Imagine signing all of the proper paperwork to finance and purchase a newly constructed dream home only to find out down the road that a mechanics’ lien has been placed on your investment without you knowing. Or imagine your house being damaged by a tornado that rolled through town and in an effort to fix your property, a mechanics’ lien has been placed on your home. These are some examples of why two consumer protection bills sitting before the Pennsylvania Legislature need to become law.
In 2009, a number of homeowners in Royersford, Pennsylvania, who purchased property, found themselves faced with mechanics’ liens against their newly constructed homes when the homebuilder subsequently declared bankruptcy. Although the homeowners had already purchased their properties, subcontractors, who were not paid by the builder for work performed, filed liens against these homes.
To remove the liens, these homeowners were faced with the prospect of having to pay the subcontractors for services that were already included in the purchase price of the property, but were not paid by the homebuilder or general contractor, as is customary.
You may also recall the tornado and hail that hit Westmoreland County in March 2011. By January of this year, 17 Westmoreland County residents found that they had mechanics’ liens placed against their properties when the roofing company they hired to repair the damages from the storm failed to pay the material supplier for shingles and other materials used on their homes. The only way for these homeowners to be alleviated of the liens is to pay the supplier for these items while the contractor walked away with additional profits on the homeowner’s tab.
The repercussions don’t stop there. A mechanics lien, if unpaid, can impact the ability of a homeowner to sell their property, refinance their home, and obtain other types of loans like home equity or service or repair items covered under a home warranty.
The legal actions that subcontractors and suppliers are pursuing against property owners are typical procedures in Pennsylvania. In fact, state law allows subcontractors to file mechanics’ liens on properties if they are not paid for their work by a general contractor. However, as examples of double payments by the consumer increases, it has been brought to the Legislature’s attention that reform needs to take place to better protect the unfairly charged homeowners.
There are two bills before the Pennsylvania General Assembly that would better defend a homeowner of a newly constricted house or for those seeking to remodel from mechanics’ liens. House Bill 1602 (HB 1602) and Senate Bill 1495 (SB 1495) would each eliminate the ability of subcontractors, suppliers and others to file liens on owner-occupied residences when the monetary obligations have been paid in full. In those cases, a subcontractor could sue only the contractor.
In addition, a homeowner doesn’t necessarily always know who is on the job, thus when he or she pays the bill, unpaid services or supplies resulting in a mechanics’ lien being filed on their home is a complete surprise to the property owner. There is a provision under these bills where a property owner would be required to file a notice when work starts, which would mandate all subcontractors and suppliers to provide owners with notice of the work they are performing or the materials they are providing. This provision will also help the subcontractor and suppliers receive payment for these services. Furthermore, HB 1602 and SB 1495 have language that protects homeowners from mechanics’ liens once closing has occurred on newly constructed property.
Efforts to make changes to the mechanics’ lien law has been proposed in prior years, however, as these victims have had to experience, the proposed legislation was never signed into law. HB 1602 passed the House of Representatives on March 28, by a vote of 190-6. The bill is currently sitting in the Senate Labor and Industry Committee. The companion bill, SB 1495, passed the Senate Labor and Industry Committee just last week unanimously.
The Pennsylvania Association of Realtors has been a strong supporter of this measure. Being I have a real estate background myself, I found it important to be a co sponsor of SB 1495 and I hope to see one of these bills signed into law before the end of the year.
Homeowners should not be held responsible when a contractor they hire and pay to do work fails to pay their subcontractors and suppliers. Subcontractors have every right to collect money owed to them for work they performed, but a subcontractor or supplier should be going after the contractor who cheated them of the funds, not the innocent consumer.
Senator Wayne D. Fontana
42nd Senatorial District