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Texas Construction Law Blog

For Subcontractors & Suppliers

Texas Laws Emergency Contractors Must Know

Posted in Business Management, Construction Contracts

Drain pipe with frozen stream of water near brick wall of a cottage outdoors in winterCo-author: Trevor Lawhorn

As evidenced by the unprecedented arctic weather last week and the resulting fallout, emergency construction services are essential. Freezing temperatures, hurricanes, tornadoes and other natural disasters lead to a high demand for remediation and reconstruction services. Contractors are often best positioned to provide the necessary emergency construction services to rebuild businesses, residences and communities. Emergency contractors must always be mindful of certain laws that impact how they conduct business after a disaster. Understandably, Texas has implemented a number of laws to protect disaster victims against predatory or otherwise unsavory business practices. Here are a few essential Texas laws that both owners and contractors must consider when contracting for emergency construction services. Continue Reading

Can the Trust Fund Act be Waived?

Posted in Collection, Construction Contracts

The general prohibition against waiving lien rights under Chapter 53 of the Texas Property Code has been written about extensively, and is well known through the industry.  However, the Construction Trust Fund Act (Ch. 162 of the Texas Property Code) does not contain any such prohibition.  From the Act itself, it is not clear whether construction trust fund rights can be waived or not.  Less than two years ago, the Texas Fourteenth Court of Appeals considered this issue, among several others, in Mesa Southern CWS Acquisition, LP v. Deep Energy Exploration Partners, LLC.  In that case, the Court considered the following provision:

CONTRACTOR shall promptly pay all bills, other indebtedness for labor and for materials furnished or purchased by it involved in or arising out of this Agreement, and shall exhibit receipted payrolls for all labor employed, and receipted statements or invoices for all material used. To the maximum extent permitted by applicable law, CONTRACTOR agrees that, in consideration for entering into this Agreement, CONTRACTOR irrevocably waives any and all rights to lien, sequester, attach, seize or assert a privilege over the Work performed by CONTRACTOR, the real property upon which the Work is located and any hydrocarbon product associated with the Work. CONTRACTOR acknowledges that in entering into this Agreement, CONTRACTOR is relying on the creditworthiness of COMPANY and shall look solely and exclusively to COMPANY for payment and shall not rely on any statutory, common law or other right to seize, attach, sequester, assert a privilege, lien or otherwise encumber the real property of COMPANY or upon which the Work is located or any hydrocarbon associated therewith. Accordingly, CONTRACTOR agrees to keep and maintain the Work free from any liens or privileges asserted by CONTRACTOR or any of its subcontractors both during and after completion of the Work under this Agreement.

The operator (i.e., the COMPANY) filed for bankruptcy.  The Contractor filed suit to foreclose its mineral lien and asserted trust fund claims against the parent company of the operator.  The trial court granted the parent company’s motion for summary judgment apparently based on the above provision.  The appeals court affirmed the trial court holding that the above provision waived the Contractor’s right to pursue anyone other than the Company for payment.  The appeals court held that the above provision could – and did – waive contractor’s trust fund rights (and its mineral lien rights which we previously wrote about here).  This, as far as I know, is the first Texas court to hold that trust fund rights may be waived by contract.  This opinion is unpublished and has not yet been cited by any other opinions for this proposition.  Stay tuned.

For now, suppliers and subcontractors should be wary of any language purporting to waive their construction trust fund rights.

Mechanic’s Liens For Design Professionals: A Powerful Payment Collection Tool

Posted in Collection, Liens

Close-up Of Yellow Hard Hat Over Rolled Up American Banknote On White Background

Co-author: Tim Fandrey

In these unprecedented times, every bit of revenue is critical to the continued operation of nearly every business operating within the construction industry. Fortunately, there are a myriad of remedies to aide collection efforts. Perhaps the most commonly discussed remedy is the mechanic’s lien provided by Chapter 53 of the Texas Property Code Chapter. Continue Reading

Lien Inception

Posted in Liens

When owners file bankruptcy or projects otherwise go south, lien priority often comes to the forefront.  The idea is relatively simple.  Priority is how courts determine which creditors get paid first.  This often pits lenders against M&M lien claimants.  For lenders, their liens typically arise when they record their deeds of trust.  However, for M&M lien claimants, the Texas Property Code has very specific rules that must be followed. Continue Reading

COVID-19 – Legal Impact

Posted in Uncategorized

COVID-19 is now interrupting and, in some instances, cancelling contracts across the country.  While the situation is highly fluid, these business disruptions appear likely to continue and perhaps even worsen in the immediate future.  This will significantly affect and perhaps threaten businesses people have worked had to establish.  And it will of course impact employees and their jobs.  Business leaders will have to make tough decisions in the coming weeks and months.  Many of these decisions will touch on important legal issues.  Below are a few legal hot topics addressed by my colleagues at Gray Reed in the past few days: Continue Reading

What’s Ahead for the Construction Industry in the 86th Texas Legislative Session

Posted in Construction Legislation

For 140 days, starting on Jan. 8, 2019, the 150 members of the Texas House of Representatives and 31 members of the Texas Senate, under the leadership of Governor Greg Abbott, will gather for the 86th Texas Legislative Session. As is often said, when the Texas Legislature is in session – your life, liberty and property are at stake – as new laws, rules, regulations, taxes and fees will be proposed and will receive substantive debate and deliberation before Texas legislators ultimately vote on your behalf.

Most legislators agree that the main issues driving the agenda for the session are public education (including school finance, school safety, workforce development and teacher pay) and property tax relief. Additionally, there is no question that the legislature will spend considerable time on what is sure to be a complicated and challenging state budget cycle. With school finance, healthcare, infrastructure funding and Hurricane Harvey recovery looming large on the horizon, this legislative session will present unique fiscal challenges – and also great opportunities – to ensure Texas remains strong and prosperous.

In terms of “construction” legislation, general contractors, subcontractors, suppliers, owners, developers, lenders and lawyers all have reason to pay particularly close attention as several important issues have seemed to gain the attention of Texas Legislators. To name a few: Continue Reading

Series LLCs in the Construction Industry: Increasingly Popular Fortresses to Protect Contractor’s Assets

Posted in Business Management

Originally published in Build Houston magazine. 

Co-author: Catherine Chlebowski

The business of construction is a day to day adventure fraught with peril and liabilities dangerous enough to put many construction firms out of business. Given that reality, it is imperative that contractors properly structure the legal entities that provide the fortresses to protect their assets. While most are familiar with the limited liability company (LLC) and limited partnership (LP) set ups, many have no familiarity with series limited liability companies (Series LLC). Continue Reading

Anti-Poaching and Wage-Fixing Agreements: Drawing the Line Between Competitive and Criminal

Posted in Business Management, Labor/Workforce

Originally published in Build Houston magazine.

In October 2016, the Antitrust Division of the U.S. Department of Justice (DOJ) issued guidance identifying poaching agreements and wage-fixing agreements as primary antitrust enforcement targets.  In April 2018, DOJ brought the Department’s first enforcement case over illegal anti-competitive employment related agreements.

In a market where skilled labor is in increasingly high demand, and the price of labor continues to rise, scrutiny of employment-related agreements is also on the rise.  Industries facing skilled labor shortages are natural targets of DOJ scrutiny, the construction industry is no exception. Continue Reading

Fighting the Four Horsemen of the Workforce Apocalypse

Posted in Labor/Workforce

Co-author: Michael Kelsheimer
Published in TEXO InFocus Magazine

Since at least 2008, Flood, Fire, Famine and Pestilence have ravaged the construction workforce across America. In the downturn, many workers left the industry never to return. Others left the U.S. and have not returned.  Couple that with construction growth, a resistance to training workers who may leave for another dollar an hour, and seeming lack of interest in construction jobs by the current generation now entering the workforce, and you’ve got the makings of a big challenge.

Protect yourself on the contracting side before heading into the storm . . .

Continue Reading