Texas

I 100% agree. This situation is insane. I stopped paying the builder after the first lien notice. I had already paid the builder more than enough to cover the lien.

arrow said:

---

I self-contracted my barndo and while it was a good experience, I wanted to push the easy button on our home. The barndo was a simple design and relatively inexpensive compared to the custom home.

I'm frustrated at myself. I do meticulous research in most interests and pursuits in my life. I thought I did adequate research for my home build, but clearly I did not. I put a lot of misplaced trust in the "system". i.e. Builder, Lender, Title Company, Insurance, Texas Law, etc.

So for the largest purchase I'll ever make, I failed to protect myself. Hopefully for anyone aspiring to build a home that stumbles upon this thread will learn something.

---

I wouldn't be too hard on yourself. Sometimes this kind of thing just happens. Material prices caused a lot of this and you obviously have no control over that. Lots of construction companies run kind of fast and loose with their leveraging but even if a company was relatively conservative they could get upside down on jobs that were sold before the spike. After that, they kind of have to mismanage things and/or take on way too much work.

In extraordinary circumstances seemingly stable companies can go tits up...

htxag09 said:

---

cevans_40 said:

---

TxAG#2011 said:

---

There has to be some logic behind allowing someone to file a lien on a property all because some other entity didn't pay them. That sounds really dumb.

---

Because they did all of the work at said property and presumable their work and materials are still there. Should a subcontractor just have to eat the labor and material costs?

---

This is crazy to me. With a previous O&G company, we had a vendor shut their doors after finishing a job for us. Obviously, a lot their vendors came after us for money they weren't paid. I worked closely with our lawyers on it, and the laws were pretty clear. If we paid our vendor what we were obligated to pay, the liens weren't valid. They also had to inform us they were going to file a lien to trigger a waiting period before they could actually file it. But if we had already paid our vendor, they had to go after them for their owed money. If we hadn't paid the vendor, the lien was valid, so we payed the subs, then paid the balance of our original invoice to our vendor.

This was specific to liens on wells/material rights and I don't expect it to be exact to residential homes, but crazy that it's basically the opposite. Honestly, I'd have guessed laws would be even more protective to the end home owner in these cases.

I mean I get that it sucks that the subcontractor should have to eat the costs. But the OP paid the builder for it. What's more fair/aka less ****ty? 1)That the home owner has to pay the builder, then pay the sub, then fight to get any money back from the builder or 2) that the sub has to fight to get their money from the builder? You can just as easily turn this back on the sub, they should have done better credit checks, had better payment terms, etc.

---

The subcontractor industry has an extremely powerful lobbying force in Austin.

Homebuilders have a stronger lobby and protect themselves with, at least in Texas, with stringent notice periods on liens. If you are paying an attorney, have him focus on this area to get the liens removed if they did not follow the very specific process. Also, many notices are incorrectly worded and/or not filed properly.

Unfortunately, the lumber company was likely on top of this and have filed a valid lien. Next likely to follow process would the Ready Mix company if you had a foundation and/or flatwork poured.

The bank has no duty or responsibility for the bank to vet the contractor. I cannot imagine any action to them would be successful unless the bank handed you a list of "approved contractors". Keep in mind bank has lawyer on staff and has more money to pay their lawyer than you likely have to pay your (or if you have it, you may not want to make your lawyer have a good year).

Regarding licensing, it is correct builders do not need one (see note on lobbying above). TREC Sunset review ended this over 10 years ago. I own a residential construction business, it amazes me there are no licensing requirements. My partner, who is a lobbyist in the industry just smiles at me.

Another comment on bonds. Bonding is rare in residential construction and typically relates to subdivision developments and then some specific municipal requirements and usually related to a sate / local licensing requirement. I cannot fathom a surety providing a performance bond to a general contractor with the obligee being individual owner of a property. And the surety will first protect the builder who purchased the bond and not the person who benefits from bond. Plus you have financing. Surety will not issue bond if they do not hold first position lien rights. Banks will not loan you money where the collateral is not protected by them being first in line.

Sorry for long post. I would prioritize on your attorney ensuring they are following any bankruptcy case. The notice periods are also strict and easy to miss. The vendors and any other creditors he has will likely have a position ahead of yours. If there happens to be any money awarded, you again want to ensure attorney follows that as it should reduce or eliminate and existing liens.

Have attorney review any and all lien notices and filings and then file to have invalid liens tossed aside. Work proactively with your bank as your attorney suggests. They have an interest in seeing your project completed. They have no interest in owning a lot with a 1/4 built custom home and a lien mess to take care of.

There are many shady GCs and small builders out there who have filed bankruptcy multiple times. I GC thats been in the business for let's say 25 years and has not filed bankruptcy is as common as unicorns.

Best of luck. We also have a business doing foundations and flatwork and I have had a couple of builders not pay us. Now for the small guys we file the lien notice the day the foundation is poured. We will give you a waiver when the check clears.

Edited: Not sure where I picked up Barndo from. Prepare for worst and work for the best. You can familiarize yourself with Texas lien law and do some of the homework for the lawyer. I typically write all of our operating agreements, contracts, addendums, etc then get the well-experienced lawyer to bless it.

Just to be clear this isn't a half built barndo. It's about 1/4 built custom home.

This afternoon has been a series of bad news. I seem to be going backwards fast with attorney fees with no result or expectations.

We're about to start the design process on a custom home. I'm so sorry you're going thru this. Bookmarking for all the great advice.

Right? The guy who paid in the beginning gets robbed... and now has to pay again to get the liens removed?

Could also easily argue the homeowner had to eat an extra expense for entrepreneurial profit which the subcontractor didn't so they got hosed worse in the beginning.

We absolutely do not qualify builders. Our process is for the purpose of determining as best we can whether we feel safe dispersing money our client owes their builder directly to their builder.

We also require a 5% contingency in contracts for many of the reasons discussed here related to costs and fluctuations.

This has the makings of a blog and list of shay contractors.

jja79 said:

---

Your comment about the bank not vetting a contractor is interesting. Not sure if you mean subctractor or the GC/builder. I cannot imagine a transaction where the bank doesn't vet the GC/builder and require lien waivers where appropriate.

We vet every builder we have any business with every two years as if we've never heard of them before.

---

I said the bank has no duty to the customer to vet their contractor for them, which is the only way borrowing party could be successful in suing the bank.

What the bank does to manage their credit risk is internal to them, be it vetting the GC and requiring lien waivers.

My point was that the homeowner cannot sue (or will not be successful in suing) the bank under premises of "well, you gave me a loan knowing who the GC was and you did not research him enough and he walked the job so pay up Mr. Bank?".

If you vetted me every 2 years as if you never heard of me, you would not be a bank I would do business with. For that trouble, I would just shop the business to a new bank.

jja79 said:

---

The builder isn't our client. The borrower is our client. We feel it's prudent to review each builder every two years as things can change.

---

Your would make much more money and reduce your risks if you lent to the builder. Are you indicating an approved list of builders? That is what could land you in a pickle as I mentioned above.

I would add the 2 years is a crazy longtime. If you truly are managing the risks of a bad builder on an owner-financed project, you sure as heck do not allow for 2 years to pass.

Builders and subs generally flame out in a 90 day period. Its amazing a guy could have done awesome work for us for 10 years, then goes through a messy divorce, decides Hunter is his new best friends, and all of the sudden your jobsites are plastered with also sorts of attorney contact information

Point being it can change so very fast in construction.

Most of our projects are 24 month build cycles so we find our process works for us and has for 30 years.

Your attorney has probably already mentioned it but I didn't see it on the thread. Might take a look at the Texas Construction Trust Funds Act. Civil and criminal remedies for homeowners whose construction funds are taken. In particular, it may be possible to hold the individual(s) who took your money, not just the company, liable. This may be a work around corporate bankruptcy if there are attachable personal assets.

https://statutes.capitol.texas.gov/Docs/PR/htm/PR.162.htm

I'm asking here rather than offering advice, as I don't know anything about this topic but need to learn before I start my own custom build.

Regarding talking to the bank, I thought the discussion would be about the bank and the homeowner being aligned on wanting to come out of this with a fully built house occupied by a financially whole homeowner paying the mortgage. In that case, the goal wouldn't be suing the bank but figuring out the best way to proceed, whether it be going after the GC, finding a new one, resolving liens, etc.

Hopefully the bank has knowledge and resources that can be leveraged somewhat. At the very least, surely it would be good to stay in touch to maintain trust and coordination in a stressful time.

Have I misunderstood?

You don't misunderstand.

We aren't going after they bank. They are trying to help. I wish they could do more, like offer to help with attorneys.

I should be able to update more later this week.

Not advocating to change your process, particularly since it has suited you well for a long time. Not being critical of your approach from a bank /lender perspective.

My point specifically is that the homeowner cannot / should not rely on a bank to do any sort of vetting on a person they are not lending to.

If your build cycles are 24 months indicating a more intensive review, do you do nothing during the build cycle to ensure builder remains solvent and current with their suppliers? I am more accustomed to the bank to have a process at each draw to ensure builder is not having issues.

We vet the builder because the money is disbursed to them. Borrowers should vet the builder the best they can. We feel we owe our client the duty to do all we can to protect ourselves and our client.

During the build we fund completed work based on an independent inspection with appropriate lien waivers. This process has worked for us over thousands of these loans for about 30 years.

I fully support what you do and agree with what you conveyed in the post above.

I was simply indicating the land / home owner should not rely on the bank for vetting the GC. I would likewise be careful discussing with the homeowner anything you did regarding "vetting" the builder.

Its not hard to setup a situation where someone relied on your perceived promise. As an example, I cringe at the concept of dummy surveillance cameras along with a sign "area monitored by 24/7 video surveillance.

Companies have been held liable under the premise that a victim of a robbery / rape said their vigilance was down because they saw the video camera and signs and "let their guard down".

If you represent you have vetted a builder and it goes tits up, you will likely stand in the line of fire and being paying your attorney of making an insurance claim. What you do may have worked for 30 years, the does not mean tomorrow you get a letter from a homeowner attorney.

To be clear, I am not objecting to your vetting process, I am pointing out that based on my experience you want to monitor builders continuously, especially at the end of a boom cycle we are staring at, and keep your assessments internal vs divulging with the homeowner "fka ftc is a solid company, we lend to them often and never had a problem." Do that and you just added yourself to any litigation.

Quote:

---

Have a credible link or cite for this? Cause otherwise, that's an internet myth just like the old "Stella Awards" frivolous lawsuits emails that used to be so popular (and totally made up). There is such a thing as "negligent security" where premises can be held liable for not providing adequate security under certain circumstances - but I'll believe this only if I see an actual credible source. Otherwise, aint no way that's true.

---

Have a credible link or cite for this? Cause otherwise, that's an internet myth just like the old "Stella Awards" frivolous lawsuits emails that used to be so popular (and totally made up). There is such a thing as "negligent security" where premises can be held liable for not providing adequate security under certain circumstances - but I'll believe this only if I see an actual credible source. Otherwise, aint no way that's true.

My original comment was directed to the OP and what the involvement of his lender was as this played out.

MAS444 said:

---

Quote:

---

Have a credible link or cite for this? Cause otherwise, that's an internet myth just like the old "Stella Awards" frivolous lawsuits emails that used to be so popular (and totally made up). There is such a thing as "negligent security" where premises can be held liable for not providing adequate security under certain circumstances - but I'll believe this only if I see an actual credible source. Otherwise, aint no way that's true.

---

Have a credible link or cite for this? Cause otherwise, that's an internet myth just like the old "Stella Awards" frivolous lawsuits emails that used to be so popular (and totally made up). There is such a thing as "negligent security" where premises can be held liable for not providing adequate security under certain circumstances - but I'll believe this only if I see an actual credible source. Otherwise, aint no way that's true.

---

This occurred in my professional experience so I can assure you there is "internet rumor". You are correct in that there will need to be additional circumstances to create a liability, but the basic premise if that the area is a known security risk and that the victim relied on the "this area under 24/7 video surveillance" which results in the victim relying on the video monitoring in deciding to proceed into the area.

This is much different than a yard sign from the security company. The burglar is not relying on the absence of a sign to break into your house. But if you create an expectation of safety through signage that is misleading alluding to the cameras you see monitoring the area are real, functioning cameras, then you may have liability.

From my experience a dummy camera is fine but not a great deterrent. Combine a dummy camera with a sign indicating the area is surveilled by an actual, functioning camera and you have opened yourself up potential liability.

You're conflating issues. Premises owners do have a duty to take reasonable precautions to provide security in certain very specific (and rare, at least in Texas) circumstances. But the idea that they can be held liable just for a dummy monitoring/surveillance sign(s) alone is just not true. Of course, that doesn't mean someone didn't allege that (you can allege anything) - but it's very far outside of what the law says a premises owners duty is.

I think I specified under what circumstances a property owner would potentially be liable. The victim would have needed to be enticed / expected a level of security based on the presence of cameras and signs saying they are being monitored and / or recorded.

https://www.securityinfowatch.com/video-surveillance/article/10552604/the-legal-side-a-dummy-cameras-question

Random link above on the subject. In the incident I had direct experience with, a retail parking lot had a series of car break ins and attacks in the parking lot. Creating the known danger. Property manager made sure all the lights in parking lot were functioning, then put a couple of real cameras near front of lot then dummy camera on remaining light poles throughout parking lot.

They communicated to tenants problem was addressed by security cameras and monitoring. Tenant has its own video security on the interior and entry doors that was monitored and recorded so they and their employees reasonable assurance the cameras in parking lot were the same.

A female closing the store one night went to her car at the further point of the parking lot where tenant instructed its employees to park. She was brutally attacked and raped. She asked if they could catch the attacker since it was all within the camera's line of sight under the light pole she parked near. "Sorry ma'am, that was not a functioning camera."

It ended in a settlement but I can absolutely tell you the landlord (primary) and tenant were held to have liability for creating a false sense of security.

If they settled, they weren't "held" anything. That's not the way it works at all. The claim was negligent security under the timberwalk line of cases - not false sense of security. I've actually handled these kinds of cases for the last 23 years.

MAS444 said:

---

If they settled, they weren't "held" anything. That's not the way it works at all. The claim was negligent security under the timberwalk line of cases - not false sense of security. I've actually handled these kinds of cases for the last 23 years.

---

So if they settled knowing they had a risk of not prevailing with a jury / judge then that means they did no wrong or had no liability? Du represent Harvey Weinstein as well?

Not going to keep going back and forth with you, we obviously have different experiences in the real world.

From your own case reference:
The exception applies, of course, to a landlord who "retains control over the security and safety of the premises." The foreseeability of an unreasonable risk of criminal conduct is a prerequisite to imposing a duty of care on a person who owns or controls premises to protect others on the property from the risk. A duty exists only when the risk of criminal conduct is so great that it is both unreasonable and foreseeable. Whether such risk was foreseeable must not be determined in hindsight but rather in light of what the premises owner knew or should have known before the criminal act occurred. For a landowner to foresee criminal conduct on property, there must be evidence that other crimes have occurred on the property or in its immediate vicinity. Id. at 757.

In the example I provided, the landlord had control of property, had previous knowledge of criminal acts on property, and was negligent when it advertised the entire premises were under video surveillance.

In cases you settle do you get an admission of liability from the defendant? Thats not been my experience, quite the opposite in fact. And the settlement resulted in a change in corporate policy regarding the use of cameras on the premises. Dummy cameras were strictly forbidden.

Any security consultant worth his/her/its salt will tell you dummy cameras are a terrible idea, particularly when accompanied by a sign advertising that the cameras are real an in use.

Quit trying to talk down to someone about "how it works" when I as well have 20+ years in risk management for businesses large and small. I gave my experience, you gave yours - though yours includes a condescending message that my experience is invalid.

Your long, researched post does nothing to prove your point and illustrates mine...but I know you won't (and/or can't) see that.

Quote:

---

Not going to keep going back and forth with you

---

Well that's a relief!

You are just being an arse and speaking from your air of apparent authority on the matter. I speak from direct experience - at two separate companies in two separate industries.

Go advise companies to put up dummy cameras and misleading signs and sit back and see what happens.

You do what you want to but he's someone I wouldn't get into an argument over the law with.