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Texas Mechanics' Lien Law (continued)

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“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.”; and

(2) below the notice, read:

“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)”

(d) If a claimant or potential claimant is required to execute a waiver and release in exchange for or to induce the payment of a final payment and is not paid in good and sufficient funds in exchange for the waiver and release or if a single payee check or joint payee check is given in exchange for the waiver and release, the waiver and release must read:

“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)”

(e) If a claimant or potential claimant is required to execute an unconditional waiver and release to prove the receipt of good and sufficient funds for a final payment and the claimant or potential claimant asserts in the waiver and release that the claimant or potential claimant has been paid the final payment, the waiver and release must:

(1) contain a notice at the top of the document, printed in bold type at least as large as the largest type used in the document, but not smaller than 10-point type, that reads:

“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.”; and

(2) below the notice, read:

“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)”

§ 53.285. Attempted Compliance

<Text of section effective Jan. 1, 2012. This section expires pursuant to its own terms Aug. 31, 2012.>

(a) A waiver or release shall be construed to comply with this subchapter and is enforceable in the same manner as a waiver and release under this subchapter if the waiver or release:

(1) is furnished in attempted compliance with this subchapter; or

(2) evidences by its terms intent to comply with this subchapter.

(b) Any provision in any waiver or release furnished in attempted compliance with this subchapter that expands or restricts the rights or liabilities provided under this subchapter shall be disregarded and the provisions of this subchapter shall be read into that waiver or release.

(c) This section expires August 31, 2012.

§ 53.286. Public Policy

<Text of section effective Jan. 1, 2012>

Notwithstanding any other law and except as provided by Section 53.282, any contract, agreement, or understanding purporting to waive the right to file or enforce any lien or claim created under this chapter is void as against public policy.

§ 53.287. Certain Agreements Exempt

<Text of section effective Jan. 1, 2012>

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.

[END OF STATUTE]

Although §§ 53.281 and 53.282 are somewhat self-explanatory, the lien forms required under § 53.284 present some drafting issues.  The four statutory forms include a blank in or at the end of the first paragraph following the words “to the following extent,” which is then followed by “(job description).”  It is not clear why “the extent” to which the lien is released is followed by the cue to fill in the “job description” in this blank.  Without guidance from the legislature, the author would suggest the claimant fill in this blank with a general description of the labor and materials furnished for which the release is provided and the date, in the case of a progress payment release, through which the release is to be effective.  From this author’s perspective, something like “to the extent of all labor and materials furnished in connection with [repeat description of scope of work][and, if applicable, through the last day of payment period]” would be likely to work. 

Note that the scope of the release, which is defined in the second paragraph of both of the Progress Payment Release forms, states that the release covers a progress payment for all labor, services, equipment, or materials . . . “except for unpaid retention, pending modifications and changes, or other items furnished (emphasis mine).”  Prior to the mandated statutory forms, many release forms allowed for a “carve out” of retainage and other pending claims.  In the author’s opinion, including “or other items furnished” in the new progress payment release introduces an ambiguity as to the scope of the release.  From releasing party’s perspective, the carve out recognizes the reality that change order work is frequently performed prior to being formally approved for inclusion in a monthly pay application.   But, most owners and, for subcontractor draws, contractors, would prefer that any exclusions from the scope of a progress payment release be specifically stated so as to avoid claims later on.  It is not clear whether an owner or contractor is now prohibited from adding language to the release that provides certainty as to the scope of the work for which the payment is made and what claims are not released.

Note that the new Tex. Prop. Code § 53.281 states the release is effective when “notarized.”  A simple acknowledgement may be “notarized.”  But, to have the benefit of Tex. Prop. Code § 53.085, (requiring a bills paid “affidavit”) or its companion provision for residential construction, Property Code § 53.259, the statement must be in the form of an “affidavit.” These Property Code sections provide for personal liability for false statements in a bills paid “affidavit.”  Thus, the signature line should include a jurat, not just an acknowledgement.

Note also that the new statutory forms do not contain an indemnity paragraph. Nor, do the new statutory forms include any representation or warranty that the claimant has not assigned and will not assign its accounts receivable in connection with the claim. Since the new statutory forms are mandatory, practitioners are cautioned against adding these types of additional paragraphs into the new forms. To the extent that a contractor or owner would prefer to have an additional indemnity available in connection with payments made, or wants an additional representation and warranty that the account has not been assigned, it is suggested that these warranties and representations be contained in a separate document signed by the claimant at the time of payment.

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