What is the Difference Between a Commercial and Residential Construction Project?

The requirements and deadlines for perfecting a lien against residential properties are different than they are for commercial properties.  Therefore, the first step in analyzing your right to a lien is to determine whether you supplied labor/materials to a “residential” property or a “commercial property as defined under the Texas Property Code.  The lien laws are far less stringent on commercial properties than they are on residential properties.  And if the residential property is the owner’s homestead, then the lien laws are even more stringent.  By default, if the project is not “residential,” then it is “commercial.”  It’s not that complicated to determine, however, there are a few instances where you might think the property is residential, when in fact it is commercial.  So what is a “residential” property?

Texas Property Code Section 53.001(10) defines a “residential construction project” as a project for the construction or repair of a new or existing residence, including improvements appurtenant to the residence, as provided by a residential construction contract.”

A “residential construction contract” is a contract between an owner and a contractor, in which the contractor agrees to construct or repair the owner’s residence, including improvements appurtenant to the residence.

So what is a “residence”?  According to the Texas Property Code, a “residence” is a single-family house, a duplex, a triplex, a quadruplex, or a unit in a multi-unit structure that is used for residential purposes and that is: (1) owned by one or more adult persons; and (2) used or intended to be used as a dwelling by one of the owners.

The key to solving the residential versus commercial mystery is to determine whether the property is being occupied by its owner.  If not, it is likely not a residential construction project under the Texas lien laws.  For example, your next door neighbor’s house, if rented, would not be a residential property under the Texas Property Code.  A spec house or a house in a large scale development would not be a residential property if it has not yet been sold and occupied by its owner.   Additionally, an apartment complex is not a residential property if all the units are intended to be leased.  Therefore, just because something looks like a house, it does not mean that the Texas Property Code treats it as a residential property.