MG Building Materials, Ltd. v. Moses Lopez Custom Homes, Inc.
179 S.W.3d 51 | Texas Court of Appeals, 4th District (San Antonio) | 2005
What This Case Means for Subcontractors
A homebuilder (Lopez) assigned all of its lien rights to a lender (MG) to secure construction financing. When the project ran into problems, Lopez tried to file a mechanic's lien but couldn't because it had already given away those rights. The court ruled that once you assign your lien rights to a lender, you lose the ability to file a lien later—even if the lender doesn't pay you. However, you may still sue for breach of contract on other grounds.
Key Takeaways
- •Never assign all your lien rights to a lender or anyone else without understanding you're giving up your ability to file a mechanic's lien if things go wrong.
- •If you must assign lien rights as a condition of financing, carve out exceptions or negotiate the right to file a lien if the lender fails to fund promised draws.
- •Losing lien rights doesn't eliminate all remedies—you can still sue for breach of contract, but a lien is faster and more powerful, so losing it is a major disadvantage.
Lopez assigned to MG all rights to assert a mechanic's and materialman's lien claim.
Frequently Asked Question
If I assign my lien rights to get construction financing, can I still file a mechanic's lien later?
No. Once you assign all your lien rights, you lose the ability to file a mechanic's lien, even if the lender fails to pay you. You may still sue for breach of contract, but that's slower and riskier than a lien. Always negotiate carve-outs or conditions before assigning lien rights.
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