Contractors and subcontractors, architects, designers, suppliers and others in the construction industry come across an owner, developer or builder who cannot or will not pay for services rendered. This situation can leave owners of small businesses in a bind and potentially put them out of business.
However, as long as the business had an enforceable written contract and did the work, they can often get their money. One effective way to ensure payment is to file a mechanic’s lien against the property.
How it works
The details will vary depending upon who files the mechanic’s lien, but it is essential to follow all the appropriate steps and meet all the necessary deadlines. The general process is as follows:
- Fill out the mechanic’s lien form: Use the official form provided by the state, make sure that it meets the guidelines and requirements set forth in the state’s statutes, and fill in all the necessary and relevant information.
- File the lien claim with the county recorder: Delivery the finished form to the county clerk of the county where the work was done and pay the fee. Filing can be done in person, by mail or electronically.
- Serve a copy to the property owner: File an Affidavit of Service with the county clerk after serving a copy to the property owner.
Pennsylvania’s notice requirements
While parties with direct contracts with the owner (like general contractors) are not required to provide a notice of furnishing before filing a lien, others like subcontracts or suppliers will if they do not have direct contact with the owner. The project must be worth more than $1.5 million, and the owner must file a Notice of Commencement with the State Construction Notice Registry.
There are non-negotiable filing deadlines. It must be within six months of the date when the last work was done or materials supplied. The value of the goods or services should not be a trivial amount. The notice of intent to lien must occur 30 days before filing the lien, which is no later than five months after providing the last goods or services. The Notice of Lien Claim must occur within one month of filing – this must be done in person or posted conspicuously on the job site.
Enforcing the lien
If the lien does not lead to payment, the claimant will need to enforce the lien. This starts with a complaint to enforce within two years of filing the lien. There is then a judgment to enforce the lien within five years. Failure to secure the judgment means the original claim will expire.
The claimant can also file a Notice of Intent to Foreclose, the final warning before enforcing the lien, which could mean taking assets of value, but not personal possessions. It signifies that the claimant plans to litigate to collect a court judgment. If the owner pays, the claimant can then release the lien. The claimant will do this with the same county clerk where the claimant filed the lien.
Why are liens effective?
Regardless of who owes the claimant, the lien on the property directly affects the owner. The owner or developer often wishes to sell the property, but no real estate transaction is allowed when there is a lien on the property. The thinking here is that the owner is looking for a much larger payday in selling the property, so they are much more amendable to paying the money owed to the business that provided goods or services.