When a mechanics’ lien clouds the title in a Pennsylvania home sale

The presence of a mechanics’ lien on a residential title may sink a potential sale of the house.

It is frustrating for both buyer and seller to discover in a home sale that a mechanics' lien clouds the legal title. In order to transfer title to the house free and clear of such a lien, it will have to first be removed. Failure to do so will likely stop the sale, because the buyer would not want to purchase real estate subject to an outside claim.

Because of the complexity of Pennsylvania mechanics' lien law, it is smart to consult with legal counsel as early as possible in a residential property sale to understand what legal options are available to extinguish a mechanics' lien. A real estate lawyer will know how to correctly proceed, which can be difficult for anyone without legal training given the extremely precise requirements of the law and the variety of potential resolutions to the problem.

A mechanics' lien is a way to guaranty that a contractor or a subcontractor can be paid for construction work or materials or labor furnished in connection with construction, defined for this purpose as erection, construction, alteration or repair of a building or structure or some other real estate improvement. Only claims in excess of $500 may be the subject of mechanics' liens in Pennsylvania.

The lien is filed as a public record of the claim against the property in question. If the lien holder is not paid for its work or materials provided, the holder can file a lawsuit based on the mechanic's lien seeking a judgment to force a sale of the property from which the claim would be paid from the proceeds. In Pennsylvania, the execution of the judgment by forcing a sheriff's sale of the property must occur within five years of the judgment entry.

In order for a mechanics' lien to be enforceable, specific notice, service, timing, deadline and filing procedures must have been met. A property seller's lawyer would review the history of the lien to see whether correct procedures were followed. If they were not, the lien could be legally challenged as invalid and unenforceable.

Even if the lien was validly created, the lien holder must file suit to enforce it within two years of the lien's public filing, unless the property owner has waived this deadline in writing. It follows that if more than two years have passed, it is no longer enforceable.

Legal counsel would also look at the lien holder's claim underlying the lien to determine whether the claim itself is valid. For example, was the underlying bill already paid? Were the services or materials actually provided? Does the owner dispute the bill because of deficient or substandard construction or materials?

One way for the seller to resolve an outstanding mechanics' lien on a residential title is for the parties to try to negotiate resolution of any controversy about the amount due on the lien. If necessary, the property owner can petition the court for an order discharging the mechanics' lien. Either way, after payment is received the lien holder must issue a release and a certificate of satisfaction of the lien.

This is a simplified introduction to the issues faced by a seller whose home is encumbered by a mechanics' lien and to the potential legal remedies. Legal counsel can advise a particular seller of options for resolution of such a problem.

The Philadelphia attorneys at Avallone Law Associates represent clients throughout the Philadelphia metropolitan area and nearby areas of Pennsylvania and New Jersey, in all matters related to buying or selling residential and commercial real estate and in construction litigation.