HBA-MPM H.B. 2056 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2056 By: Coleman Business & Industry 3/11/2001 Introduced BACKGROUND AND PURPOSE Historically, general contractors in Texas who have a direct contractual relationship with an owner of property on which a structure is to be built have had three options available to them to secure payment for labor and materials. The first is a statutory lien, which some consider somewhat complicated, which requires that notices with specific wording be sent to the owner within a specific time period. The second option is a contractual lien, which is based on the terms of the contract between the owner and the general contractor. The third option is the constitutional lien, which is created merely by the execution of a contract between the owner and the builder and requires no specific contractual provisions or separate notices or filings of any kind. Contractual and constitutional liens require an enforceable contract with property owners, while statutory liens are remedies provided by statute. Statutory liens are also the only recourse for subcontractors who are seeking to secure payment for services rendered. Recent additions to law governing statutory liens may have made it unclear as to whether the ability of a general contractor to obtain a contractual or constitutional lien has been affected. Additionally, current law does not protect purchasers or owners of real property from having a lien placed on their property for the nonpayment by a seller or general contractor of labor and materials. House Bill 2056 clarifies existing law to specify that a general contractor's ability to obtain a lien is not affected and provides this protection to purchasers and owners. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS House Bill 2056 amends the Property Code to provide that a person must comply with applicable law if the person intends to perfect a mechanic's lien arising from a claim resulting from a residential construction project. The bill specifies that before a residential construction contract is executed by the owner, the original contractor who intends to seek protection under a disclosure statement required for a residential construction contract is required to deliver the disclosure statement to the owner. H.B. 2056 requires the lender to deliver all documentation relating to the closing of a loan to the original contractor in addition to the owner no later than three business days before the closing, rather than one day, if the owner is obtaining third-party financing for the construction of improvements under a residential construction contract. The bill requires the original contractor, in connection with final payment under a residential contract to execute and deliver to the owner's agent at the time the final payment is tendered an affidavit stating that the original contractor has paid or will pay each person pursuant to their contract with the original contractor for all labor and materials used in the construction of improvements on real property. The bill requires the seller of any real property on which a structure of no more than four units is constructed and that is intended as a principal residence for the purchaser to execute and deliver at the time of closing an affidavit stating that the seller has paid or will pay each person pursuant to their contract with the seller for all labor and materials used in relation to improvements on the property. If the original contractor or the seller has not paid in full each person pursuant to their contract with the original contractor or seller, the original contractor and the seller are required to state in the affidavit the total amount owed and agree to protect the owner or purchaser, as applicable, and the real property from any mechanic's liens. The bill removes provisions also requiring the original contractor or seller to also provide the name and address of each person to whom payment is owed or has been made. EFFECTIVE DATE September 1, 2001.