On the House: Mechanics' liens create difficulties

It was designed to give subcontractors a chance to recover some of the money they were owed for work done but never paid for.

Instead, Pennsylvania's mechanics' lien law is increasing the anxiety of hundreds of people who bought houses from T.H. Properties L.P., of Harleysville, in the last six to 12 months.

THP filed for Chapter 11 bankruptcy protection April 30. All work has stopped. People who didn't move into their houses before April 30 are renting, leasing the houses they sold from patient buyers, or, like Rob Eckenrod and his family, living out of suitcases in a hotel.

"It's not easy finding short-term rentals that are willing to accommodate children and pets," said Eckenrod, whose house at THP's Biltmore Estates remains incomplete.

For those who did close on their houses, the mechanic's liens mess they find themselves in is a tangled web indeed.

Since the day in mid-April Sean R. Simpson moved into his house at THP's Burbank Grove development, he has been "working nonstop" to get answers on where he and other homeowners stand in relation to the liens.

"On the day of settlement, they did not mention a thing," Simpson said of THP. "About a week after settlement, I contacted the title company asking for receipts or documentation showing that all vendors were paid for my home, and I also asked how they could provide clear and equitable title, knowing that THP was not paying their subs and vendors.

"I was told to have my lawyer contact their lawyers," he said. "We did, and as of this day, we have heard nothing."

Some 2007 revisions to the mechanics' lien law have made it much easier for subcontractors and materials suppliers to place liens against properties that have gone to settlement, to try to collect the money THP has not been able or willing to pay them.

Until recently, the typical buyer of a newly constructed house could purchase title insurance - very expensive, and most balked at paying for it - to protect them against mechanics' liens, said John F. McGowan, a Center City real estate lawyer.

That is no longer true, he said, and "the result is that these buyers are exposed to tens of thousands of dollars in claims against their homes, even though they paid full price and obtained title insurance.

"They could almost literally pay for their house twice, McGowan said, a situation he finds "absurd and outrageous."

It results, in part, from the change in the law, "but [is] mostly due to the rise in claims in the title industry," he said.

Simpson is racing the clock. He has two letters of intent to file lien claims against him from insulation companies totaling more than $4,000.

One of his neighbors already has had a lien filed against his property.

The lien problem isn't limited to Simpson, McGowan said. It can happen to anybody.

"At this point, THP has all the protection in the world," Simpson said. "I have nothing - not even a finished house."

"On the House" appears Sundays in The Inquirer. Contact Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.

Inquirer real estate writer Alan J. Heavens is the author of "Remodeling on the Money" (Kaplan Publishing). His home-improvement columns appear Fridays in Home & Design.