A Premier Legal Resource Since 1985

Filing a construction lien can protect your investment

On Behalf of | Nov 15, 2016 | Construction Law

Owning and operating a construction company is a tough way to make a living. It means hard work and constant oversight. Between material costs, permits, licenses and employees, the margin for making profit seems to get slimmer each year. Of course, some businesses appear to have money just thrown at them.

That appearance can lead those in construction to put their skill sets to use and broker a deal into ownership of other operations such as restaurants and nightclubs. You come across someone who has a properly zoned building in disrepair and trade your construction skills, labor and materials for a piece of the pie.

However, if you are a partner in the business but not the building, you may find yourself taking a big loss if the operation goes belly up. That’s one reason it’s important to protect your investment.

Why you should file a lien

Filing a lien against the property may seem to show a lack of confidence or trust between you and your partner. But, without some security, you can’t recover your losses if the business fails. It’s only fair considering the building owner enjoys a vastly improved property.

The window for filing a lien in Texas is quite short. You have about four months from the time construction ends. Filing a lien shouldn’t be perceived as an aggressive legal action because it can be lifted when you recoup your investment or any time you see fit. However, having a lien in place may entitle you to:

  • Make a demand for payment
  • Own an interest in the property
  • Prevent sale of property
  • Attorney fees

In all fairness, your labor and materials investment results in the property being more valuable to lease or sell. It would be an unjust enrichment given that you paid for the upgrades. Failing to file a lien puts you in a tough spot. Your attorney can help you explore other remedies.

Bad faith

The fact that your partner used one company for the property and another for the business may raise a judge’s eyebrow. If you can prove the other person never truly intended to go the long haul of operating the business, you may be able file a civil lawsuit. To successfully demonstrate the other party breached the agreement by acting in bad faith. However, you’ll need to persuade the court that he or she:

  • Was intentionally dishonest
  • Misrepresented important facts
  • Willfully misled you
  • Did not fulfill the contractual obligations

It comes down to showing that there was no adherence to the basic standards of honest business dealings. If you are able to make a case for this type of breach of contract, you may be entitled to interest on your investment and attorney fees.

If you are in construction and need to file a lien or lawsuit, learn about your options at the law firm of Wright & Greenhill.