ABC Supply Co. is a wholesale distributor of roofing materials, meaning that they frequently supply roofing materials to roofing contractors who then install those materials on residential and commercial properties.
I came across a new story from the CBS affiliate in Pittsburgh about a group of mechanic liens they filed against residential projects in Hempfield, PA. There’s a great video of the story available on the affiliates website (unfortunately, I could not embed here): Hempfield Homeowners Deal With Mechanic’s Lien. Hat Tip to @TrinaOrlando, the reporter on the story.
This news story is a great case study to material suppliers and subcontractors as to why they should preserve and enforce their mechanic lien rights. Here’s what this news story demonstrates about the power of a mechanic’s lien:
Mechanic Liens Are Effective and Encumber Property
If you have a lien put against your house, you cannot refinance, you cannot sell your house, and you cannot obtain a new home equity unless that lien has been satisfied.” — Barbara Lotz, Homeowner. A homeowner with a lien against her property was interviewed for the story, and her quote really sums up how effective a mechanic’s lien can be. Barbara Lotz says, “if you have a lien put against your house, you cannot refinance, you cannot sell your house, and you cannot obtain a new home equity unless that lien has been satisfied.”
While this is demonstrative of a mechanic lien’s principal effects, it’s worse that Ms. Lotz reports, and that’s because if the lien remains unpaid, the home can be put on the auction block and sold to pay off the debt. That’s a very powerful payment mechanism.
Mechanic Liens Create Payment Triangles That Result In Getting You Paid
If you listen to the news story, it is clear that the group of homeowners confronted with mechanic liens had hired the same Texas roofing company to install their roof (Prime Roofing) and had paid that roofing company in full. The Texas company took the money and scuttled back to their hometown, all the richer.
While really unfortunate for these particular homeowners (who should have required lien waivers before issuing the Prime Roofing any payments), the fact that the homeowner paid Prime Roofing does not excuse their liability to ABC Roofing. When mechanic lien laws are utilized, material suppliers and subcontractors recieve ultimate payment protection. The homeowner will be required to pay a debt twice, and then be left with the burden of pursuing payment from the general contractor who didn’t properly organize payment.
This payment triangle results in getting suppliers and subcontractors paid. When the prime contractor is still around and the property owner still owes it money, the property owner will pay off the lien and withhold that money from the prime. When the prime is gone and already paid, the property owner will have to pay the lien (because they’ll lose in suit) and then file suit against the prime to get some money back.
In either event, the subcontractor or supplier is paid.
Mechanic Liens Can Get The Right Kind Of Attention
This story from the Pittsburgh CBS affiliate demonstrates that mechanic liens can get you the right kind of attention.
Two good things happened for ABC Supply Co. after filing this mechanic’s lien. First, Prime Roofing is now the subject of a negative news story, which will affect their business and put pressure on them to pay ABC Supply. Second, Prime Roofing is now evidently the subject of a government investigation for contractor fraud. Again, this will put pressure on the company to pay ABC Supply.
“We’re just doing what we do all the time. If we’re not paid, we have lien rights. I’m very sorry these homeowners paid their bills and did not have the contractor ultimately pay for their materials.” — Karl Leo, ABC Supply Chief Legal Officer. While ABC Supply is probably going to get a little discontent from the homeowners who are at the bad end of this deal, that is really an isolated problem for them. Even the news story is careful to not beat up on ABC Supply. After all, ABC Supply is in the right, not the wrong. The Pittsburgh Live Tribune did an article on this situation as well, and the ABC Supply Chief Legal Officer was quoted as saying: “We’re just doing what we do all the time. If we’re not paid, we have lien rights. I’m very sorry these homeowners paid their bills and did not have the contractor ultimately pay for their materials.”
All in all, this news story demonstrates why it’s a great idea to file a mechanic’s lien. It’s something that we’ve written about here in the past (a lot).