Understanding the Mechanics’ Lien

You complete the construction of a new garage for a homeowner when suddenly the owner says that he cannot pay you the remaining $5,000.00 balance you are owed. What can you do? You can file a breach of contract claim, but that may take too much time. Perhaps it is time to consider a Mechanics’ Lien.

What is a Mechanics’ Lien?

A Mechanics’ Lien is a lien that is used to protect contractors that have provided labor and materials to a construction project for which they are not being paid. A Mechanics’ Lien allows the contractor to “jump ahead” of other creditors. For example, a contractor and an oil delivery company are owed money by a homeowner. The contractor and oil company subsequently obtain judgments against the homeowner for the balance owed. However, the oil company obtains its judgment first and therefore has a better lien position and priority of payment. The Mechanics’ Lien changes this scenario and allows the contractor to obtain a lien and priority of payment over the oil company even before the contractor has obtained a judgment

What property is subject to a Mechanic’s Lien?

All of the improvements provided by a contractor for an owner as well as the owner’s property are subject to a Mechanics’ Lien. However, some property is exempt and is not subject to a Mechanics’ Lien.

What property is exempt from a Mechanic’s Lien?

A Mechanics’ Lien cannot be used for labor or materials provided for a purely public purpose. A Mechanics’ Lien cannot be used against publicly owned land, which may include the property of the state, a county, city or school district. Also, the property of public corporations, such as public utilities, is not subject to a Mechanics’ Lien.

A Mechanics’ Lien is also not permitted against the owner of an apartment building for work that a contractor provided for a tenant. This holds true even if the owner gave his consent to have the work performed. A Mechanics’ Lien may only be used against the owner of an apartment building if there is something in writing, signed by the owner, which states that the work was performed for the immediate use and benefit of the owner.

Can a Mechanic’s Lien be used to secure payment for fixtures provided?

A Mechanics’ Lien can be used to secure payment for a fixture as long as the fixture is attached to the property. For example, a Mechanics’ Lien could be used to secure payment for an automatic sprinkler system installed in a building, or for doors installed in an apartment building.

How does one file a Mechanics’ Lien?

It is important to note that a principal contractor is not required to serve notice of an intention to file a Mechanics’ Lien. However, a subcontractor must provide notice of his or her intention to file a Mechanics’ Lien. A subcontractor must provide thirty days notice to the owner prior to filing a Mechanics’ Lien. (Please note that a subcontractor will no longer be required to provide such notice to an owner after January 1, 2007.) However, a subcontractor is not required to provide notice to the principal contractor prior to filing the Mechanics’ Lien.

When filing a Mechanic’s Lien, the following elements must be included:

1. The name of the individual that is making the claim, including whether he or she is a contractor or subcontractor;
2. The name and address of the owner against whom the Mechanic’s Lien is being filed;
3. The date that the work was completed on behalf of the owner;
4. If a subcontractor is filing the Mechanic’s Lien, the name of the person with whom he or she contracted and the dates on which notice of an intention to file the Mechanic’s Lien were provided;
5. If a contractor is filing under a contract for an agreed sum, an identification of the contract and a general statement of the labor or materials provided;
6. In all other cases, a detailed statement of the labor and/or materials provided and the prices charged for each (a description as to kind, quality and price should be included);
7. The amount claimed to be due; and
8. A description of the property claimed to be subject to the Mechanic’s Lien.

It is very important that all of these elements are included in the Mechanics’ Lien. A Mechanics’ Lien that does not include all of these elements will be considered defective.

A Mechanics’ Lien must be filed within four months after completion of the work at issue, and it is typically filed with the prothonotary of the county in which the owner’s property is located. (Please note that this time period will be expanded from four months to six months as of January 1, 2007.) A contractor must provide notice to the owner that the claim has been filed within one month after filing the claim. The notice must include the court in which the Mechanics’ Lien was filed, the term and the docket number as well as the date of filing. The contractor must then file a proof of service in order to show that notice was provided to the owner.

How is a Mechanics’ Lien enforced?

If an owner does not pay his or her debt after the Mechanics’ Lien has been filed, it is then necessary to obtain a judgment. An action to obtain a judgment must be commenced within two years from the date of filing the original Mechanics’ Lien, unless the time to do so was extended in writing by the owner. A verdict must be recovered or judgment entered within five years from the date of filing the claim.

A complaint or an agreement for an amicable action must be filed with the prothonotary in order to obtain a judgment. Other causes of action, such as a breach of contract, may not be raised in the complaint. A contractor may not execute upon a Lien until he or she has obtained a judgment.

Important Points to remember about a Mechanic’s Lien:

1. A Mechanic’s Lien may not be used for unliquidated damages for breach of contract such as time spent negotiating with subcontractors or for the cost of the balance of services as quoted in the contract but which have not been performed. A Mechanic’s Lien is limited to labor and materials that have actually been provided.
2. Unless there is an adequate excuse for nonperformance or a waiver of performance by the owner, performance of the contract is ordinarily necessary in order to entitle a contractor to a Mechanic’s Lien. Substantial compliance with the terms of the contract is sufficient to enforce a Mechanic’s Lien, but no claim will be permitted for incomplete items.
3. A Mechanic’s Lien must be for a debt that exceeds $500.00.

Changes to Mechanic’s Liens that will take effect on January 1, 2007.

1. In the case of residential buildings, a contractor or subcontractor will be permitted to waive his or her right to file a claim against the property owner for services if the total contract price between the parties is less than $1,000.00.
2. In the case of residential buildings, a waiver by a contractor of lien rights without consideration for payment of work, services, materials or equipment provided will be considered void.
3. Any Lien obtained under the Act by a contractor or subcontractor will be subordinate to both a purchase money mortgage and an open end mortgage.

Although the filing of a Mechanics’ Lien may seem simple, there are many nuances, twists and turns that may arise. Prior to filing a Mechanics’ Lien, you should consult with other contractors that have filed Mechanics’ Liens in the past or you want to consult an attorney.

*Some of the information contained within this article was obtained from the Pennsylvania Law Encyclopedia, 2nd Edition, Volume 32, 2003 Matthew Bender & Company, Inc.

Mahlon J. Boyer, Esquire
Bingaman, Hess, Coblentz & Bell,
Home Builder’s Association Member