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Liens on a Homestead

In my experience with residential contractors and subcontractors, I have found that pervasive beliefs of those contractors regarding their ability to file a mechanic's and material man's lien on residential homestead properties fall into two extreme categories: either they believe it is not an option at all or they believe they can lien the homestead property just like any non-homestead property. Neither of these beliefs are representative of the law on lining homestead property. 

It is absolutely possible to file a valid mechanic's and material man's lien on homestead property IF the correct legal process for doing so is followed by the original contractor. Unfortunately, for a subcontractor, whether or not it may place a lien on a homestead property is dependent on whether the original contractor complied with the necessary steps allowing a valid lien on a homestead. Protections for homesteads against liens are based on the Texas Constitution and are additionally regulated by the Texas Property Code, both of which set out a number of steps which must be followed for a mechanic's and material man's lien to be valid on a homestead. Which of those steps an original contractor must follow depends on whether the original contractor is to perform new improvement or whether it will be doing repair or renovation work on existing improvements. 

If the original contractor has been hired by the owner to build new improvements, the Texas Constitution requires only that the contract must be in writing. In addition to that constitutional requirement, the Texas Property Code requires that the contract must set forth the terms of the agreement, must be signed by the owner and owner's spouse (if there is a spouse) BEFORE work commences, and must be recorded in the real property records. Because the contract must be recorded in the real property records, there is an additional requirement that the signatures be notarized, as unsworn documents cannot be filed in the real property records. When we have residential contractors come to us wishing to assert their lien rights as to a residential homestead property, the lack of notarized signatures is the most common barrier to doing so because this requirement is not specifically enumerated in the statute.

When the original contractor is performing work for the renovation or repair of an existing home, there are additional and far more stringent requirements for perfecting a lien on a residential homestead. The original contractor and owner and owner's spouse must sign a written contract providing the terms of their agreement before the work begins, and no more than five days after the owner has applied for credit to finance the work. The contract must contain specific language providing that the owner may rescind the contract without penalty within three days after all parties have signed the contract. The contract for work must be signed by the owner and the owner's spouse at the office of the lender financing the work, at an attorney's office, or a title company, and then filed in the real property records of the county in which the property is located. 

This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, please consult an attorney.

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