Notice of Unpaid Balance or Prelim?

Protecting your rights to claim a mechanics lien in Texas can get a little dicey.

Unlike many states which require a preliminary notice or notice to owner to be served at the beginning of the project. Texas takes a different approach by requiring those who are protected by the lien laws of Texas to serve what is known as a “Notice of Unpaid Balance”.

This “Notice of Unpaid Balance” can appear in many formats. It can be as simple as a statement of job account or as complex as a custom designed document. As long as it meets “ALL” of the requirements of the Texas Statute including “WHO” it is served upon and “WHEN” it is served, it should be adequate to establish your rights to move forward with a mechanic lien.

Now because it is a “Notice of Unpaid Balances” it has absolutely nothing to do with “Past Due Accounts Receivables”. The Notice of Unpaid Balances is impervious to the Terms of Payment you may have extended to your client. Let’s use the following example to expand upon this point:

Assume that you have this great client who has begun to work on improving a privately owned building in Houston, Texas. Your client needs some very lucrative terms in order to commit to you for suppling all of the materials he will be needing to complete this job. You decide that you can extend him 90 day terms in order to lock up the business. So far, so good.

On March 5, 2016 he orders $75,000 in supplies. You ship the materials to the job site on March 14, 2016 and you prepare your invoice on March 21, 2016. Of Course, your invoice has 90 day terms, So it won’t become due until June 20, 2016. So the question to ask is:

What must I do to secure my mechanics lien rights?

To be in compliance with the Texas Statute you must serve the “First Notice of Unpaid Balance” on or before May 15, 2016. Now realizing that the invoice is not due according to your 90 day terms, you will not be in compliance with the Texas Statue that will protect your right to lien. Unless this First Notice of Unpaid Balance is served by May 15, 2016. Furthermore, you will also need to serve a Second Notice of Unpaid Balance on or before June 15, 2016. Keeping in mind that most likely you have not been paid a dime before June 20, 2016 nor were you expected to be paid before June 20, 2016. You still must serve both the First and Second Notice of Unpaid Balance within the times as required by the Statute. Remember the Statute does not address “Past Due Accounts Receivables”  It is only concerned with “Unpaid Balances”. Therefore the minute that order leaves your warehouse and the invoice is created, you have “Unpaid Balances”. Granted they are not due according to your 90 day terms. But they are unpaid regardless if they are due or not.

So, if playing it safe and protecting your “Unpaid Balances” with a right to file a mechanics lien, is part of your sound credit policies. Then you don’t want to allow your generous terms strategy end in Unpaid Balance that may become an Uncollectible Receivable.

What if I issue more invoices in the same month?

What if I combine other orders, for different jobs, on the same invoice?

What happens if I do not serve the first notice?


Want to learn more about protecting your accounts receivables for Texas construction projects? We have the answers and the conversation is free.

Call or Contact CRM Lien Services, Inc. We are here to help!


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