Monday, March 19, 2018

The Cromeens Law Firm, PLLC, Joins The Houston Food Bank’s 3rd Annual  Food From the Bar Competition

The Cromeens Law Firm, PLLC, is pleased to announce that it has joined the Houston Food Bank’s 3rd Annual Food From the Bar initiative, a month-long competition among Houston’s legal community where participants earn points by donating food, funds and volunteer time to benefit the Houston Food Bank. The competition starts on April 2nd and ends on May 2nd.
Through donations and support, the legal community helps Houston Food Bank feed more kids and families in our community. The event is timed to raise much needed resources just before the summer break when kids will be out of school and not receiving school breakfast and lunches. Many local families struggle to provide that extra food during the summer and you are helping bridge that gap.
To actively raise the most funds and food donations as possible, The Cromeens Law Firm, PLLC, will run fundraising campaigns through its various social media sites, volunteer time and will accept goods at its office location throughout regular business hours.
“This will be our second year participating in the competition and are excited to be a part of this great effort to support the Houston community in need again,” stated Karalynn Cromeens, Managing Partner of The Cromeens Law Firm, PLLC. “The Houston Food Bank is such an important organization, and we strive to make difference through partnership with them.”
Last year, 45 participating legal organizations raised $177,412, collected 14,675 pounds of food and donated 2,344 volunteer hours (702 volunteer shifts), which generated the equivalent of 685,105 meals for the community.
About The Cromeens Law Firm, PLLC
Founded in 2006, The Cromeens Law Firm, PLLC, is a full-service, Houston-based law firm serving clients across the state of Texas. With a concentration in construction, real estate and business law, our firm is committed to providing results driven, cost-effective and personal representation to each one of our clients. For more information, please visit
About the Houston Food Bank
A member of Feeding America, the Houston Food Bank is a 501(c)3 non-profit hunger relief organization. It serves an 18-county area and works with 600 partner agencies to distribute millions of meals annually. In terms of distribution and size, Houston Food Bank is the largest food bank in the United States.
Media Contact:
Carly Norausky
Marketing Director
The Cromeens Law Firm, PLLC


Wednesday, March 7, 2018

GOOD BUSINESS: Limiting Your Personal Liability

One of the best tools to limit or avoid personal liability associated with running your business in Texas is to set up a corporation, limited liability company, or a similar entity. However, many business owners set up their business entity, open a bank account, and go about their "business as usual" without timely filing the required business franchise tax reports with the State of Texas.
The Basics of The Franchise Tax
The State of Texas Comptroller website states: "The Texas franchise tax is a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas."

The annual franchise tax report is due May 15, and various penalties are assessed for failure to file and pay the tax by the due date. The comptroller provides a notice of forfeiture if the report and/or required tax is not paid prior to forfeiting an entity's corporate privileges. Once an entity's corporate privileges have been revoked, a business may continue to operate; however, the protections against liability that are afforded by maintaining the corporate form are no longer in effect. This means that corporate directors and officers may be held personally liable for debts which are incurred during the period wherein corporate privileges are revoked.

The Basics of Reinstatement
Reinstatement of corporate privileges is a fairly straightforward process. An entity must pay the penalties on its account, file franchise tax reports for the missing time periods, and obtain a letter from the Texas Comptroller showing the account has been brought current. This letter is then presented to the Texas Secretary of State for reinstatement.

Liability Issues
Even if corporate privileges are reinstated, corporate officers or directors will remain potentially liable for any contractual-type monetary debts which were "created or incurred" during the forfeiture period (between the date that a company forfeits its corporate privileges and the date that it revives them). See Tex. Tax Code Ann. Section 171.255(a). For instance, if an LLC forfeited its privileges in June 2017 and revived privileges in October 2017, but the company purchased $200,000 of materials during August of 2017 and they were signed for on behalf of the (now forfeited) entity - an officer or director could be pursued in his or her personal capacity for the materials purchase because the debt was created or incurred during the forfeiture. Some business owners mistakenly believe that reinstatement of the corporate privileges in October 2017 reaches back into time and covers the debts that were incurred during the forfeiture period. However, the Code states: "If a corporation's corporate privileges are forfeited, each director or officer is liable for each debt of the corporation that is created or incurred in Texas after the date on which the report, tax, or penalty is due and before the corporate privileges are revived. See Tex. Tax Code Ann. Section 171.255(a).
It is also mistakenly assumed that for personal liability to exist, the director or officer must have been personally involved in the transaction which created the debt. However, as recognized by Texas courts, it is a director's or officer's "consent or approval of the corporate debts" in general, providing the basis of personal liability. First Nat'l Bank of Boston v. Silberstein, 398 S.W.2d 914, 915-16 (Tex. 1966). Therefore, a director or officer does not need "actual knowledge" of the debt to be held personally liable. Silberstein at 916, In re Trammell, 246 S.W.3d 815, 822 (2008).
Once exception to this general liability, found in Section 171.255(c) of the Tax Code, provides a director or officer the ability to show the debt was created (1) over his objection, or (2) without his knowledge. The officer or director has the burden to show he objected to the debt. Arguably, it would be difficult to meet this burden in court.

Exactly What Is A Corporate Debt?
It is important to know - particularly for those in the construction industry-liability during a tax forfeiture does not apply to "involuntary debts," such as judgments obtained against an entity resulting from personal injury claims. Williams v. Adams, 74 S.W.3d 437, 442 (2002). "[S]ection 171.255 cannot be used to impute personal liability to an officer or director of a corporation for a corporate debt when the 'debt' at issue is a tort judgment based on negligence liability." Williams at 442.
With regard to judgments flowing from contractual agreements, the Texas courts have expended a certain amount of energy attempting to clarify when a "debt" becomes liquidated and enforceable. In Hovel, a homeowner sued an LLC for breach of contract and DTPA violations. The Court concluded a judgment-debt is created or incurred when the conduct or contract occurs. Hovel v. Batzri, 490 S.W.3d 132 (2016). Therefore, if a specific money judgment is obtained during tax forfeiture, but the entity was in good standing when the conduct or contract occurred, then the officers and directors may not be held personally liable: "[W]e hold that, under Section 171.255 of the Tax Code, judgment-debts arising from or related to pre-forfeiture agreements and pre-forfeiture acts are considered to have been created or incurred pre-forfeiture even if not liquidated until post-forfeiture, whether the claims are expressed solely as contract claims or a combination of contract, statutory and tort claims." Hovel at 134. The Court concluded that the contract was executed pre-forfeiture, and the breach, tortious conduct, and injury occurred pre-forfeiture, even though the specific amount of the claim was not calculated until after forfeiture. The Court, as a result of this analysis, provided the officers and directors with limited liability.

With these various arguments in mind, corporate officers and directors should make it a priority to finalize tax reports to prevent or close up any potential gaps in franchise tax reporting. However, in the event of delay - which happens for many reasons - care should be taken regarding entering into various transactions in light of the potential for personal liability.

With a concentration in business, construction and real estate law, The Cromeens Law Firm, PLLC, is committed to providing results driven, cost-effective and personalized representation to each one our clients. Contact us today to learn more about our in-depth experience and how we can assist you.

This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, please consult an attorney.

Monday, October 9, 2017

After the Flood - Legal Issues for Homeowners and Builders to Consider

In the days following Hurricane Harvey, news agencies reported only about 80 percent of homeowners in the affected areas were covered by flood insurance.[1] As a result, uninsured flooded homeowners have sought other options to repair and replace their damaged property. In an effort to find alternative forms of compensation, some homeowners have attempted to direct their complaints at their builders, subdivision developers, municipalities, and state and federal authorities. This articles summarizes the recent legal actions considered by flooded homeowners, and information that homeowners and their builders should consider going forward.

Suits against builders. If a homeowner pursues a torrential rain flooding case against a builder, the owner would need to show: (a) the builder directly warranted or guaranteed the house would not flood (this would be a difficult provision to find in any contract) -OR- (b) the builder gave an "implied warranty" the home was constructed in a workmanlike manner and is fit for habitation. Humber v. Morton, 426 S.W.2d 554, 555 (Tex. 1968); Gupta v. Ritter Homes, Inc., 646 S.W.2d 168, 169 (Tex. 1983). Except for very unusual situations, all home purchases carry an "implied warranty of habitability," which covers hidden defects not discoverable by a reasonably prudent inspection of the building at the time of sale. Humber, 426 S.W.2d at 552. The implied warranty of habitability does not include defects, even substantial ones, that are known by or expressly disclosed to the buyer. In the case of flooding during a torrential hurricane rainstorm, the homeowner would have to show that the builder knew, or should have known, that the property would flood and had a duty to disclose it to the homeowner. In the case of previously flooded homes, it would be possible to make a case for a breach of implied warranty if the flooding is not disclosed. However, for a home that has never flooded, it would be difficult and very expensive to make such a case.

Suits against subdivisions/developers. Residents in the Millwood Riverstone subdivision in Sugar Land, a five year old subdivision, are gearing up to sue the developer, neighborhood engineer, and possibly the homeowners' association because they allege their property was removed from the Brazos River flood plain before it was developed.[2] These lawsuits would have to be brought a group of homeowners due to the expense of hiring engineering and floodplain experts to prove the case against the developer. It is expected that several similar lawsuits will be filed in Houston over the next year. The legal claims will most likely be based upon misrepresentation of facts known by the developers or the homeowners' associations.

Suits against municipalities, and state and federal authorities. Claims against local and state agencies will be the topic of discussion over the next year in Houston as well. The San Jacinto River Authority released water from the Lake Conroe dam during Hurricane Harvey, which is largely believed to have caused major flooding around Lake Conroe, Spring, Humble, Kingwood, and Atascocita. Similarly, The Army Corps of Engineers, a federal agency which deals with dams, canals and flood protection in the United States, released water from the Addicks and Barker reservoirs in west Harris County, which also resulted in flooded neighborhoods.[3] The claims against these agencies, if they are pursued, would be considered "takings" claims -- a plaintiff must allege: (1) an intentional governmental act; (2) that resulted in his property being taken; (3) for public use. Harris Cty. Flood Control Dist. v. Kerr, 499 S.W.3d 793, 799 (Tex. 2016); Gen. Servs. Comm'n, 39 S.W.3d at 598. If the government does not pay for the property and damaged or destroyed it, the takings claim is called "inverse condemnation." Kopplow Dev., Inc. v. City of San Antonio, 399 S.W.3d 532, 536 (Tex. 2013). The homeowners will need to show that governmental entity caused the harm.

What can builders do to make a difference? Although it would be difficult to find a builder directly responsible for a home flooding as a result of a hurricane or tropical storm, some in the building community are calling for more proactive approaches to residential development, particularly new construction, because flooding is so unpredictable. Armando Cobo, a builder interviewed in What's Wrong, and What's Right, With Residential Building in Texas, stated that builders, engineers and homeowners should consider raised elevations above and beyond the local code requirements for flooding. In addition, if a new home construction is near a creek, golf course, or other low-lying areas, to consider higher elevations - even when not required - and to use treated plywood for the first four feet of wall sheathing.[4]



This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, please consult an attorney.

If you have a related legal matter, The Cromeens Law Firm, PLLC, is here to assist you. Contact Us today.

Monday, August 7, 2017

Business Debt Collections: How an Attorney Can Help You

Business Debt Collections: How an Attorney Can Help You
As a business owner, you have most likely encountered customers/clients who have failed to pay for products, labor and/or services that you provided for their benefit. You may have also experienced the difficulties involved in collecting those outstanding debts yourself. The insecurity caused by not knowing the collection measures you are legally allowed to utilize and the lack of responsive communications with these types of customers/clients often lead small business owners to give up collecting their past due accounts. Having an experienced, commercial debt collections attorney on retainer can be an extremely effective way to collect these past due accounts.

Advantages of Utilizing a Debt Collection Attorney
As an attorney who works in commercial collections, I believe every business should have an internal process for making initial attempts to collect outstanding accounts. A key element of those processes, however, is knowing when to hand over collection efforts to a collections attorney. Once the initial attempts prove to be ineffective with a particular debt, there are several reasons why it is a good idea to pursue professional, legal help.

First and foremost, there are Federal and state laws that provide protection to consumers by regulating the efforts that can be made in collecting debts. Attorneys are in the business of knowing the law and the consequences for violating it. It is far more efficient to rely on a professional who is familiar with the laws related to debt collection than to use time that should be spent focused on growing and bettering your business than figuring out which laws could affect your collection attempts. It will also give you peace of mind to know that you won't be unintentionally violating the law and opening yourself up to potential claims from debtors.

Additionally, experienced collections attorneys have knowledge and access to tools that the average small business owner does not possess. This knowledge allows them to evaluate each collections issue you have, determine the assets available to secure collection and develop a plan for the most effective options for recovery. For example, they know how to trace assets that the debtor may have hidden. A collections attorney will be able to communicate to a debtor all of the pre-suit and post-judgment options available to your business to secure payment from them, convincing the debtor that it is in their own best interest to pay their debt. In situations where the debtor is not convinced, the attorney will be able to follow-through with utilizing those options.

Finally, collection attorneys are usually able to get your money more quickly than when you use self-help methods. When a letter appears bearing the name of an attorney, most people become afraid that they will encounter legal action, and that fear leads to you getting payment more quickly.

Why an Attorney and Not a Collection Agency?
The foremost concern of most small business owners when considering ways to effectively collect their past-due accounts is cost. This is why so many attempt collections on their own. Most collection agencies work on a contingency basis, meaning they keep a portion of the debt they collect, regardless of the amount of time and effort they expend in collecting that debt. While this approach may seem appealing to business owners because of the lack of up-front investment, this model can cause businesses to unnecessarily give up a significant portion of the amounts they are attempting to collect. Collection agencies are limited in the options they have for collection: usually they will only send letters and make phone calls. If they are successful in collecting a debt, they receive the agreed percentage even if they put in minimal effort. Using an attorney, however gives the client has more control over the cost they are willing to expend to collect each specific debt they are owed. If the attorney is successful in collecting a debt with minimal effort, the business will retain more of the funds it is owed.

As mentioned above, collection agencies are very limited in the actions they can take on your behalf, which makes their collection efforts less effective. By the time you are seeking assistance to collect a debt, you have likely already sent several letters and made multiple telephone calls to the debtor. The likelihood that a collection agency will be more effective with letters and phone calls than you were, is not high. Additionally, the more ineffective attempts at collection are made, the longer the debtor has to potentially restructure or hide assets. Debtors tend to take communications from attorneys more seriously, because they come with the possibility of legal action and the ability to follow-through with bringing a suit if necessary.

In conclusion, it is critically important for small business owners to choose the right course of action for collecting each debt they are owed. Hiring an attorney that is knowledgeable and experienced in all facets of debt collection can prevent a business from making the wrong choices could lead to the unnecessary expenditure of resources, including valuable time that should be spend managing and growing their business.

If you have a related legal matter and would like to find out how The Cromeens Law Firm, PLLC, can assist you, contact us today.

This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, please consult an attorney.

Monday, June 5, 2017

Dealing With an EEOC Charge of Discrimination

If you have received a notice that an EEOC (Equal Employment Opportunity Commission) Charge of Discrimination has been filed against your company by either a current or former employee, the following are tips on dealing with a Charge of Discrimination.

1. Don't Panic. Although it's called a "Charge of Discrimination," the initial notification that a claim of discrimination has been made is just that - a claim by the employee. No investigation or finding of discrimination has yet been made by the EEOC. The "Charge" simply puts you on notice that an employee has filed a claim alleging discrimination and/or retaliation which the EEOC will investigate.
2. Don't Ignore the Charge. You should immediately and thoroughly review the Charge. It contains important information and instructions that you should carefully read and follow. Note any deadlines to file a response to the Charge or provide requested documentation. Your response to the Charge is called a "Position Statement." A Position Statement is your opportunity to tell your side of the story and correct any misstatements by the employee and defend the claims being asserted against your company.
3. Don't Ignore Additional Requests for Information. After receipt of your Position Statement, it is not uncommon for the EEOC to request additional information. You may be asked for your policy on discrimination, employee handbook, personnel information or even employee files. If you don't supply the information requested, the EEOC will issue an administrative subpoena for the documents.
4. Ask for Additional Time to Gather Any Documents Requested. If it appears complying with an EEOC request will be difficult or impossible, request additional time in writing. It is best to ask well before your deadline to respond.
5. The EEOC's Investigation. After receiving your Position Statement and relevant documents, the EEOC may conclude there was no finding of discrimination and close its file. However, If the EEOC determines that discrimination may have occurred, its investigation will continue. The EEOC may request an on-site visit, interview witnesses or ask for additional documentation.
6. Take Advantage of Mediation If It Is Offered. Some, but not all, Charges will be eligible for mediation. Take this opportunity to try to resolve the claim. If the case is voluntarily settled, the EEOC will close its file. However, the EEOC may place certain requirements of its own in the settlement such as employer training on discrimination and/or setting up anti-discrimination policies.
7. Propose A Settlement to The Charging Party. Even without mediation, you can propose and negotiate a settlement to the Charging Party at any time. The EEOC will take part in this settlement proceeding. Additional terms and conditions not required by EEOC may be set forth in a separate settlement agreement (which will not include the EEOC) if the Parties desire additional terms and conditions be included such as non-disparagement or other terms important to the Parties, but not necessarily important to the EEOC.
8. If You Can't Resolve the Issue. If you are unable to resolve the Charge issues, the EEOC will continue its investigation and either issue a finding of discrimination (a "for-cause" finding) or may find it is unable to determine if discrimination occurred.
9. Bringing Suit Against the Employer. If the EEOC is unable to determine that discrimination occurred, it will issue a Right to Sue letter which gives the employee the right to file a civil suit in federal court against the employer within 90 days. If the EEOC concludes there is reasonable cause to believe that discrimination may have occurred the EEOC may file suit against the employer.
10. You Have the Right To Hire An Attorney. Retaining an experienced attorney WHEN YOU FIRST RECEIVE A CHARGE OF DISCRIMINATION can be your best decision in order to secure a positive outcome for your company when you are faced with a Charge of Discrimination.
If you have a related legal matter and would like to find out how The Cromeens Law Firm, PLLC, can assist you, contact us today.

This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, please consult an attorney. 

Monday, May 8, 2017

Everything you need to know about 85(R) HB 3065

Construction industry professionals may or may not be aware that there is currently a bill pending in committee in the Texas House of Representatives that would completely overhaul the mechanic's and materialman's lien process in Texas. Those who are aware may be asking themselves and their colleagues whether they should give this bill their support. Read on for an in-depth summary of the most sweeping changes proposed by HB 3065 and how those changes could affect the lien process and rights of contractors, subcontractors, and material suppliers.

HB 3065 primarily does two things: it provides clarification of various provisions of Chapter 53 of the Texas Property Code by cleaning up much of the confusing language currently found there and proposes amendments that will significantly change the lien process in Texas. The biggest, and perhaps best known change to the current lien process proposed by HB 3065 is the creation of a new website where owners, contractors, and subcontractors will be able to search for notices related to construction projects within the state and post notices to owners and original contractors. The current version of the bill requires that the website allow claimants to post notices free of charge and also that the website provide free forms to claimants to use for all notices required under Chapter 53. The only fees currently authorized by HB 3065 are those charged to owners when they file a notice of commencement for a project. The filing of a notice of commencement by owners would be mandatory, and so far, the requirement is not qualified as applying only to projects of a certain value, as is the case in some other states. Proposed amendments to Texas Property Code 53.003, would allow notices from subcontractors to be posted on the new lien website or sent to the owner by email to the email address provided, in addition to by certified mail. The effective date of a notice would be the date the notice is posted on the lien website or the date the email is sent.

While the lien website may be the biggest proposed change to current lien law in Texas, it is not the only significant change. As will be appreciated by lien claimants and their attorneys, the deadline for notices and liens would be extended to the next business day when the 15th of the month falls on a weekend or holiday. HB 3065 also proposes to simplify the notice requirements for a subcontractor's lien claim from requiring multiple notices to requiring only one notice, known as a notice of furnishing. The notice of furnishing would be posted on the lien website, emailed, or mailed to the owner. Under the proposed new rule, a subcontractor would want to file their notice of furnishing as soon as they are hired on a project, because there would be limitations on claims for work/material furnished prior to its filing. The notice of furnishing would preserve lien rights on work/material furnished no more than 45 days before the notice is posted/filed if an owner does not file a notice of commencement, but only 15 days before the notice of furnishing is posted/filed if the owner does file a notice of commencement for the project. Also, subcontractors working on the same project for more than one original contractor would need to file a notice of furnishing for each original contractor to whom it provided work.

HB 3065 additionally proposes to change the deadline for filing a lien with the county clerk to the 15thday of the 4th month after the work under the original contract is completed or terminated for commercial projects (and the third month for residential projects), instead of the current rule which is the 15th day of the 4th month after the work/material is furnished. Owners would be required to either post a notice of termination on the lien website, or to send a copy to every person who filed notice of furnishing. This amendment would eliminate the potential need for a subcontractor who is working on the same project for an extended period of time to file multiple liens on the same property. One proposed rule that could use some revision is that providing for a notice of completion to be posted and filed by the owner. As currently proposed, that rule states that owners "may" file a notice of completion with the county clerk and post it on the lien website if a notice of commencement was filed. It does not provide for the owner providing a notice of completion when it has failed to file a notice of commencement, and does not make the filing of the notice of completion mandatory. However, as you can see, this bill in its current form would provide the construction industry with much more simplified lien notice and filing requirements: each subcontractor would only be required to file one notice and one lien for each project to which they provide labor/materials.

Owners would be benefited by HB 3065's proposed opportunity for owners accelerate the filing of liens by claimants once a project is complete or an original contract is terminated. Since the time for filing a lien has been extended for subcontractors, HB 3065 offers owners the option of sending via certified/registered mail to all subcontractors who have filed a notice of furnishing, a notice of completion/termination providing the date of completion/termination and demand that any subcontractor who intends to file a lien on the project do so within 30 days. The 30-day deadline would begin on the date the notice was sent from the owner, and would only be effective as to those who have actually completed their work at the project. The downside to this rule for subcontractors, is that any subcontractor who didn't comply with the demand would waive any lien rights they have on the project.

One proposed change that is not as far-reaching as some of those discussed thus far, but is nonetheless beneficial to lien claimants, is the proposed extension of the deadline for sending a copy of a filed lien affidavit to the owner and original contractor from 5 days to 10 days.

When discussing HB 3065 with a material supplier recently, one of the concerns he expressed was that the proposed revisions would eliminate the trapping of funds by owners. However, just as the current law allows owners to withhold payment to an original contractor if that owner receives a notice or lien affidavit from a claimant in the amount necessary to pay that claim/lien, so does the proposed amendment to that rule. Although, as I am sure original contractors will be glad to hear, the proposed amendment would limit the owner's ability to withhold funds to only the amount necessary to pay claims. If the owner is already withholding payment from the original contractor for retainage at the time it receives notice of a claim/lien, then the owner would have to include the amount of retainage withheld in the overall amount withheld from the original contractor to pay the claims/liens. For example, if an owner has withheld $25,000 in retainage from an original contractor and receives a $12,000 lien claim, the owner would not be able to withhold any additional funds from the original contractor. It would only be after the claims/liens exceed the amount of retainage withheld that an owner would be authorized to withhold additional funds from the original contractor. The amount of time an owner could withhold funds from an original contractor to pay claims would be revised to be until payment is made, the claim is settled/discharged or determined to be invalid by final order of a court. The opportunity to release funds to the original contractor once lien deadlines have passed would no longer be available.
Another significant benefit to subcontractors proposed by HB 3065 is the expansion of owner liability. No longer would an owner's liability be limited to retainage; it would instead be limited to the full amount (including change orders) of the original contract. Payments by the owner to the original contractor would also not affect the owner's total liability to claimants. Furthermore, an owner's liability would no longer attach only to the property: the revisions proposed would hold an owner personally liable for a lien claim even after transfer or foreclosure of the owner's interest in the property.

The proposed revisions concerning the liability of purchasers of liened property is another change that could use some additional attention. Though this amendment provides that new purchasers of liened property cannot be held personally liable for the claims/liens on the property, it clarifies that they can be held liable for attorney's fees under Section 53.156. What is not clear, and what could in my opinion use further clarification, is whether the property at issue in these situations could be foreclosed on to pay the claims/liens asserted thereon. The current proposed language seems to imply that it could not, but there is enough ambiguity in the language used that litigation on the issue would be invited.
Though subcontractors seem to be the focus of HB 3065's overhaul of our lien statutes, there are also some benefits for original contractors being proposed. In additional to the above-discussed limitations of an owner to withhold funds from an original contractor for the payment of claims, HB 3065 proposes to eliminate an original contractor's statutory obligation to defend an owner against lien claims when the owner is in violation of its contract with the original contractor.

There are also a few proposed revisions that would more directly affect attorneys litigating in this area of construction law, the first of which is a revision of the deadline to bring suit to foreclose a lien. HB 3065, in its current state, reduces the two-year deadline to bring suit on liens filed on commercial projects to the same 1-year deadline for residential projects. An owner and claimant could extend either deadline to 2 years, but only by written agreement filed with the county clerk. There is also an amendment proposed which would affect the ability of attorneys to bring summary motions to remove liens. The current law allows for seven situations in which a summary motion may be used to remove a lien. HB 3065 proposes that two of those situations be eliminated: when the deadlines for perfecting a lien claim for retainage have expired and when the contested funds have been plead into the registry of the Court. It seems the intention here is to limit the availability of a summary motion to remove a lien to instances where the claimant has somehow failed to comply with the statutory requirements for perfecting its lien.

As we are all aware, sometimes bonds are filed on a project to protect the owner/property from lien claims and potential foreclosure based on those claims. HB 3065 proposes to revise a few of the rules related to the filing of bonds and bond claims. For example, the amount of a claim requiring a bond two times the claim amount has been raised from $40,000 to $60,000, meaning also that claims above $60,000 will require a bond in the amount of one and a half times the claim amount. The sponsors of HB 3065 are also seeking to simplify the notice requirements for bond claims. Bond claimants who contracted directly with the original contractor would not be required to provide any notice of their claim to the original contractor, and those who did not contract directly with the original contractor would only be required to give the original contractor a notice of furnishing. Effective notice to the surety would be achieved by a simple notice stating the amount and nature of the claim, and if required, a copy of the notice of furnishing provided to the original contractor.

In summary, the changes to current lien law proposed by HB 3065 seem to be very subcontractor focused, and have the potential to shift some of the risk and burden currently carried by subcontractors onto owners in a way that is more true to the intentions expressed both in the plethora of court opinions issued by Texas courts over the last century and in the legislative history of our current statutes governing this area of law.

This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, please consult an attorney. 

Monday, May 1, 2017

If you are owed money for work performed, below is a reminder on important lien deadlines:

Residential Projects - The Deadline is May 15th for Work Performed in March

• For Notice to Original Subcontractor or Derivative Claimant

Non-Residential Projects - The Deadline is May 15th for Work Performed in February and March

• For Notice to Original Contractor by a Subcontractor or Derivative Claimant (March)
• For Notice to Owner and Original Contractor by a Subcontractor or Derivative Claimant (February)

The Cromeens Law Firm, PLLC, specializes in construction law and will aggressively work to protect your rights. Contact us today to learn more.