Lien on Commercial Property

by | Jan 22, 2021 | Commercial Real Estate Tips

Lien on a Commercial Property

A Summary of Mechanics Liens or known as Tenant improvement liens

What is a Lien?

 

In simple terms, a lien on a commercial property uses this instrument to secure payment of a debt or debts that remain unpaid. The lien holder does not have property ownership rights.  Therefore, a lien puts an interest on the commercial property to secure payment of a debt. When this in place, the owner of the property has an encumbrance on their respective property.

 

Mechanics Lien on Commercial Property

In the state of Texas, there are 2 types of mechanics liens.  One is statutory, the other is constitutional.Mechanics, artisans and contractors have a lien upon a commercial property for the value of their labor. They are also covered for their material workmanship.

A lien extends to the building, fixtures or improvements. It also extends to the land that the property is on within a city or town. Outside the city or town, the lien extends to 50 acres that the building occupies.

Liens can also exist for architectural , engineering, surveying services for landscaping, dirt work or demolition services.

 

Notices

Contractors must :

1. Must give appropriate preliminary notice

2. Make the appropriate filing

3. Give notice to the property owner

4. Must provide a list of all subcontractors and suppliers on a project .

5. Commercial property sub-contractors must send notices to the property owner. The time frame is the 15th day of the third month following each month work is performed and unpaid.

 

 

Contractors must :

1. Must give appropriate preliminary notice

2. Make the appropriate filing

3. Give notice to the property owner

4. Must provide a list of all subcontractors and suppliers to be used on a project .

5. Commercial property sub-contractors must send notices to the property owner. The time frame is the 15th day of the third month following each month work is performed and unpaid.

 

Constitutional Lien

  • This lien is self-executing
  • No filing or action is required by the contractor.
  • Only applies to direct contractors who have a contractual obligation with the owner of the commercial property.
  • Sub-contractors are not covered by a constitutional lien.
  • Rules are in Chapter 53 of the Texas Property Code.
Overview of an ALTA Survey and Zoning issues with CRE

Lien Priority

Generally, mechanics liens do have priority over other liens.  This priority is over all other liens not attached to the commercial property.  This has to be prior to the activation of the mechanic’s lien.

Keep in mind , a mechanic’s lien is very technical.  For respective advice, you should always have a discussion with an attorney who undertands the rules regarding liens.