The State Bar of Texas Construction Law Section

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Residential Construction Contracts

10th Annual Construction Law Conference

February 20 & 21, 1997

Austin, Texas

Douglas W. Becker
Philip R. Hall

Cauthorn Hale Hornberger Fuller Sheehan & Becker, Inc.
San Antonio, Texas

I. Introduction 3
II. The Texas Homestead, Past and Present 3
A. Homestead Rights 3
1. Homestead Provisions Contained in the Texas Constitution 3
2. Statutes that Define and Exempt the Texas Homestead 4

III. Properly Securing a Lien on the Texas Homestead 6

A. Securing the Right to File a Lien on a Texas Homestead 7

1. Timing of Filing Requirement 7
2. Strict Compliance with the Statute 7
3. Inapplicability of D'Oench Duhme Doctrine 7
4. Form of Lien Instrument 8
5. Effect of Noncompliance 8
B. Securing and Perfecting a Lien on a Texas Homestead 8
1. Original Contractor 9

a. Table 1. Deadline for Notice of Filed Lien Affidavit and Notice to Owner 9
b. Additional Language Required on Lien Affidavits 10
c. Foreclosure 10

2. Denvative Claimants 10

a. Table 2. Deadline for Derivative Claimant Notices to Owner and/or Original Contractor 13
b. Additional Language Required on Notices Delivered to Homestead Owners 14
c. Derivative Claimant Lien Affidavits 14

IV. Derivative Claimants; Retainage and Funds Trapping 14

A. Retainage Statutes 15
1. Owners Responsibilities and Liabilities under the Retainage Statutes 17

a. Amount 17
b. Type of Contract 17
c. Duration 17
d. Completion 17
e. Failureto Retain 18

B. Funds Trapping Statutes 18

1. Owner's Responsibilities and Liabilities under the Funds Trapping Statutes 20

V. Warranties 20

VI. Miscellaneous Issues 21

A. Contract Price 21

1. LumpSum 21
2. Cost Plus 21

B. Delays 22

C. Allowances 22

VII. Proposed Property Code Amendments 22

VIII. Conclusion 23

VIV. List of Appendices 24

A - H.B. 740 by Rep. Solomons

B - Construction Contract (Construction on Owner's Lot - Biased towards owner)

C - Residential Construction and Sale Agreement (Construction on Builder's Lot - Biased towards builder).

D - Builder's Limited Warranty (including Appendix setting forth performance standards - Biased towards builder).

Abstract

The purpose of this article is to summarize the statutory requirements for creating a residential builder's lien, and to discuss some of the typical issues that arise when one represents a client that is contracting to either (i) build a home on the client's own property, or (ii) build a custom home built on the builder's lot. Although there are forms included, this article is not intended to be a full discussion of all the issues that could arise. The contract attached as Appendix B is drafted with a bias towards the owner's perspective, while the contract attached as Appendix C, and the Limited Warranty attached as Appendix D reflect a bias in favor of the builder. Attached as Appendix A is a copy of H.B. 740 by Rep. Solomons, which bill proposes expansive amendments to the residential mechanics lien provisions of the Texas Property Code.

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Last updated 6 June 2001

Full Text

Residential Construction Contracts

10th Annual Construction Law Conference

February 20 & 21, 1997

Austin, Texas

Douglas W. Becker Philip R. Hall

Cauthorn Hale Hornberger Fuller Sheehan & Becker, Inc. San Antonio, Texas

TABLE OF CONTENTS

Abstract

Full Text

Appendices

Douglas W. Becker
Philip R. Hall

Cauthorn Hale Hornberger Fuller Sheehan & Becker, Inc.
San Antonio, Texas