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Texas Construction Law Blog For Subcontractors & Suppliers

Texas Public Payment Bond Claims: Just as Good as a Lien

Posted in Bonds

You cannot lien public real property.  Instead, you have a claim against a payment bond obtained for the project you furnished labor or materials to. For the construction, alteration, or repair of a public building or public work (i.e., land owned by a “Governmental entity”) in which the prime contract is in excess of $25,000, Texas law requires the general contractor to provide a payment bond.  Governmental entities include: the State of Texas or any county, municipality, or any departments, boards or agencies thereof, any school district or any other governmental authority organized under the laws of Texas.  The purpose of the payment bond is to provide a substitute for a lien and protect subcontractors and suppliers who furnish labor and/or materials to public projects.

Who and When to Notice

You perfect a Texas public payment bond claim by sending a notice via certified mail, return receipt requested, containing a sworn statement of account to the general contractor, the surety, and, if you are a second tier subcontractor, the first tier subcontractor you have a contract with.  You should also send notice to the contracting authority for the government.  If you are a first tier subcontractor then you must send notice no later than 15th day of the third month following each month you furnish labor and/or materials.  Second tier subcontractors or suppliers must give additional notice of the unpaid balance to the prime contractor not later than the 15th day of the second month following each month in which labor was performed or materials were delivered.  Unlike liens, there is no lien affidavit to record.

The Contents of the Notice

All notices must include a sworn statement of account that states “the amount claimed is just and correct” and “all just and lawful offsets, payments, and credits known to the affiant have been allowed.”  If your claim arose under a written agreement then you may (and in many instances should) attach a copy of the contract to the notice along with a statement of the completion or the value of partial completion of the agreement.  If you have a written unit price agreement, then you must also attach the following to your notice: a list of units and unit prices set by the contract and a statement of the completed and partially completed units.  If you do not have a written contract then your notice must also include: (1) the name of the party for whom the work was done or to whom the materials were delivered; (2) the date of the performance or delivery; (3) a description of the work or materials; and (4) the amount due.  In these circumstances, you should also attach your invoices to your notice as an exhibit because these invoices will help satisfy these requirements.

What do you do if you do not know who the surety is?

Demand it in writing.  The general contractor is required to provide you with the following information within 10 days of your written demand: (1)  the name and last known address of the governmental entity; (2)  a copy of the payment and performance bonds for the public work; and (3)  the name of the surety issuing the payment bond.  The better practice, however, is to collect this information and a copy of the bond before you begin work or supply any materials.

When to File Suit

The surety and general contractor are allowed a 60 day window after the date of perfection to investigate and settle the claim.  Therefore, you cannot file suit before that sixty day window has expired.  However, bear in mind that the statute of limitations is short: you must file suit within 12 months of the date notice for a claim is mailed.