Construction / 4 min read
Lien and bond law, especially in Texas, is complicated. If construction companies are not perfecting their lien or bond claims in-house, construction companies are faced with the choice of using two types of services to perfect their lien or bond claim: (1) law firms or (2) third-party lien or bond service companies—sometimes operating in many states, which market themselves as comprehensive lien services.
Each option aims to provide perfected lien and bond claims for their customers or clients by preparing, notarizing, transmitting, and filing necessary documents for the preservation of your claim. Many of these lien or bond services companies market themselves as low-cost, comprehensive services which allow a customer to file a lien or bond claim while avoiding the higher cost of an attorney.
If your business is deciding between these services, it is important for you to consider the benefits of a properly perfected lien or bond claim (no matter the cost) and, perhaps more importantly, the dangers of using these third-party services, as opposed to a licensed attorney.
Benefits of having a properly perfected lien or bond claim
Leverage. A perfected lien or bond claim provides powerful leverage in payment disputes. These claims allow general contractors, subcontractors, and suppliers to directly sue the Owner of the Project (or directly sue the Principal and Surety on a bond claim). The Owner, Principal, or Surety most likely have the money to pay such claims by virtue of their obligations under the Texas Property Code, Texas Government Code, and/or the bond itself. For subcontractors and suppliers, lien or bond claims allow you to bypass the bad actor who failed to pay you.
Cost Efficiency. When properly perfected, lien and bond claims have a higher potential to settle (or be paid in full) before the initiation of costly litigation than other claims for non-payment. In the event of litigation, these claims are also one of the most cost-efficient claims to bring. Additionally, you are entitled to pursue reimbursement of your attorneys’ fees in connection with having to pursue your lien claim in litigation.
Dangers of a third-party lien or bond claim service company
Invalid Lien or Bond Claim. Lien or bond claim service companies are not a substitute for a licensed attorney that understands the nuances of lien and bond law. Especially in Texas, where the law is complicated on this subject, it is important to understand that these companies do not provide legal advice, and many do not guarantee the legal validity of the documents that they prepare for your claim.
Here are just a few examples of potential mistakes in a lien or bond claim:
- Failing to properly identify the correct name or location of an owner or general contractor;
- Failing to timely send pre-filing notices to the correct parties;
- Failing to timely send notice of a filed lien affidavit to the correct parties;
- Failing to timely file a bond claim because the third-party service is unaware it is a bonded, public project.
A single mistake can be fatal to your lien or bond claim.
Attorneys’ Fees. Filing an invalid lien or bond claim will not only provide an avenue for your lien or bond claim to be removed but also could result in you having to pay the opposing party’s attorneys’ fees incurred to remove your invalid lien. So, not only have you lost your leverage, but you’ve also lost money in addition to what you’re already owed by your client or customer.
Lack of Recourse. When considering these companies, it is important to read the fine print of the Terms and Conditions accompanying these services. In our review of some of the more popular companies being used, we see that these companies expressly limit their liability or insert disclaimers in their terms and conditions. If a lien or bond claim service files an invalid lien or bond claim on your behalf, you may have little, if any, recourse for their error.
Benefits of using a law firm
It is worth paying more to have an attorney specializing in Texas lien or bond law (or the law of the state your project is in) review the file and do the necessary research to ensure you have the highest possible leverage and increase the chances of collection of outstanding amounts.
At Andrews Myers, we have a whole team dedicated to analyzing lien and bond files, performing research, and doing our best to make sure your lien or bond is valid and perfected or providing you with other options if it is not.
We also provide training and assistance to teach you and your employees the ins and outs of perfecting a lien or bond claim either in-house or in conjunction with the services we offer.
Further, the training we can provide will be tailored toward your type of business, whether you are a general contractor, subcontractor, or supplier.