(Fun drinking game, take a shot every time this guy says “property.”)
A few months ago there was a tiny uproar in the small town of Hempfield, Pennsylvania when ABC Supply filed a handful of mechanics lien claims against homeowners who were defrauded by their general contractor. In that matter the general contractor did roofing work for a bunch of homeowners in one neighborhood, ran off with the money without paying the supplier, and the supplier filed mechanic lien claims.
The homeowners claimed the liens were unfair because they had paid the general contractor. The media picked up on the story. Pouncing on that attention, the legislature and special interest groups like the Pennsylvania Association of Realtors (PAR) introduced a bill seeking to amend the state’s mechanics lien law to “put an end to these unfair liens.”
As the legislative session draws to a close and this bill stalls, the PAR is working to push the bill through.
The PAR Is Twisting Facts About Mechanics Lien Filings
When a special interest group supports a new bill its expected that they will distort the facts to build support. The PAR is doing exactly this in representing that these lien claims are “unfair.”
Take a look at how their recent press release discusses residential mechanics liens:
PAR supports this legislation because it protects homeowners from subcontractors and suppliers from unfairly filing mechanics’ liens against their homes, even though the general contractor has been paid in full.
This is a funny play on words because the whole purpose of the bill is to prevent mechanics liens from being filed when the contractor has been paid in full. Therefore, to say that the bill will prevent unfair liens “even though” the contractor has been paid in full, is suggesting that there are unfair liens being filed irrespective of whether the general contractor has received payment.
Further, if you watch the video at the top of this post, you’ll hear from the PAR chair Greg Herb that “recently we’ve seen an increase in the amount of mechanics liens being filed against properties.” I highly doubt this considering the current economy, and I highly doubt that the PAR has done an extensive investigation into this.
Why The PAR Is Wrong About Mechanics Liens
The introduction of this mechanics lien bill in Pennsylvania was sparked by the PR situation in Hempfield. Yes, the situation is unfortunate for the homeowners, but it is not because anyone abused the laws, nor is it because anyone took advantage of some set of archane or unfair laws. The supplier merely filed a lien in accordance with a law that is the most widely adopted in the United States, and a law with perhaps one of the richest history in the Untied States: the mechanics lien laws.
A few years ago I wrote an awesome blog post about the History of the Mechanics Lien.
The mechanics lien laws were originally introduced to the United States by Thomas Jefferson in the 1800s. They have been very popular in this country and have expanded to common law countries like Australia and Canada. The laws aren’t there to create unfair situations or to impose unnecessary obligations on a property owner. The laws are there to preserve our credit markets and to solve a problem in the construction industry that has a lot of financial vulnerability.
The mechanics lien laws work, and they’ve worked fairly for over 200 years. Sure, there are unfortunate situations here and there when an unsuspecting homeowner is forced to pay for a service twice. This, however, is the exception rather than the rule. Plus, the homeowner is left with remedies in this instance — To sue the general contractor, to withhold other payments to the general contractor or to better manage the general contractor’s receipt of funds from the start of the project. These remedies are not available to subs and suppliers.