By: Lane Kelman & Anthony Bottenfield
Mechanics’ liens are a unique statutory remedy that can help contractors, subcontractors and suppliers recover unpaid monies on construction projects. The statutory elements, however, require special care and attention to detail. If a party fails to meet even the slightest of requirements, its lien rights can be jeopardized.
On April 18, Cohen Seglias Pallas Greenhall & Furman, P. C. partner Lane Kelman and associates Alexander Barthand Anthony Bottenfield, along with Steven Rothberg, attorney with First American Title Insurance Company, presented a CLE program titled “The Ins & Outs of the Pennsylvania Mechanics’ Lien Law.”
What is a mechanics’ lien? A mechanics’ lien is an encumbrance on real property or a leasehold that acts as security for unpaid labor, material or construction services. Mechanics’ liens are borne from statute and provide a very specific remedy that requires strict adherence.
The CLE focused on a number of the statute’s strict requirements that are often obstacles to maintaining lien rights and bringing a lien to judgment. For example, a mechanics’ lien must be filed with the prothonotary where the property is located within six months from a party’s last day of work. Six months is a very short statute of limitations and can easily lapse before the parties are prepared to escalate a dispute. Moreover, a subcontractor is required to serve a formal notice of their intent to file a lien on the owner 30 days before the lien filing.
Naming the legal owner of the real property is also an important detail. A party’s contract may identify a purported owner while the actual owner is different. It is recommended that a title search be conducted in order to identify the true owner.
Service is a tricky and possibly problematic part of perfecting a mechanics’ lien. A lien must be served by sheriff (except in Philadelphia County), or posting if service has not been effectuated, within 30 days from filing. If the mechanics’ lien is not served by the sheriff – whether there is an error, neglect or service cannot be achieved – the lien will be discharged if disputed by the owner.
Another intricacy relates to apportionment, or division, of the amount owed and assigning the amount to the location where the work was performed. The purpose is to only encumber the property where a debt is attached and not encumber innocent property.
Mechanics’ liens are most often filed against commercial properties but exist in the residential realm as well. Differences exist in the residential context such as the fact that contractors and subcontractors can waive the right to file a mechanics’ lien prior to receiving payment. Also, owners may protect themselves against subcontractors’ liens when payment is made to a general contractor unlike the commercial context.
Leaseholds are also susceptible to mechanics’ liens. Leaseholds can be liened if certain conditions are met including that a writing exists stating that the improvements, alterations or repairs are for the owner’s immediate use and benefit. However, there are certain exceptions to this rule.
A constant and consistent theme throughout the CLE was that mechanics’ liens are highly specialized statutory remedies that have strict and rigid requirements. Unlike many other areas of the law, mistakes relating to mechanics’ liens often lead to losing one’s rights as opposed to being able to ask for forgiveness.