It’s no surprise to contractors and subcontractors across the country that liens act as the primary point of leverage for construction professionals nationwide when it comes to getting them paid on time. But what if you file a lien wrong—on accident or on purpose? There are serious repercussions for filing both fraudulent liens and invalid liens across the nation. Repercussions for fraudulent liens in some states can include recompense for the defenses’ attorney’s fees and punitive damages. Filing a fraudulent lien is never an effective means of getting a leg up on somebody, or exacting revenge; it will always hurt you more in the end no matter the state. Let’s look into why you don’t want to file fraudulent liens and invalid liens.
Additionally, all it takes to file an invalid lien in any state is missing a step in that state’s specific lien laws, or otherwise executing a step incorrectly. Understanding and properly performing each step of the lien laws in your state is a must. Repercussions for invalid liens can also include having to pay the opposition’s attorney’s fees and can result in you and your team losing out on receiving the pay you are owed for the work you have done! This is why it is essential to learn your state’s lien laws, and work with an experienced construction attorney on creating an air-tight collection strategy. Visit our sister site, Subcontractor Institute, to see the lien laws broken out for all 50 states, or contact our team of lien and collection experts that are well versed in filing liens nationwide.
Filing Fraudulent Liens in Texas
Filing a fraudulent lien is an act of intentional harm and is not dealt with lightly, especially in Texas. This is because after a period of repeat bogus liens being filed against government officials and large corporations for purely retaliatory reasons, the Texas Legislature enacted Civil Practices and Remedies Code Section 12.002 (“Chapter 12”). This statute provides specific repercussions for those who file a fraudulent lien against any party, as well as compensation for those who incur damages due to a fraudulent lien filed against their property. Liens are your leverage, but they are not a way to cheat the system.
They’ll Make You Pay for It: Literally!
The largest repercussion of filing a fraudulent lien to be aware of is the massive toll it can take on your finances. While it may seem like an easy way to get under someone’s skin and a way to get additional compensation, it is never worth it to be dishonest. This Code enacted by the Texas government ensures the penalties received for this behavior are significant.
The guilty party must pay damages to EACH injured person for either $10,000 or the actual damages incurred—whichever is more. Additionally, each individual financially wounded by the fraudulent lien will be compensated for their court costs, reasonable attorney’s fees, and exemplary damages as determined by the court. If you file a fraudulent lien, you will not only be responsible for repaying them for damages incurred, but you will also be on the hook for paying for all the legal fees they’ve built up fighting your lien.
Claiming a Fraudulent Lien: The Burden of Proof
A person claiming a fraudulent lien must establish three elements based on the Civil Practices and Remedies Code:
- Knowledge that the document was fraudulent;
- Intent that the document was going to be given the same legal effect as a valid document; and
- Intent by the filer to cause physical injury, financial injury, mental anguish, or emotional distress to them.
However, one additional element is required to prove a fraudulent mechanic’s, contractor’s, or materialman’s lien. The individual filing the lien must also be found to be intentionally trying to defraud the person they’ve filed a lien against. This last element was introduced to protect those claimants who, through an error (typographical, clerical, or some other explainable mistake), unintentionally submit an inaccurate lien affidavit for filing without a specific intent to defraud. However, actual case law on this specific element varies, so it’s always best to work hand-in-hand with an experienced construction attorney should you wind up in this scenario.
Because of the potentially large monetary damages for a lien determined to be fraudulent, especially when looking at the example in Texas, lien claimants must be vigilant in complying with all deadlines and notice requirements and ensure the factual accuracy and components required for each lien affidavit. Texas’ Lien Laws are among the most complicated in the country, so contractors must work with a skilled Texas construction lawyer to ensure the liens they file are valid and accurate. Our collection team assists clients throughout the State of Texas in filing lien claims that comply with the Texas lien laws, removing fraudulent liens, and other lien and collection efforts throughout the country. One way to be sure you’re not filing fraudulent liens and invalid liens? Connect with our team and solidify your lien process today!
This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, consult an attorney.