Statutory Waivers of Mechanic s Liens Paul McNutt, Jr.

Transcription

1 Statutory Waivers of Mechanic s Liens Paul McNutt, Jr. Executive Vice President/General Counsel

2 Texas Underwriting Memo DATE: December 15, 2011 TO: FROM: RE: All Texas Agents Paul McNutt, Jr. Executive Vice President/General Counsel Statutory Waivers of Mechanic s Liens Required Forms to Release a Residential Mechanic s Lien Claim The Legislature passed HB 1456 with new provisions of the Property Code Sec , entitled Waiver and Release of Lien or Payment Bond Claim, which will be effective January 1, The purpose is to protect mechanic s lien claimants by allowing them to only sign statutory promulgated forms of Waivers of Mechanic s Liens, as set out in the new statute. This new law requires you to only accept these new statutory forms when you rely on the release of a mechanic s lien claim that is made or could be made by anyone against the types of properties covered by the law. It only applies to contracts begun January 1, 2012, and after, and not to prior contracts, for which your present waivers may continue to be used. Types of Property Applicable: Sec (a)(3) the statement is: (A) in a written original contract or subcontract for the construction, remodel, or repair of a single-family house, townhouse, or duplex or for land development related to a single-family house, townhouse, or duplex. (B) made before labor or materials are provided under the original contract or subcontract (Of course, we must always have any contract for these purposes entered before any work began, to have a lien on the property that is insurable). Sec (c) Subsection (a)(3) does not apply to a person who supplies only material, and not labor, for the construction, remodel, or repair of a single-family house, townhouse, or duplex or for land development related to a single-family house, townhouse, or duplex. (No written contract is required for furnishing material.) Sec Unconditional Waiver and Release: Payment Required. A person may not require a claimant or potential claimant to execute an unconditional waiver and release for a progress payment or final payment amount unless the claimant or potential claimant receives payment in that amount in good and sufficient funds. TX Memo : Statutory Waivers of Mechanic s Liens

3 Sec Forms for Waiver and Release of Lien or Payment Bond Claim. The statute provides four forms of release: two for progress payments, or payments before completion, which are Forms #1 and #2, and two for final payments after all work is ended, which are Form #3 and #4. Each form as promulgated is attached to this memo. In each category there is a release form if the payment received is by check not yet cashed, requiring that it is conditional, unless the funds are in fact received when the check is presented for payment. These are Forms #1 and #3. Normally, you will not accept these forms for proof of payment by others, as they are conditional. And two forms, one for a partial release and the other for a final release when the payment has been made either for cash, or earlier, and the funds are acknowledged as received in full. These are Forms #2 and #4 attached to this memo. These are the forms you should accept for payment by others to the contractor(s). But you need to know they are in fact unconditional. Your escrow requirement is to be careful to only accept the two release forms that are for progress payments receive and paid, Form #2, and, for final payments received and paid, Form #4. And not accept conditional releases, because if the payment checks do not pay, they are void. Also, with the new law effective January 1, 2012, only the Statutory Promulgated Forms release a lien claim on the types of properties this law covers. If you are paying lien claims from your escrow, you must request the subcontractor or contractor to only sign the conditional release Form #1 or Form #3, either for a progress payment during the job, or the final payment release, if you pay them by check. But you are issuing the payment, so this is permissible, as your payment will be good funds. However, you must be careful to only accept either conditional release form executed by an authorized representative of the claimant, and deliver funds only to an authorized representative of the claimant. This Underwriting Bulletin has the four forms of mechanic s lien waivers, as promulgated, that you must require January 1, These will be used for payments you make out of escrow to release lien claims and for waivers of liens being brought to you for use to release any mechanic s lien claim filed or claimed. Hopefully, with the lien waiver required forms in your office ahead of time, you can become familiar with them before the law takes effect, and have your contractors also prepared to use the correct forms by January 1, Form #1: Use this form when you make an interim payment to a contractor, and they will continue work. It is contingent on the check you issue to them clearing. Do not accept this form from an owner to remove a mechanic s lien claim for interim work unless you also receive evidence that the check was paid and has cleared the bank of the party who was paid. Normally you will not accept this form from anyone else paying the contractor. TX Memo : Statutory Waivers of Mechanic s Liens

4 Form #2: This form gives a full release for an interim payment to a contractor that was paid for all work up to that date. It means the payment has already cleared the bank, or was made in cash. Do not accept this form if it was executed with a check paying the contractor by the owner but the check has not cleared the bank. Only accept this form where a prior payment received and cleared is involved. Form #3: This form is a final full release, but conditional on the check clearing. If you are paying the contractor with an escrow check this is the correct form to use. Be careful the payment is made to an authorized person of the contractor to receive payment. For payments made by the owner to the contractor this form is not acceptable unless proof is furnished that the check paying the contractor has cleared the bank of the contractor. Form #4: This form is a full final release of mechanic s lien. It is needed to release the contractor s right to a mechanic s lien. It is only used if the payment has been made in full in cash or, if paid by check, has cleared the contractor s bank. You must know that the payment was cleared before accepting this form. If you are paying the contractor their final payment you use the Form #3, as it is the form to use where a check is tendered for the final release and has not cleared. But, for payment by others, this Form #4 is the final release to require if payment was made in cash or the check used has cleared. Exemptions not requiring the statutory form lien waivers: Sec Certain Agreements Exempt. This subchapter does not apply to a written agreement to subordinate, release, waive, or satisfy all or part of a lien or bond claim in: (1) an accord and satisfaction of an identified dispute; (2) an agreement concerning an action pending in any court or arbitration proceeding; or (3) an agreement that is executed after an affidavit claiming the lien has been filed or the bond claim has been made. Therefore if you have a filed mechanic s lien claim, you may accept a release under the normal prior requirements, and do not need these statutory form waivers. Effective dates for use: Sec (d). applies only to a lien claim arising under or by virtue of a contract entered into on or after the effective date of this act. Therefore, the new statutory waiver forms only apply if the contract involved was entered into January 1, 2012, or thereafter. The former laws are continued for all prior claims. TX Memo : Statutory Waivers of Mechanic s Liens

5 CONDITIONAL WAIVER AND RELEASE ON PROGRESS PAYMENT Project Job No. On receipt by the signer of this document of a check from (maker of check) in the sum of $ payable to (payee or payees of check) and when the check has been properly endorsed and has been paid by the bank on which it is drawn, this document becomes effective to release any mechanic s lien right, any right arising from a payment bond that complies with a state or federal statute, any common law payment bond right, any claim for payment, and any rights under any similar ordinance, rule, or statute related to claim or payment rights for persons in the signer s position that the signer has on the property of (owner) located at (location) to the following extent: (job description). This release covers a progress payment for all labor, services, equipment, or materials furnished to the property or to (person with whom signer contracted) as indicated in the attached statement(s) or progress payment request(s), except for unpaid retention, pending modifications and changes, or other items furnished. Before any recipient of this document relies on this document, the recipient should verify evidence of payment to the signer. The signer warrants that the signer has already paid or will use the funds received from this progress payment to promptly pay in full all of the signer s laborers, subcontractors, materialmen, and suppliers for all work, materials, equipment, or services provided for or to the above referenced project in regard to the attached statement(s) or progress payment request(s). Date (Company name) By (Signature) (Title) Conditional Waiver and Release on Progress Payment Form #1

6 NOTICE: This document waives rights unconditionally and states that you have been paid for giving up those rights. It is prohibited for a person to require you to sign this document if you have not been paid the payment amount set forth below. If you have not been paid, use a conditional release form. UNCONDITIONAL WAIVER AND RELEASE ON PROGRESS PAYMENT Project Job No. The signer of this document has been paid and has received a progress payment in the sum of $ for all labor, services, equipment, or materials furnished to the property or to (person with whom signer contracted) on the property of (owner) located at (location) to the following extent: (job description). The signer therefore waives and releases any mechanic s lien right, any right arising from a payment bond that complies with a state or federal statute, any common law payment bond right, any claim for payment, and any rights under any similar ordinance, rule, or statute related to claim or payment rights for persons in the signer s position that the signer has on the above referenced project to the following extent: This release covers a progress payment for all labor, services, equipment, or materials furnished to the property or to (person with whom signer contracted) as indicated in the attached statement(s) or progress payment request(s), except for unpaid retention, pending modifications and changes, or other items furnished. The signer warrants that the signer has already paid or will use the funds received from this progress payment to promptly pay in full all of the signer s laborers, subcontractors, materialmen, and suppliers for all work, materials, equipment, or services provided for or to the above referenced project in regard to the attached statement(s) or progress payment request(s). Date (Company name) By (Signature) (Title) Unconditional Waiver and Release on Progress Payment Form #2

7 CONDITIONAL WAIVER AND RELEASE ON FINAL PAYMENT Project Job No. On receipt by the signer of this document of a check from (maker of check) in the sum of $ payable to (payee or payees of check) and when the check has been properly endorsed and has been paid by the bank on which it is drawn, this document becomes effective to release any mechanic s lien right, any right arising from a payment bond that complies with a state or federal statute, any common law payment bond right, any claim for payment, and any rights under any similar ordinance, rule, or statute related to claim or payment rights for persons in the signer s position that the signer has on the property of (owner) located at (location) to the following extent: (job description). This release covers the final payment to the signer for all labor, services, equipment, or materials furnished to the property or to (person with whom signer contracted). Before any recipient of this document relies on this document, the recipient should verify evidence of payment to the signer. The signer warrants that the signer has already paid or will use the funds received from this final payment to promptly pay in full all of the signer s laborers, subcontractors, materialmen, and suppliers for all work, materials, equipment, or services provided for or to the above referenced project up to the date of this waiver and release. Date (Company name) By (Signature) (Title) Conditional Waiver and Release on Final Payment Form #3

8 NOTICE: This document waives rights unconditionally and states that you have been paid for giving up those rights. It is prohibited for a person to require you to sign this document if you have not been paid the payment amount set forth below. If you have not been paid, use a conditional release form. UNCONDITIONAL WAIVER AND RELEASE ON FINAL PAYMENT Project Job No. The signer of this document has been paid in full for all labor, services, equipment, or materials furnished to the property or to (person with whom signer contracted) on the property of (owner) located at (location) to the following extent: (job description). The signer therefore waives and releases any mechanic s lien right, any right arising from a payment bond that complies with a state or federal statute, any common law payment bond right, any claim for payment, and any rights under any similar ordinance, rule, or statute related to claim or payment rights for persons in the signer s position. The signer warrants that the signer has already paid or will use the funds received from this final payment to promptly pay in full all of the signer s laborers, subcontractors, materialmen, and suppliers for all work, materials, equipment, or services provided for or to the above referenced project up to the date of this waiver and release. Date (Company name) By (Signature) (Title) Unconditional Waiver and Release on Final Payment Form #4

9 Texas Underwriting Memo Date: December 21, 2011 To: All Texas Agents From: Paul McNutt, Jr. Vice President/General Counsel RE: Texas Underwriting Memo , Further Requirements for Statutory Waivers of Mechanic s Liens Required Forms to Release a Mechanic s Lien Claim Clarification of the Law and Our Underwriting Requirements for Waivers 1. In Memo I did not correctly state that the Waivers of Mechanic s Liens applies to all types of properties. For contracts of all types of improvements that are entered beginning 1/1/2012, you must use the new Waiver of Mechanic s Liens statutory forms under Sec of the Property Code, to release potential lien claims by both contractors and subcontractors. 2. On all closings of 2012 contracts you must have the contractor sign your normal bills paid affidavit. And, you must have them sign the promulgated Unconditional Waiver and Release on Final Payment form, if they have already been paid in full, or the Conditional Waiver and Release on Final Payment, if you are paying the contractor their final payment. 3. For waivers of liens for all contracts begun before January 1, 2012, the previously used releases of mechanic s lien claims are still effective. Therefore do not use the statutory Waivers of Mechanic s Liens for prior contracts entered before January 1, For any mechanic s lien affidavit filed in the Real Property Records, the proper release for all such claims is one that describes the filed lien, with the filing reference of the lien, and fully releases that lien. It is not the new Waiver of Mechanic s Liens forms See Sec (3) of the law set out in the Memo #5. 5. For all litigation on mechanic s liens, the proper release is one that describes that litigation and any filed mechanic s lien claims, not the new Waiver of Mechanic s Lien forms. See Sec (2) of the law set out in the Memo #5. 6. The Statutory Waiver of Mechanic s Lien forms do not contain a jurat. In Memo #5, I attached the forms exactly as passed by the Legislature. However, I require you add a jurat to any waiver of Mechanic s lien form. This requirement is so that it can be used later to prove execution by the party, and their swearing they received the funds listed in the Waiver. Also so that it may be filed of record in the Real Property Records of the County of the property to evidence in the public records the waiver of the lien claim. 7. Also, both of the progress payment waiver forms contain a place for how much money is paid to the claimant. The conditional final waiver also has the amount paid shown on a line. However, the form entitled Unconditional Waiver and Release on Final Payment does not have a $ in the form, for inserting the amount paid. I require you add in the line entitled (job description) the amount of payment made for the final payment of the job, as part of the job description. This will give you evidence later that final payment was acknowledged as received, including the amount of the payment. Page 1 of 1 Title Resources Guaranty Company 8111 LBJ Freeway, Suite 1200, Dallas, TX