Mechanics' Liens In Pennsylvania

What Is a Mechanics’ Lien?

Home buyers and construction contractors often hear the term “mechanics’ lien” and probably have a limited understanding of exactly what it is. A mechanics’ lien is a construction or building repair debt that has attached to real estate. The real estate cannot be sold or transferred to a new owner unless the debt is paid in full or unless the new owner agrees to accept the real estate with the attached debt.

Since virtually no new owners are willing to take on the debts of the prior owners, a mechanics’ lien must be paid off, at the latest, at the time of sale of the property. Mechanics’ liens have the ability to jump to the head of the line of liens on a property, even ahead of the first lien mortgage.

The Background

Although contemporary usage of the term “mechanic” implies a worker who uses or works on a machine, just about any contractor or subcontractor involved in construction qualifies to file a mechanics’ lien if he or she completes work and is not paid. Mechanics’ liens arose in the law to level the playing field between construction workers and property owners. Construction workers invest their time, effort, and materials in buildings and repairs located on land owned by someone else. An owner who refuses to pay has the upper hand, since the work has been completed and the property is now in the control of the owner.

Enter the mechanics’ lien. The law gives the worker a powerful response by providing the opportunity for the worker to file a lien in the case of nonpayment. An unpaid builder, plumber, electrician, or material supplier who is owed more than $500 can file a mechanics’ lien in the courthouse. He or she simply has to give the property owner notice and file a fairly simple document announcing the lien. The lien attaches to the real estate where the work was done or where materials were supplied.

If properly filed, a mechanics’ lien for new construction dates back to the day when “visible commencement” of the work began. Liens for repairs and alterations are effective only from the date of the filing of the lien.

The Details

But mechanics’ liens are quirky. Contractors have only four months from their last day on the job to file the lien. The lien attaches to the property described on the document filed. If the contractor does not clearly and accurately describe the property, the lien will not attach. If the lien document is not promptly and properly served on the owner, the lien fails.

Because mortgage lenders live in dread of mechanics’ liens, they are very careful to require that contractors sign broad waivers of liens prior to starting any new construction. The waiver does not only apply to the general contractor. If properly filed and indexed at the courthouse, the mechanics’ lien waiver also prevents the filing of any mechanics’ liens by all subcontractors.

If you are purchasing a home that has not yet been constructed, your lender will want to be sure that construction does not commence until the general contractor signs and files a mechanics’ lien waiver. Even lot-clearing, grading, and excavation can give rise to liens, and both lenders and title insurance companies can insist that all work start only after your mortgage is signed and recorded in the courthouse, and that a mechanics’ lien waiver be filed.

If you are a construction contractor or subcontractor, you should regularly expect to be asked to sign a waiver of liens as a condition of your customers’ entitlement to borrow mortgage money and to purchase title insurance. When doing business with an owner who is not borrowing to finance a home‑improvement project, you should consider refusing to sign a waiver of mechanics’ liens. When no lender or title insurer is involved in the transaction, a contractor should do his or her best to preserve the entitlement to file a mechanics’ lien, since it is a powerful tool to secure full and final payment.

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