HB 2237 changes affect owners, general (or “original”) contractors, subcontractors, suppliers, and others with original contracts entered into on or after January 1, 2022.

This article highlights some of the significant changes in Texas HB 2237 relevant to subcontractors on non-residential projects.

    1. Streamlined Notice Requirements for Non-Residential Projects. Second month notices have been eliminated. All subcontractors, whether or not contracting with the original contractor or another subcontractor, must now send the statutory notice to the owner and original contractor no later than the 15th day of the third month after the month in which they provided labor or materials for which they have not been paid. See accompanying summary chart of the subcontractor’s notice deadlines on non-residential projects.
      » Click for Texas Non-Residential Lien Chart
    2. Required Subcontractor Notice Forms. The Texas Property Code now requires substantial compliance with the forms in Sections 53.056 and 53.057. Section 53.056 sets forth the statutory notice to perfect a claim for unpaid labor or materials. Section 53.057 sets forth the statutory notice to perfect a claim for unpaid contractual retainage.
    3. Expanded Notice Deadlines. When calculating a deadline to provide notice, if the last day of the notice period falls on Saturday, Sunday, or a legal holiday, the period is extended to include the next day that is not a Saturday, Sunday, or legal holiday. Section 53.003(e).
    4. Shortened Time Period to File Suit. Lien claimants are now required to file a lawsuit for lien foreclosure within one year from the last date the claimant was permitted to file its lien affidavit under Section 53.052. This period may be extended up to two years if the claimant enters into a written agreement for an extension with the owner, and the agreement is recorded in the property records of the appropriate county.
    5. New “Sham Contract” and “Purported Original Contractor” Provisions. A new key provision is the “Purported original contractor” definition in Section 53.001 (7-a):

“Purported original contractor” means an original contractor who can effectively control the owner or is effectively controlled by the owner through common ownership of voting stock or ownership interests, interlocking directorships, common management, or otherwise, or who was engaged by the owner for the construction or repair of improvements without a good faith intention of the parties that the purported original contractor was to perform under the contract. For purposes of this subdivision, the term “owner” does not include a person who has or claims a security interest.

When a subcontractor enters into a contract with a “purported original contractor,” it is considered to be an original contractor for purposes of perfecting a mechanic’s lien. This means that the subcontractor can not only claim a sham contract under Section 53.026, which will avoid the pre-filing notice requirement, but the subcontractor may also be able file a Constitutional Lien upon meeting the sham contract requirements.

While HB 2237 brought numerous changes to the lien notice and filing requirements, best practices remain the same—send notice as soon as you encounter a payment issue, and contact an attorney for help navigating the complex legal requirements. PDH Law stands ready to continue assisting owners, contractors, subcontractors, suppliers, and other professionals manage and protect their interests in the construction industry!

Katie Lee is an Associate Attorney with Pagel, Davis & Hill, P.C. and may be reached at klee@pdhlaw.com.

LEGAL DISCLAIMER: This article is provided for educational purposes only, and does not constitute legal advice.

» Texas Non-Residential Lien Chart