Discharging a Mechanics’ Lien Claim by Surety Bond or Payment of Cash into Court

Posted in Business & Corporate, Litigation

This blog is part of an ongoing series discussing the Pennsylvania Mechanics’ Lien Law. For more information on Mechanics’ Liens in Pennsylvania, click here.

A Mechanics’ Lien Claim can present problems for Owners seeking to sell or refinance a home or other real estate.  Likewise, higher-tiered Contractors and Subcontractors can encounter headaches where a Subcontractor files a Lien Claim of questionable legitimacy or for defective work, jeopardizing the Contractor’s reputation or relationship with customers. 

The Pennsylvania Mechanics’ Lien Law presents remedy to Owners and Contractors for cases in which the Mechanics’ Lien Claim is disputed, but where a time-sensitive transaction concerning the property must be completed.  The Law allows an Owner to Discharge the Lien upon either payment of cash in the amount of the Lien into the Court, or upon the acquisition of a Surety Bond in double the face amount of the Lien (or a lesser amount upon approval of the Court).   This remedy may also be available to a higher-tiered Contractor, however the Contractor must first successfully Petition the Court to intervene in the case, and then move to pay the cash into Court or substitute the Surety Bond.

It is important to note some of the legal fictions involved in Mechanics’ Liens to better understand the import of this procedure.  A Mechanics’ Lien Claim is technically an action against real property, and not against an individual or entity.  When the Court grants the “Discharge” of a Mechanics’ Lien Claim upon payment into Court or entry of a bond, this does not extinguish the Claim, but merely substitutes the cash or bond for the real property, and removes the Lien from the chain of title to the real property so that a transaction may occur without first satisfying the Lien itself by payment to the Claimant.  Even after Discharge of the Lien Claim, the Claimant may prosecute the Claim seeking the cash held by the Court or payment under the surety bond, and therefore the Owner or intervening Contractor must defend an action at law upon the Mechanics’ Lien Claim.