That's a new one on me also ... being constantly required to obtain
releases, I'm pretty familiar with Chapter 53 of the Texas Property Code
and it seems on the surface that the notice requirements would preclude
Then again, I'm not a lawyer, I just play one on the keyboard, and since
it was surely written by the breed, there are undoubtedly trapdoors,
intended or otherwise.
I forget to add that I do recall a provision that when working with a
retainage, a lien can be filed at inception on the retainage, but I was
under the impression that it also took some type of notice and agreement
of all parties ... then again, it seems a pretty antagonistic thing to
do a client, but the guy in Robert's example sounds like he deserves it.
Now that sir, is sad. I have had different folks screw me, and some
got away with it. Realistically, how do you collect a $350 repair
when the folks don't want to pay it? How much is your time worth,
especially knowing the court system it could be a year and a half
before you come up in small claims court.
I have been working here so long that with my subs it isn't at all
unusual for me to contract for $7 - $10K on a handshake. Many will
start on a job for me (like my roofing subs) without knowing anything
about the job but when and where to show up. We *never* talk about
money until the job is finished. In fact, I help some of them bid the
jobs they do for me (and others) as I want to make sure they make
money and stay in business for our future endeavors.
They know if they do what they are supposed to do, I will treat them
fairly. I have a tendency to pay just a little bit more than the
market price for services to my favorite guys, so they respond by
taking good care of me.
Thankfully, the only big ticket item I ever got screwed on was when a
group of doctors filed for bankruptcy just as I finished their office
finish out. I was hit for a little over $16K, and I thought I would
never drink that one off.
But as far as a fellow contractor trying to put the drill to me..... I
literally grew up in construction. I know how to handle those things
for the most part. No lawyer needed.
I ONLY do this when it is a big ticket contract and folks I don't
know. I like for my clients to know that we are playing on a level
field and they will nt be hiding behind any legal maneuvering or
I am in Texas and spent a great deal of time in finance here, so I
learned from some very knowledgeable people.
I managed the construction/remodel portfolio of Norwest Banks when
they were here. As a matter of course, we filed a lien against the
property before allowing any work to start, because in Texas the
oldest liens (first filed) are considered superior to any subsequent
In the case of the liens being addressed (paid), each lien is
completely satisfied before going to the next inferior lien.
When at Norwest, we executed some fairly sophisticated liens
structures for their time, and modified them after each draw. Each
draw required 1) an invoice for a certain dollar amount from a
contractor 2) a description of the work performed requiring a draw 3)
a partial release of lien signed by the contractor detailing the
percentage of completion. If the contractor used subs for work
instead of all employees, we required releases from them as well.
The master lien held by Norwest was modified (reduced) at the end of
each billing cycle to reflect the new outstanding amount of the lien,
as well as the new loan balance accrued by the payout(s).
At the end of the project, the master lien was released after all
monies were paid out and all mechanic's lien waivers had been
collected with an attachment that acknowledged that the contractor(s)
had been fully paid.
The final release of lien and the loan documents were then given to
the permanent financing organization (bank, mortgage company, etc.)
and a permanent loan was established.
In the case of remodeling, many folks go to the bank for a second lien
these days. This is another opportunity for disaster if you don't
know what you are doing. Usually, the client still has a first lien
(mortgage). The bank they go to for he second will INSIST on being in
second position, superior to any contractor ( "mechanic an
workman's" ) liens. That means that the contractor is in the last
If for any reason the property is foreclosed upon, (medical problems,
divorce, loss of ability to pay, etc.) the mortgage company will
foreclose. In Texas, since the mortgage company is almost always the
superior lien, they will be completely satisfied, even if they have to
take some money out of the second lien position. What is left after
the first is satisfied is the bank's position, and after that the poor
So imagine this; clients start a new large room addition. The main
earner loses a job. The house is foreclosed upon. When sold on the
courthouse steps, it is under the market price because it is not only
a slow market now, but because the work wasn't completed since the
people quit paying their bills. Since they have a bunch of unfinished
work to contend with, bids are low and not much money is generated at
the foreclosure sale.
The mortgage company will most certainly be satisfied. The bank is a
little shakier, but they are great at protecting their own ASSets.
But that that poor contractor waits to see if there is any money left
after the banks pick the loan clean....
If the superior lien holders take all the money, the contractor gets
nothing. In this economy with falling real estate prices, it happens
all the time.
He is off to civil court to try to go after the client personally.
Good luck with that one.
Texas has some strong (and strange) real estate laws. New
construction is different than remodel, and you need to get a good
title company (or a law firm that specializes in real estate liens) to
make sure you have the proper liens filed the correct way.
Lonnnnng ago I found that it is more important to be a good business
man than it is to be a good contractor. You can lose your whole
company in one poorly structured deal. You can be a pretty good
contractor and still stay in business. But if you don't know the
legal aspects of what you are doing, the right customer (or their
attorney) can skin you alive if they want.
It's a jungle out there.
On 11/3/2010 1:39 PM, email@example.com wrote:
f Norwest Banks when
A different kettle of fish though, eh? ... a Lender has an entire legal
pallette of liens that a mechanic/contractor/materialman (unless I'm
missing something in the Texas Property Code) does not have access to,
from Deeds of Trust, to the liens of which you speak?
Then again, as every lawyer who I've tried to talk into suing a bank for
me has noted: In law school, if the question involves a bank, the answer
is automatically "the bank wins".
I can't get away with that. :)
And it's a lawyer's game and you can't win, even if you prevail.
IME, and it often happens that, the more contractual diarrhea used in
trying to protect yourself against all eventualities, the more you
expose your intent to adverse interpretation in a court of law.
I've learned to do everything I can to keep it simple, or I walk away
... Bill Clinton's meaning of "is", notwithstanding.
Mention Youngstown, Ohio and Ed Debartolo in the same breath, you will
get a broad range of wry smiles about tales not told.
Some say those tales might include the "Family".
Had a customer who did some crane work on a shopping center project
DeBartolo was developing.
When the outstanding invoices hit $750K, guy dropped the crane across
the entrance at the start of the day and shut the job site down.
Story is guy has his $750K by noon and construction resumed.
Would I liked to have been a fly on the wall?
What do you think?
I must confess that I don't remember the exact name of the lien type
that was filed. In the case of the Lender action, Norwest filed a
lien equal to the amount of construction as a second position to the
lot or land loan.
In some cases, the lot/land equity was actually deeded over to Norwest
as a down payment in lieu of cash. These transactions were handled
differently since Norwest held title to the real estate itself, and it
held the only position of interest against the real estate. With that
in mind, the Norwest would pay off the outstanding balance of a lot/
land, assuming the superior position. The master lien would be
modified (increased) as the construction continued until finished.
Since Norwest's loan was not on a house, they had to file the lien as
a lien against real property with proposed improvements (as you
know). At the end of the process we took the clear title and flipped
the construction loan including the lot and recast it as a permanent
"real estate" loan.
I had a few of my remodeling cohorts that (when they were still in
business... this economy finished them off) that filed a M&W lien
against a project before it started. Only prudent when you are doing
$80 - $250K additions.
Their liens were not considered valid for the full amount of the
project as while **in process** they had not performed the full amount
of work. The strategy there was to have the lien in place to protect
their position in the line of creditors, and if/when it went to court
the judge would modify the lien to reflect actual monies owed.
Texas real estate law is set up to protect the homeowner and in many
ways leaves everyone else (except the banks) out in the cold. Since
only the superior lien holder can force foreclosure, and only for the
reason of non-payment (not only the note, but insurance and taxes if
collected by them in escrow) a contractor that is in second position
has little power.
You can file all the liens you want and they will just sit in the
system. No harm will come to the deadbeat client.
That is why the banks and lenders have entire legal firms that
specialize in Texas real estate law constantly review, update, and
implement new documentation and strategies.
Truer word were never spoken. The banks know the legal system/real
estate law so well that they can create a Gordian knot that can't be
unraveled by anyone but them. And one little hickey in your
paperwork... on small mistake... it can render your paperwork invalid
in some instances.
Can I get an AMEN on that one, brother? Not possible. Even if you
"win", you are lucky to be made whole, and if you are made whole, how
much goes to your attorney? And there is a lot of back and forth on
how much of your attorney's fee are "reasonable" and how much you
should allow as a normal cost of doing business for collections.
I agree. With plethora of unrealistic legal shows on TV, many now
think they are junior lawyers. I hear things like "I'm not sure I'm
comfortable with the language you used here" and other such drivel.
Some don't even understand what they are reading in the first place.
I think some believe it is a game, and the more aspects you provide
for them to consider, the more challenged they feel.
We are certainly on the same path. I only do work for one attorney,
and he is such a great guy you would never know he was one. Others
are too argumentative, and LOVE to split hairs and interpret every
aspect of a project or repair. My current contract has the basic
legal caveats and verbiage in it, and no more. It is a simple two
page contract, with no tiny writing on it.
While this may sound arrogant, it isn't. I look at my meeting with my
proposed client as a mutual interview. I want to see if we are a good
fit for each other. If I smell trouble or there is an overly
aggressive know-it-all in the mix, I simply tell them "I don't think
we can help you" and leave.
Life is too short. The legal system is a long and winding road with
no end. Who needs the aggravation?
On 11/4/2010 12:50 PM, firstname.lastname@example.org wrote:
As usual, Robert ... well spoken!!
I'm waiting, as we speak, to pickup a signed contractand check that we
were, according to the client, going to do "in the morning". They have
had some unusual health issues, and are old acquaintances and previous
clients, so I'm not concerned, but like I told Leon, "don't hold your
(Just got email while I was typing this that he is on his way home from
the office so his wife can sign, and that he's got a check with him ...)
Leon, keep breathing! :)
Where there is ambiguity in a contract, the ambiguity must be
resolved against the interest of the author of the contract.
Apprectiated this thread -- as a contractor and as an occasional
Ken in Calgary.
On 11/3/2010 3:34 AM, email@example.com wrote:
<snip of good stuff>
Most all remodel work I do, and I dislike the work intensely and the
circumstances in which I will do it are very narrow, and with the
exception of the kitchen portion, is on a cost plus, coordination fee
Since I generally don't do remodels without a full, to the studs,
kitchen renovation, I cover the kitchen portion in a separate
contract/proposal generally included as an additional "exhibit" to the
basic remodel contract.
Basically, I like simple contracts if I feel I can get away with them,
if not, I go with boiler plate stuff I've used for years ... I spent 15
years in the O&G business, much of it writing and negotiating drilling
and operating agreements, and supervising an in-house title
curative/contracts section with as many as 11 attorneys at my direction
... I've had the "contract" course to the nth degree.
I am REQUIRED by my colorblindness to do the same thing ... IOW, I deal
in numbers, not colors.
I explain upfront that it is useless to ask me a question about colors
(and generally get the opportunity to prove it, but generally not more
than once, before they get the point fully.) :)
On a custom job my paint contractor of years deal with ALL questions of
color, in my presence, with the client. (The last custom I did in the
Austin area was with a paint contractor I'd never used before and, as
expected, they did paint one wall the wrong color before the owner
noticed ... BTDT, so I had had the foresight to cover that almost
guaranteed circumstance in the sub's contract)
On spec homes, I'm lucky to have a wife who is excellent at interior
design and I just turn her loose with a budget.
<snip of more good stuff>
In the recording studio business I got _damn good_ at making money from
a clientele who never has any ... musicians!
I'm here to testify that that experience alone will make a decent
business man out of a stone stump.
And, to add to the fun, there are paints that go on as one color, and dry
to something _completely_ different. Woe be unto you if the customer
sees the wet paint going on.
The specific paint I recall went on as a *BRIGHT* saffron yellow, but
dried to a subdued fern green. If I (customer) hadn't been on-site, and
observed the color shifting _as_ it dried, I would -not- have believed
that somebody did _not_ go in there and repainted the 'right' color.
Got forcibly reminded of this, when, some 25 year later, I had to do some
repair work on one of the walls in that room. Go down to the basement and,
yup, there is the carefully squirreled-away remanents of the various paints
used, labeled by which room, color name, and drips/smears on the outside
of the can. The right green smears on the outside, and bright yellow
inside. The touch-up work Looked even gaudier against the green background
than originally (over white primer). The next morning, you couldn't tell
where the repairs had been made. <grin>
5. CHANGES TO THE PROJECT, CONTRACT PRICE OR CONTRACT TIME
A Change Order is a written order prepared by the Contractor and
signed by the Owner and Contractor, issued after execution of the
Contract, authorizing a change in the Project, Contract Price or the
Contract Time. The Project, Contract Price and the Contract Time may
be modified only by a Change Order. Any change or proposed change
submitted to the Owner for review and signature must be reviewed and
finalized within a reasonable period of time.
Any changes not required by unforeseen conditions or beyond the
control of the Owner shall be priced according to the Contractor's
normal pricing policy, and shall include an administrative charge of
$100. All Change Orders shall be priced prior to presentation to the
Owner. No portion of the Project shall be suspended or delayed in
contemplation of a proposed Change Order. The Owner shall make
payment in full upon his signing of the Change Order.
If the Contractor is delayed at any time in the progress of the
Project by any act or neglect of the Owner, his agents, or by any
separate contractor employed by the Owner, or by changes ordered in
the Project, or by labor disputes, fire, unusual delay in
transportation, adverse weather not reasonably anticipated,
unavoidable casualties, or any causes beyond the Contractor's control,
or by delay authorized by the Owner pending mediation, then the
Contract Time shall be extended by Change Order for such reasonable
time as the Owner and the Contractor determine.
Any supplemental design work requested by the Owner shall be performed
at a rate of $150./hour.
The Contractor does not anticipate any Change Order extras at the time
of Contract signing, and will not request any Change Order extras,
except for Owner requests, latent and concealed conditions, and
required construction differing materially from the Contract.
And on a different topic, but still an all time favorite contract
The Owner shall not bring other contractors, onto the job during the
course of the Project. If the Owner desires to have additional work
performed by the subcontractor's hired by the Contractor within one
year of Project completion, the Contractor's written authorization
must be received prior to the start of the additional work.
Excellent example Robert!
But in my case, I'm the one wanting to add the ceiling fan, we were still
waiting to see of our proposed price for the house would be accepted by the
builder. Admittedly there are costs of adding to the plans and cost of
labor and materials but nothing in the way of actual building the house had
taken place yet.
Additionally the original prices for the ceiling fans were $150 each. To
add the price of the extra fan was $150 + $175 for blocking and wiring+ $350
I was perfectly willing to pay the whole sum but the builder's salesman
intervened before presenting me with those figures and "he" got the builder
to waive the $350 admin fee.
But Leon, that's all the difference in the world. If a shovel hasn't
been turned, to me, you are still in the negotiating aspect. No other
schedules have been disrupted or modified, no materials need to be
verified as to compatibility, or any of that other stuff.
You are doing what you need to do now, not while in process.
Completely different from my example. I wouldn't charge an admin fee
upfront while we were still wrangling over prices since I could see
for myself what it would cost to make a change, and charge just that
much. After all, you want to get the job, right?
It may have been, (Lordy... it's my sales background....) that the
"waiving of the fee" was a good sales tactic concocted by the sales
Or, it may have just been common sense on their part.
I was reflecting on the folks that want to change horses after the
race has started.
I suspect a 'cookie-cutter' developer, with the admin fee designed to
cover the costs of riding herd on the 'deviation' from the "standard
plan". In that scenario, there is a 'production' issue of "pay attention,
this is *DIFFERENT* on _this_ job". if there were a a whole group of
modifications bundled to gether, a single instance of the admin fee makes
sense. If there was _only_ the -one- change that was something other than
a selection between 'standard' options, it make sense to waive the fee.
I am never a smart ass to my clients. I need and want as much
business as I can handle (difference between a part time and full
time?), plus I like to stay in control of the situation.
My response to them is: "Wow... that's a great price! If you are
sure they can do it for that price, I would wait until we are finished
and then call them right away! They must have some special deal cut
with someone because of their volume".
And if they call me later, I don't gloat. I am sorry they didn't get
what they wanted, sorry they were screwed, and sorry they wasted their
time. I give them a chance to save face. I tell them there is a
small upcharge if we have left the job, and that's that.
I don't ever bad mouth the other contractor(s) either. Unless the
work is pitifully bad, I even try to make excuses for them like "well,
I guess when you try to do that much volume you can't supervise every
job", and "even the best contractors have bad days".
If they are pissed off enough at the other guy, they will double their
attacks on them in front of me while my hands stay clean.
I don't get any satisfaction or remuneration out of being right. I do
make money (think of The Walrus and The Carpenter here) when I am the
good guy and pick up the pieces for my clients, leaving their dignity
I admit though, I DO love to hear, "damnit Robert, something told me
we should have let you handle this".
"Well, the installer they had 3 installers ago, last month, he did an
okay job, but I have NO idea who they have doing the installs now."
That all depends on how it went and the kind of client. Sometimes I do
gloat. I am weak. Can't help myself.
" What did I tell you?" sometimes just slips out. Maybe once a
If they ridiculed MY price, I WILL gloat.
I'm there on that one. No need to butcher the competition, many will
do that themselves...the good ones, well, they don't deserve to be
butchered. I have never minded losing a gig to a credible opponent.
Amazing how close our quotes can be. Once, on a $14,000 job we were
100 bucks apart.
For that reason, I like some of the European quote systems. Get 3
quotes TELL them you're getting 3. Toss high and low. Gets rid of
gougers and low-ballers.
quotes TELL them you're getting 3. Toss high and low. Gets rid of
gougers and low-ballers.
Once had a buyer who indicated he would put a job out to bid and the
low 5 bidders got to rebid.
This was a 6 digit job that was low balled going in.
There was nothing left for another bid; however, buyer was told that
he was truly serious, he would have gotten the "real" price.
Good thing buyer didn't follow up, but it was fun watching buyer's
expression as the blood rushed to the face.
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