Protecting Owners against Lien Affidavits
by Michael L. Hood
A mechanic’s lien filed against an owner’s property can cause chaos for the owner. It may cloud title or put the owner in default of lender restrictions. There are two often overlooked provisions of the Texas Property Code to protect an owner from liens: (1) the “summary lien removal” procedure; and (2) the “bond around” payment bond.
Summary lien removal. When a lien claimant files suit to foreclose a lien, or an owner files suit to declare a lien invalid, the owner may file a motion with the court to remove the lien. Texas Property Code Section 53.160 sets out the procedure. A verified motion must state the legal and factual basis for objecting to the lien. There are 7 grounds on which the owner can object and have the lien removed, such as the lien claimant did not follow the form, filing or notice requirements relating to a lien affidavit. There are also grounds for removal relating to statutory retainage and homestead property.
The motion can be heard on 21 days’ notice. At the hearing, the owner has the burden of proof on most of the grounds. Following the hearing, the court promptly determines whether the owner is entitled to have the lien removed. If the court determines that the owner is entitled to have the lien removed, the court will order the removal of the lien.
In that case, the court also must set the amount of the bond that the lien claimant may provide in order to stay removal. If the lien claimant timely and properly files the bond with the clerk, the court must stay the removal order. If the lien claimant fails to provide the bond within 30 days, the owner can obtain a certified copy of the order and a certificate from the clerk that no bond has been filed and record those two instruments in the real property records. When that is done, the lien is removed and extinguished as to any creditor or subsequent purchaser for valuable consideration.
Because the order removing the lien is not a final judgment, the litigation between the owner and the lien claimant may continue. If the claimant does not furnish the bond in a timely fashion, but nonetheless obtains a final judgment that establishes the validity of the lien, the lien claimant may file a certified copy of the judgment with the county clerk. When the judgment is filed, the lien is revived, and the lien claimant is entitled to foreclose on the lien. However, the lien is not revived as to creditors or purchasers for value who obtain their interest in the property after the lien was removed but before the final judgment reviving the lien was filed with the county clerk. Attorney's fees are recoverable in a proceeding to declare that a lien is invalid as the court deems “equitable and just.”
“Bond around” payment bond. Texas Property Code Sections 53.171-.175 provide that an owner may file a “bond around” payment bond to “discharge” a lien already filed. The bond must be filed with the county clerk in which the property is located and properly served upon the lien claimant. The bond must describe the property, refer to the lien, and be double the amount of the lien referred to in the bond (unless the lien exceeds $40,000, in which case the bond must be the greater of 1 1/2 times the lien amount or $40,000 plus the lien amount), payable to the lien claimant, executed by the party filing the bond as principal and an authorized corporate surety, and conditioned that the principal and surety will pay the lien claimant as if its lien had been proven to be a valid. The owner must provide proper notice of the bond to the lien claimant. The county clerk records the bond, the notice and a certificate of mailing in the real property records. The lien claimant must file suit on the bond within one year after the bond notice is served or after the underlying claim became enforceable. Similar to the lien removal action, attorneys’ fees are recoverable in actions involving “bond around” bonds as the court deems “equitable and just.”
Michael Hood is a partner at Haynes and Boone, LLP. He can be reached at email@example.com.