Failure to Retain?

What if the Owner fails to Retain?

If the owner fails to retain trapped funds and pays them over to the contractor, the owner is liable and the owner’s property is subject to a lien to the extent of any money the owner should have retained under Property Code Section 53.081. Prerequisites to liability for failing to withhold trapped funds are (1) the receipt by the owner of the required notices to trap the funds, (2) perfection of the claimant’s lien, and (3) the reduction of the claim or any part of it to judgment. Though this last clause requiring reduction of the claim “to final judgment” might be construed to require the party asserting the lien to first bring suit against the general contractor as the primary obligor, that construction of the statute has been rejected. Instead, the language refers to the reduction of the lien itself to judgment. Accordingly, a subcontractor is not obliged to sue a general contractor before foreclosing a mechanic’s lien against the owner.

Note: In an action to foreclose a lien provided for under Property Code Section 53.021, the court may award reasonable attorney’s fees and costs.

• Payment of Trapped Funds
• Failure to Retain?
• Notice to Trap Funds