Discussion Paper

Deconstructing Mechanic’s Liens

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.

Keywords: mechanic’s liens; contractor fraud; home improvements;

JEL Classification: D18; K12; K25; R2;

https://doi.org/10.21799/frbp.dp.2020.0

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Consumer Finance Institute discussion papers

Publication Date: 2020-08-01

Number: DP 20-04