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Can subcontractor foreclose my property if they were not paid by a general manager, whom I paid as agreed

PennsylvaniaMechanics LienRight to Lien

I hired a construction manger to work on my new house and all my payments to this manager are current, as stipulated in the agreement we had signed. I just received a phone call from a lawyer that they will be filing a mechanics lien on behalf of a subcontractor. Apparently, there is a dispute between my manager and this subcontractor. Am I responsible for paying the subcontractor? Can they really foreclose my home and how can I protect myself?

2 replies

Nov 15, 2019
It's relatively common for an unpaid subcontractor to threaten to file a mechanics lien against the project property when they've gone unpaid for their work. Unfortunately, it's also common for the payment dispute to come out of nowhere and surprise a property owner. Before diving too far in, I think this resource should be valuable: I Just Received a Notice of Intent to Lien – What Should I Do Now?

Can a subcontractor file a mechanics lien in Pennsylvania?

Subcontractors in Pennsylvania are generally entitled to mechanics lien rights - regardless of whether they have a contract with the owner of the property. So, if there's a payment dispute between a project manager or general contractor and a subcontractor on the job, it's entirely possible that the subcontractor might be entitled to file a valid and enforceable mechanics lien claim. Further, note that a subcontractor may be entitled to lien even where the property owner has fully paid their GC or project manager since Pennsylvania is what's called a "full price lien" state. Of course, a mechanics lien filing doesn't mean a project manager is off the hook for making payment - even where a mechanics lien has been filed, they're still the one obligated to make payment. But, the stakes are much higher for an owner once a lien has been filed on their property - and, if the lien remains unpaid and if the lien claimant is successful in enforcing their lien claim, a property owner may end up having their home foreclosed if they do not make payment.

How to protect yourself with a mechanics lien on the horizon

It can be hard to procedurally block a lien claim before it's actually been made. Once a lien claim is filed, there will generally be a few options for defending against that claim - but, before the claim is made, there may not be a lot on the table. Still, if an owner can coordinate a resolution of the payment dispute, or if they can identify flaws in the claim, then they may be able to avoid having the lien claim filed against their property. And, many owners demand that a claimant refrain from filing a lien against the property via attorney letter when the claim would ultimately be improper. But, reminding the project manager or contractor that a subcontractor's claim is still very much their problem, too, may help to resolve the issue. If they understand they'll also be dealing with the headache, cost, and time the mechanics lien dispute will take - they'll likely want to avoid that, too.

Once a Notice of Intent to Lien has been received, it may be easier for an owner to hold their contractor accountable

Stay with me here. For one, if an owner receives a Notice of Intent to Lien from a sub-tier claimant, the owner is then entitled to withhold payment from their direct contractor. And, if an owner has withheld some amount of payment from their contractor (potentially, including any retainage amounts), then the owner is entitled to send a notice to their contractor regarding the claim, pursuant to § 1601 of Pennsylvania's mechanics lien statute. Pursuant to § 1603, upon receipt of that notice, the contractor (1) must settle or have the claim discharged; (2) defend the claim; or (3) provide a bond to the owner which the owner can use for their protection against the lien. So, in conclusion: If an owner has withheld payment from their contractor, they can procedurally rope their contractor into the mechanics lien dispute to force them to resolve, defend, or indemnify the owner from the claim.

Defending against a lien claim once it's been filed

Once a lien has been filed, the owner will generally have more options to procedurally or officially fight the lien claim. For one, having a lien claimant release their own lien claim will be the fastest way to resolve the matter. So, again, pushing to resolve the dispute - by putting pressure on the nonpaying party, by pointing out issues with the claim, or by pushing for some other resolution - will be the easiest way to resolve the matter, if possible. Obviously, things aren't always so easy. So, another option to fight the lien claim might be to bond off the lien claim. Bonding off a lien won't make the claim disappear, but it will clear the lien from the property title, and it will force the claimant to pursue a lawsuit if they want to proceed with their claim. And finally, any time a lien has been filed, an owner is entitled to challenge their lien claim through legal action. And, as mentioned above, the owner may also be able to force their contractor to pay for the prosecution of that challenge. Here's a resource that will be helpful in the event a lien claim is ultimately filed: A Mechanics Lien Was Filed on My Property – What Do I Do Now?
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Jul 25, 2020
I recently learned the answer to my question. "Due to the amendments to the PA Mechanics Lien Law as codified in 49 §§1301, the sub cannot lien the property as it is a residential property and the GC has been paid the full contract price by the homeowner."
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