Part 2: Public Works Projects & Subcontractors ("First Tier Claimants"): Prime Contracts Less Than $25,000.00

As noted in Part 1 of the series, in most cases, subcontractors ("First Tier Claimants") on public projects who have not been paid by the general contractor may make a claim on the payment bond posted by the general contractor. However, when the general contractor’s contract with the public entity is less than $25,000.00, the general contractor is not required to post a payment bond. Consequently, when the contract is less than $25,000.00, subcontractors have limited lien rights. The lien attaches to money due to the general contractor. (Tex. Prop. Code § 53.231).

To assert a lien, the subcontractor must give notice to both the general contractor and the appropriate public official. (Tex. Prop. Code § 53.232). Subcontractors must ensure that they strictly comply with notice deadlines and content requirements or they risk not perfecting their lien. The subcontractor must give the notice before any payment is made to the general contractor and not later than the 15th day of the 2nd month following the month in which the work was performed or the material furnished. (Tex. Prop. Code § 53.234). The notice must contain specific information relating to the labor performed or materials delivered. The notice must include (1) the amount claimed; (2) the name of the party to whom the materials were delivered or for whom the labor was performed; (3) the dates and place of delivery or performance; (4) a description reasonably sufficient to identify the materials delivered or labor performed and the amount due; (5) a description reasonably sufficient to identify the project for which the material was delivered or the labor performed; and (6) the claimant's business address. (Tex. Prop. Code § 53.233). The notice must also be accompanied by a sworn statement that the amount claimed is just and correct and that all payments, lawful offsets, and credits known to the affiant have been allowed. (Tex. Prop. Code § 53.233). Failure to comply with any of the notice requirements may result in loss of the lien.

When the public official receives notice, he should retain from the money due to the general contractor enough to pay the claim for which the notice was given. (Tex. Prop. Code § 53.233).

A general contractor may file a bond with the public entity to release the lien and obtain the money withheld. (Tex. Prop. Code § 53.236). The subcontractor must sue on the bond within 6 months after the bond is filed. (Tex. Prop. Code § 53.239).

Please visit our blog again in a few days for Part 3: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00.



Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.



Posted by Sarah F. Berry.