A VIEW FROM THE FIELD - Legal Construction
The most commonly asked subcontractor legal questions...and the answers.
You build Texas. We build the future of your business. The Cromeens Law Firm, PLLC, is a full-service firm for subcontractors and material suppliers that has been delivering exceptional, personalized representation since 2006. With offices in Houston, San Antonio, and now Austin, our highly experienced attorneys focus on construction, business, and real estate-related law. Our firm is committed to providing high-quality, cost-effective results that exceed our clients’ expectations.
As seasoned construction industry professionals, our team is privy to the unique legal issues subcontractors and material suppliers face most often. Here we’ll present the four most commonly asked legal questions we receive from contractors—and our answers to help set you on the right path.
Q: What risks are hidden in my subcontract?
A: The current state of subcontracts is a mess; it’s like a fight club… “the first rule of subcontracts is that there are no rules.” I think there is a misconception that there are some sets of rules that protect subcontractors when it comes to subcontracts. There are no such rules; what you sign in a subcontract will be used against you. Some of the most dangerous parts of the subcontract that I see cause the most damage are: pay when paid clauses, delay damages (agreeing to a schedule you cannot complete), agreeing to the terms of the prime contract, and change order requirements. It is worth your time and money to understand the terms of the subcontract before you sign.
Q: What is the first action I must take to perfect my lien rights?
A: Commercial job—For a subcontractor that is hired directly by the general contractor on a commercial project, the first action you must take to perfect your lien rights is to send an intent to lien letter. This letter must be sent by the 15th day of the 3rd month after you are first owed money. For example, if you are owed money for work done in August and September, your intent to lien letter needs to go out on or before the 15th day of November. The intent letter must be sent certified mail to the owner and general contractor.
A: Residential job—If you are a subcontractor hired directly by the general contractor on a residential project, you must send out your intent to lien letter by the 15th of the 2nd month after you are first owed money. For example, if you are owed money for work performed in August and September, your intent letter must be sent to the owner and GC via certified mail on or before October 15th. Remember, you can always send out the intent to lien letter early, you just can’t send it out late!
Q: What are my options if I have passed the deadline to file a lien for a job that I did not receive payment on?
A: While filing a mechanic’s lien is a subcontractor and material supplier’s best bet to collecting payment, it is not your only option. If you have missed your deadline to file a lien or your lien was found invalid, don’t be too discouraged. You can still file a lawsuit against the party who hired you, such as the general contractor, 1st tier subcontractor, etc., for a breach of contract to collect payment. Filing a lawsuit can become very costly though, which is why it is so important to make sure you file your lien correctly. Be wary of online lien filing services. We have seen many liens filed by online lien filing services that are not enforceable. You only have one chance to make sure your lien is done on time and is enforceable, so do it the right way.
Q: If I need to prove a breach of contract to collect payment, what evidence is required to prove non-payment (breach of contract)?
A: Here are some of the items you will need to help prove your case:
- • Signed written contract with change orders. You can have a verbal contract, but it is much harder to litigate as the parties often argue over who said what.
- • Emails, texts, or signed documents accepting the completed work.
- • Photos of the completed work.
- • Signed submittals.
- • As-built drawings.
- • Affidavits (sworn statements) from those with knowledge of the facts and circumstances or custodians of the books and records for the company testifying that payment was not received.
Karalynn Cromeens is the Owner and Managing Partner of The Cromeens Law Firm, PLLC, which has locations in Houston, San Antonio, and Austin, TX. Devoted leader and seasoned managing partner, Karalynn has paved the way for her team of strong, talented, and committed individuals. She has firsthand knowledge of the construction industry and understands the different obstacles that subcontractors face on a daily basis. Karalynn is passionate about protecting the businesses her clients have built and being a lifelong partner in their company’s success.
To learn more, visit: thecromeenslawfirm.com. To contact Karalynn Cromeens, call 713-903-3188 or email firstname.lastname@example.org