Wouldn’t it be nice if your industry had a statutory lien such as the Mechanic’s, Contractor’s, or Materialman’s Lien (Chapter 53, Texas Property Code) (M&M lien) which construction contractors have? If you provide a service to real property such as landscaping, security and janitorial service, a contractual lien can be used to give your business the equivalent of a statutory lien. Under Texas law, all that is needed to create a contractual lien on a certain property is for the contract of the parties to make it clear that was their intent. The specific property upon which the contractual lien is being created for should be described in the contract with a unique street address so that there is no question which property the lien applies to.

What I have recommended to clients is that their contract not only state the intent to create a lien to secure payment for the service provider’s services, but that the contract invoke the M&M lien statute and Article 16, §37 of the Texas Constitution which provides for a lien for labor to construct or repair real property. I also recommend that the contract state that the deadlines under the M&M lien for giving a notice and filing the lien be extended from 2.5 and 3.5 months to 6.5 and 7.5 months respectively because I have found that many clients tend to give their customers far more than three months time in which to pay before they consider contacting an attorney.

I realize that many of you have your own clients who have their form contracts and they won’t let you change theirs. However, many of those clients are economically more powerful than the service contractor, which is why they can force their contract on you. In such cases, having an attorney send a demand letter and follow up with a collections lawsuit should take care of most situations since that party has an apparent ability to pay which is why you went with their contract to begin with.

However, with the less economically powerful clients who will likely not have a form service contract and thus will sign yours, a contractual lien provision in your contract can be a very useful tool when attempting to get paid. Many clients only read the price part of the contract and nothing more. For those who do read the contract and object to the lien provision, your comeback can be, “what’s the problem, do you anticipate not paying?” After all, the purpose of the contractual lien is to secure payment. If the client pays, the lien provision will not be invoked.

There are other considerations to make with a contractual lien on property being provided a service. For instance, many apartments and commercial properties hire contractors via their property manager as an agent. The contract should require the agent to disclose who its principal is (unless you are sure you are dealing with the owner directly or through its authorized employees). Even if eventually a property owner can “get out of” the lien you file on its property for some legal reason (such as the agent had no apparent authority to agree to the lien), putting a lien on the property will likely require the owner to have to retain counsel and that owner might just decide that it would be a lot cheaper to pay your bill and get a release of lien than it would to litigate whether your lien is valid or not. Moreover, if you file the lien and they continue to ignore paying your bill, you will really get their attention when you file a lawsuit to foreclose on the lien which could lead to a court ordered sale of the property so that you can collect what is owed.