What You Don’t Know Can Hurt You
 |
Suzanne C. Hixenbaugh, Esq. |
So you finally decided to build your dream house, or remodel that outdated kitchen, or add on that extra space your family needs. Congratulations! But, before you finalize the plans and begin work, you should be aware of mechanics’ liens and the danger they pose to enjoying that new space.
Mechanics’ liens allow workers, both contractors and subcontractors, to file a lien against the property claiming payment for labor and materials. Mechanics’ liens operate in such a way as to allow a lien to be placed against property, even though the owner may not know the worker or even have any contact with the worker.
Mechanics’ liens exist to secure payment for services, labor and material on property. They are intended to level the playing field between owners and workers. Without them, owners, who have control of the property, could refuse to pay once workers invest their time, effort and materials into a project.
To protect against these type of claims, most lenders will require a waiver of mechanics’ liens, signed by the general contractor, be filed with the court before construction begins. Recording this waiver with the court gives “record” notice to subcontractors hired by the general contractor and operates to preclude claims by subcontractors, protecing both the lender and the owner.
If a waiver is not obtained prior to construction, the workers can file a lien against the property up to six months after the work is done. Mechanics’ liens are created by filing a relatively simple form with the court. In order for a claim to be “perfected” or finalized, the claimant must follow the statutory requirements.
While waivers operate to preclude claims, contractors or subcontractors may still manage to file liens. Most contractors and subcontractor do not verify a lien waiver has been filed and courts are not obligated to verify the existence of a waiver before permitting a claim to be indexed. In these cases, it is necessary to ask the court to strike off the offending lien, a process which, unfortunately, is not quick and often requires the assistance of an attorney.
Title insurance and attorneys helps purchasers guard against mechanics’ liens in new home purchases, both by verifying the existence of claims and by requiring releases from subcontractors who did work on the property.
The rules for residential projects exceeding one million dollars and commercial projects vary. Lenders and owners in these situations need to work closely with their title insurance company and attorney to guard against mechanics’ liens in these situations.
Suzanne C. Hixenbaugh is an associate with the law firm of Saidis, Flower & Lindsay, PC in Carlisle, Pennsylvania. Ms. Hixenbaugh concentrates her practice in the areas of real estate and corporate law
