are “substantially in the following form,” meaning they must be followed closely. Failure to use the correct statutory form, or using a substantially different form, can jeopardize a claimant’s right to a lien. For public projects, all previous rules apply and lien rights cannot be waived by contract. 

According to Texas lien law, for a contract between the supplier and the GC or a subcontractor, the owner’s liability for that lien claim is limited to two sources of funds: the 10% retainage and ‘trapped’ funds. ‘Trapped’ funds refer to money that is (or will be) in the owner’s hands—money that would otherwise go to the GC but is withheld because the owner received a notice from a supplier or lower-tier subcontractor stating that they haven’t been paid. “This notice is required by law, and once the owner receives it, the law requires them to withhold, or ‘trap,’ any funds owed to the GC until they receive confirmation that the claimant has been paid,” said Walker. According to the 2021 law, liens on retainage are due by the 15th day of the third month after original contract completion. 

Critical deadline changes 
Deadlines for lien and bond claims in Texas are mandatory and strictly enforced—missing one can result in all or part of your claim being denied. If a notice is not sent to the correct parties, the claim will be invalid. Under the 2021 legislation, for non-residential projects, a third-month notice is due by the 15th day of the third month following the month in which labor or materials were provided, and the lien must be filed by the 15th day of the fourth month. For residential projects, notice is due by the 15th day of the second month, and the lien must be filed by the 15th day of the third month. Additionally, if any deadline falls on a weekend or legal holiday, it is extended to the next business day. 

The 2021 legislation eliminates the requirement of sending the second-month pre-lien notice—typically due on the 15th day of the second month—on non-residential projects. “Originally, by Texas lien law, subcontractors or suppliers were required to send a second-month notice of non-payment to the GC on non-residential projects,” Walker said. “In the 2021 law, it is no longer required, but it is optional. I recommend sending a second-month notice because it raises the chances of getting you paid more quickly, rather than just waiting another month to send one.” 

Before the law changed, it was mandatory to send lien notices via certified mail, return receipt requested (RRR), registered mail or in-person delivery—to provide proof that written notice was received, regardless of how it was sent. Under the 2021 law, a notice may be delivered using any traceable private delivery or mailing service that can confirm proof of receipt. 

Additional changes 
Prior to the law change, if specially fabricated materials were sent to a job site but not delivered, lien rights were typically unavailable under the Texas statute. “If, however, there is a provision that says the material is specially fabricated, and you send a notice no later than the 15th day of the third month after the month in which they would’ve normally been delivered (not received or accepted), you may secure your lien rights,” said Walker. “Just because they weren’t delivered, if you can prove that they were custom-made or somewhat custom-made, you should be able to have lien rights.”  

Additionally, while Texas’s previous law requiring notarization for certain lien waivers was repealed in 2022, the core rule remains that lien waivers do not generally need to be notarized in Texas unless specifically required by contract or an agreement between parties.   

Best practices for navigating Texas liens 
 To gather the most accurate job information on a customer, refer to reputable outside resources such as the state’s licensing bureau or the Secretary of State website. Don’t simply rely on Google, because the information is not regularly updated. “A single technicality, like a six-month-old address found online, can render your notice invalid because it is no longer their actual address,” said Anne Scarcella, CCE, CCRA, regional credit manager at Crawford Electric Supply Co., LLC (Houston, TX). “Make sure you get a copy of the contract to refer back to, and don’t be scared to make calls and ask questions. If customers are paying slow, there’s no harm in picking up the phone and calling the GC and asking, ‘Hey, are you filing a lien?’ At the end of the day, you just have to go with your gut.” 

With demanding schedules, it can be easy to miss notice deadlines. Finding a routine or system that alerts you to important dates for sending notices can be instrumental in securing lien rights. “A common question my clients ask is, ‘I haven’t sent a notice—is it too late to file a lien?’ The answer is yes if you missed a notice deadline that was required to perfect that lien claim,” Walker said. “Be consistent—don’t send notices for one job and not another. If the boss understands how important it is to maintain your lien rights—and the fact that in Texas, most GCs and subcontractors are aware of their lien rights and expect to get these notices—there is no legal penalty for sending notices early.” 

Communication with your customer, those involved in the project, your team, and other departments within your company is essential. “One of the biggest challenges I face is around training and communication with the sales team,” said Maggie Gautreaux, CBA, financial services supervisor, credit and collections at Hill Country Electrical Solutions (Irving, TX). “We work in partnership with sales to complete job sheets which, in turn, helps us secure payment from the customer.” 

Staying informed on lien and bond changes will help you handle them more confidently. “I believe it’s essential to regularly attend lien and bond seminars, whether hosted by NACM or a local attorney, because the laws in Texas change frequently,” Gautreaux said. “Hearing insights from others, especially experienced attorneys, can offer new perspectives and highlight best practices that may improve how you work. It’s important for teams to stay current and exposed to the language and nuances of the law. With enough exposure and practice, it becomes like a science—you can master it.” 

The bottom line: Texas lien and bond laws are complex, technical and constantly evolving. Staying informed and consistent is not just a best practice—it’s your best defense.