I Filed My Mechanic’s Lien, Now What? Turning that Lien into Dollars - Texas Webinar

In this blog presented by SunRay Construction Solutions and Rebecca A. Hicks of Hicks Law Group, we will understand what happens after filing a mechanics lien in Texas, from practical steps to prompt payment to the legal requirements for turning that lien into real dollars.

The Purpose of a Mechanics Lien

At its core, the mechanics lien exists to secure payment for those who improve real property. Subcontractors, suppliers, and general contractors contribute value to a project, and Texas law gives them the right to a security interest, essentially the equivalent of a mortgage, on the property.

However, a lien recorded in county property records is only potential leverage. Unless it is acted upon, it remains just ink on paper. The true purpose of a lien is to provide the means of collecting money owed.

Immediate Steps After Filing

Texas law requires that after filing a lien, the claimant must send notice within five days to everyone in the construction chain. This ensures that all relevant parties, property owners, general contractors, and others involved, are aware of the claim.

Even after this notice, sometimes nothing happens. In that case, two approaches must be considered:

• Practical Measures: steps taken to prompt payment without going to court.

• Legal Measures: steps required to preserve lien rights and pursue foreclosure.

Practical Steps to Prompt Payment

The first practical step is often as simple as communication. Typically, attorneys or lien professionals begin with phone calls to the property owner or general contractor. These calls emphasize that the lien has been filed, that foreclosure is the next step, and ask for an update on payment.

Surprisingly often, this open communication is enough to resolve the issue. Owners may simply need the reminder that their property is now encumbered and at risk.

The Foreclosure Demand Letter

If phone calls fail, the next step is a foreclosure demand letter. This is not a statutory requirement; it is not found anywhere in the Texas Property Code, but it is a highly effective tool.

The letter is sent to the property owner, general contractor, and others in the construction chain. It states that the lien exists and warns that if payment is not made within 10 days, foreclosure proceedings will begin.

While the law does not prescribe how to send this notice, it is typically delivered via certified mail and email to ensure it reaches the intended parties.

The demand letter serves as a wake-up call. It reminds owners that foreclosure would mean losing their property at a sheriff’s sale. In many cases, this is enough to secure payment without resorting to costly litigation.

Moving to Legal Action

When communication and demand letters fail, legal action becomes necessary. At this stage, claimants cannot represent themselves if they are an LLC or corporation; they must hire an attorney.

Filing a Foreclosure Lawsuit

A mechanics lien must be judicially foreclosed in Texas. Unlike a bank foreclosure, which may involve non-judicial processes, a mechanics lien requires a court order authorizing foreclosure and sale.

The lawsuit must be filed within one year of the lien filing date. While there are nuances in Chapter 53 of the Texas Property Code, best practice is to treat the lien filing date as a strict deadline.

To avoid last-minute issues, attorneys recommend calendaring the deadline with at least 60 days of lead time.

Where and How the Lawsuit is Filed

The lawsuit is usually filed in the county where the lien is recorded. Claims may include:

• Foreclosure of the mechanics lien

• Recovery of trapped funds

• Breach of contract claims against the customer

• Prompt Pay Act violations

• Quantum meruit (payment for the reasonable value of work performed)

In addition, claimants may pursue personal liability through:

• Personal guarantees

• The Texas Construction Trust Fund Act

• Tax forfeiture statutes, which may hold company officers and directors personally liable

The Litigation Process

After filing, the court clerk issues citations that must be properly served on all defendants. Accuracy is crucial here, as any errors can invalidate service.

Once served, the case proceeds based on the defendants’ response:

• No Response → Claimants can seek a default judgment.

• Weak Response → Claimants may pursue summary judgment.

• Strong Defense → The case moves into discovery, mediation, and potentially trial.

What Happens After Judgment?

If judgment is obtained, foreclosure can proceed. Importantly, foreclosure does not mean the lienholder becomes the property owner. Instead, the property is sold at a public auction conducted by the constable or sheriff. Proceeds from the sale are applied to satisfy the lienholder’s judgment.

In practice, very few cases reach this final stage. Most disputes are resolved either after the foreclosure demand letter or once the lawsuit is filed. The pressure of litigation, combined with the real threat of foreclosure, often motivates owners and contractors to settle.

Key Takeaways

• Filing a lien is only step one; enforcement is necessary to secure payment.

• After filing, notice must be sent within five days.

• Practical steps, such as phone calls and a foreclosure demand letter, often resolve disputes without litigation.

• If necessary, a foreclosure lawsuit must be filed within one year of lien filing.

• Litigation can result in judgment and foreclosure, but most cases settle before reaching that point.

Conclusion

A mechanics lien is one of the most powerful tools available to construction professionals in Texas. But it only works if enforced. From practical communication strategies to formal foreclosure proceedings, every step is aimed at the same goal: turning a recorded lien into real dollars.

For subcontractors, suppliers, and contractors, understanding both the practical and legal sides of lien enforcement ensures that the value they add to a property is ultimately recognized and paid for.

Common Questions Contractors Ask

What if I don’t have a signed written contract but only a verbal agreement? Do I still have lien rights, or can I only sue on quantum meruit?

‍
Yes, you definitely have lien rights. Whether you have a signed written contract or not has nothing to do with lien rights. Even with just an oral agreement, you should still send notices, file your lien, and proceed as normal.

When it comes to filing a lawsuit, you would sue the owner based on the mechanic’s lien. Your claim against the customer depends on whether oral contracts are enforceable in your jurisdiction (for example, Texas enforces certain oral contracts). If the oral contract turns out to be unenforceable, you can still pursue a quantum meruit claim (getting paid for the value of the work performed). Importantly, your mechanics lien is a separate and valid claim regardless.

If there’s an error on a third-month fund trapping notice or the lien—something like a scrivener’s error—would that invalidate lien rights?

‍
It depends on the type of error:

• Critical errors (notice sent late, notice sent to the wrong parties) will invalidate the lien.

• Minor errors (like a typo in the owner’s name, an extra letter, or a small clerical mistake) are usually excused and won’t affect lien rights.

• Serious errors in addresses that prevent the notice from being delivered could invalidate the lien.

Ultimately, this is fact-specific and depends on the exact nature of the error.

On a residential homestead project, do you need a recorded contract to have lien rights? When should it be recorded—before or at the time of the lien?

‍
Yes, for residential projects, a signed contract is required.  

Key points:

• The contract must be signed by the owner.

• If the property is owned by a husband and wife, both must sign.

• The contract must contain very specific terms under the statute.

• Typically, you don’t need to record the entire contract but may need to record a summary of the contract.

• The timing of recording is not always clear under Chapter 53 of the Texas Property Code, but recording before filing the lien is generally advised.

Do both husband and wife have to sign the residential homestead contract?

‍
Yes, if the property is owned by both spouses, both must sign the contract for it to be valid.

What is the timeline for asking attorneys to send a foreclosure demand letter?

‍
There is no statutory deadline or rule requiring when this must be sent. However, as a practice, many attorneys (for example, Rebecca’s office) aim to send the foreclosure demand letter within 60 days of filing the mechanic’s lien.