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Deconstructing Mechanic’s Liens

Author

Listed:
  • Lauren Lambie-Hanson
  • Jeanne Rentezelas
  • Larry Santucci

Abstract

In this paper, we examine a new data set composed of mechanic’s lien complaints filed in the First Judicial District of Pennsylvania (Philadelphia County). Over a 10-year period, 426 mechanic’s liens were filed against 398 single-family properties, which is less than 0.1 percent of single-family properties in Philadelphia. The lien properties in our data set tend to be more expensive, newer, and larger than non-lien properties. About 80 percent of mechanic’s liens are filed by general contractors, with the remainder pursued by a subcontractor. Notably, a 2014 change in Pennsylvania law made it less advantageous for subcontractors to file liens, and we find a concomitant decline in the share of liens filed by subcontractors. We conclude by discussing how homeowners can protect themselves from mechanic’s lien filings, including a requirement that the general contractor sign a written release of the lien at the time a payment is made.

Suggested Citation

  • Lauren Lambie-Hanson & Jeanne Rentezelas & Larry Santucci, 2020. "Deconstructing Mechanic’s Liens," Consumer Finance Institute discussion papers DP 20-04, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpdp:89000
    DOI: 10.21799/frbp.dp.2020.0
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    File URL: https://www.philadelphiafed.org/consumer-finance/consumer-credit/deconstructing-mechanics-liens
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    More about this item

    Keywords

    mechanic’s liens; contractor fraud; home improvements;
    All these keywords.

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K25 - Law and Economics - - Regulation and Business Law - - - Real Estate Law
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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