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Is it possible for Highway Equipment Company to file a Mechanics Lien to protect their interests? Please advise?

PennsylvaniaRight to Lien

I have an out of state customer who asked our Service Department to repair a Hydraulic Hammer. The cost of the repairs was substantial, $15,590.68. The Hammer which we repaired is still at our facility in Zelienople, PA. On 11/27/2018, I received a letter from our customer's attorney that they are liquidating their assets. I confirmed that the repaired hammer is still at our Highway Equipment Company’s Facility. I spoke with our customer's attorney and he said they have not filed for Bankruptcy protection. He is still waiting for results from the Auction Company to determine how much money there is to spread around, first to secured creditors. Is it possible for Highway Equipment Company to file a Mechanics Lien to protect their interests? Please advise?

1 reply

Jan 8, 2019

Mechanics liens are involuntary security interests in real property provided to parties who improve that property through construction, provided the rules and requirements to obtain that protection are met. That's a legal way of saying that construction participants can protect the amounts they are owed through the value of the improved property itself. Because the security is the actual property, mechanics liens are only available on private projects. If a potential claimant works on a public works project (whether local, state, or federal) generally the protection is through making a claim against the project's payment bond (or occasionally claiming a lien on funds). A payment bond provides similar security to the claimant, but instead of the claim being secured by the property itself, which may later need to be foreclosed on to satisfy the debt, the claim is secured by the payment bond which is a pile of money set aside for that purpose.

In order to qualify for mechanics lien or bond claim protection, a potential claimant generally must be involved with some construction project resulting in 'permanent' improvement to property, and must have provided labor or materials in furtherance of that project.

Parties renting equipment to construction projects generally qualify for mechanics lien or bond claim protection depending on whether the project was a private or public project, respectively. Usually, highway or other infrastructure road work is a public project.

To the extent a company was providing labor or equipment to a highway project, there is likely some protection available - provided that the prerequisite steps, like providing notice, and the associated deadlines are met. However, the repair of a piece of equipment by itself, is not specifically related to the improvement of property and would generally not qualify for mechanics lien or bond claim protection.

In situations where a piece of moveable property is concerned, a more appropriate path to becoming a secured creditor is usually through a UCC lien.

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