Can subcontractors file liens on my home when I paid the contractor but he failed to pay his bills?
The answer to this question is controlled by Chapter 53 of the Texas Property Code, which sets out the process for filing and invalidating mechanic's and materialman's liens in Texas.
Under Chapter 53, unless the original contractor (the contractor who contracted with the owner for the work) has perfected a homestead mechanic's lien contract, no one on the project can file a valid mechanic's lien. To perfect a homestead mechanic's lien contract, the original contractor would have to: (1) have a written contract signed by all the owners (husband and wife) of the home; (2) prepare the contract with Chapter 53's specified homestead lien warnings; (3) and file the contract with the county clerk. If one or more of these requirements is missing or omitted, no contractor can file a valid lien for construction work on the home.
The owner may pay the original contractor up to 90% of the original contract price. However, if the owner receives a notice of non-payment from a subcontractor or supplier, the owner is required to withhold payment from the original contractor until the non-payment problem is resolved.
The owner is required to withhold the remaining 10% of the contract price (really 10% from each payment to the original contractor) until 30 days after the project is fully completed. (If no one can file a valid mechanic's lien on the project, then the owner is not required to withhold the 10% retainage. This situation occurs when the original contractor did not perfect a valid homestead mechanic's lien contract, or has posted a payment bond.)
If the owner has paid out all of the contract funds for the original contract in accordance with Texas law, no subcontractor or supplier may file a valid lien against the homeowner or the homestead property. Under Texas law, an owner is only responsible for the original contract price and no more, as long as the owner does not pay the original contractor after receiving a notice of non-payment, and (if required) withholds 10% retainage until 30 days after the project is fully complete.
If the subcontractor's lien is invalid, you can write to the subcontractor, and provide the reasoning why the lien is invalid, and demand the the subcontractor voluntarily release the lien. It is best to provide a filled out lien release to make it convenient for the subcontractor. You should advise the subcontractor that if it does not voluntarily release the lien, it could be liable for filing a fraudulent lien, which could allow the owner to recover $10,000 or actual damages whichever is greater under Chapter 12 of the Texas Civil Practice & Remedies Code.
Also, you should advise that if the subcontractor does not voluntarily release its lien, you as the owner may be forced to file suit and seek a summary removal of the lien, as well as attorney's fees and court costs under Texas Property Code section 53.160.
My web site, The Construction Report, has a lot of information about the propriety of mechanic's liens, the full text of the lien law statutes, notice and claim forms, explanatory materials, deadline charts, and much more. Feel free to check it out: http://www.theconstructionreport.org