Deconstructing Mechanic’s Liens

Lauren Lambie-Hanson, Jeanne Rentezelas and Larry Santucci

No DP 20-04, Consumer Finance Institute discussion papers from Federal Reserve Bank of Philadelphia

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 (search for similar items in EconPapers)
JEL-codes: D18 K12 K25 R2 (search for similar items in EconPapers)
Pages: 18
Date: 2020-08-01
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpdp:89000

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DOI: 10.21799/frbp.dp.2020.0

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