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Stipulation Against Mechanics Liens (the Stip)


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Mary's Forum Posts: 101
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By Mary in PA on 10/25/2009


Stipulation Against Mechanics Liens (the stip).

 

I’m no lawyer, so take the following with a grain of salt. I looked into this mechanic's lien topic for my project. If you’re in the state of PA, this info may be of special interest to you.

 

I’ve seen mentioned on this site several times how OBs have gotten contractors to sign a Lien Waiver when a partial or full payment is made for work completed. I plan to do this too. But there is another document, called a Stipulation Against Liens (a Stip) which I haven’t seen discussed in the forums here (unless I missed it). I didn’t understand the difference between the Release and the Stip – or if there was any difference – or if there really was anything such as a Stip or if it had been dropped in recent changes to mechanics lien law (in PA).

 

Early on in my project I had tried to meet with a lawyer to get this info and had rather a disappointing go at it – got booted from his office.  I tried to research it a bit on-line but still couldn’t get a handle on it. So a few weeks back I got together with yet another lawyer to get the info I needed. This meeting was a LOT more professional than the previous go; but it still included the apparently obligatory speech and a Q&A session where the lawyer tried to ascertain if I was fit to take on such a project. Thirty-five minutes later, all the while with me paying the hourly rate, I guess I passed because I was then allowed to get the information I needed. Irritating to say the least – but at least I got what I needed to move forward.

 

As I understand it, in Pennsylvania owners or General Contractors on behalf of owners can file a Stipulation Against Mechanics Liens PRIOR TO THE START OF ANY CONSTRUCTION on the project.  This document is filed at the courthouse and serves as a public notice to all potentially involved in the project. It provides a very strong protection to the owner against any future filing of lien by that contractor, for the specified work. The Stip document references a contract agreement, so the owner will need the contract agreement to be part of the filing as well. I found out from the lawyer how to file the papers at the courthouse (at the Prothonatary office) for a fee of $27.50. In PA, the Stip applies to only residential construction for projects under $1M. Technically, you can also file a Stip after the start of construction, but it is much more cumbersome. And, even with the Stip, you should still consider getting a signed release with payment (I guess the belt and suspenders approach).

 

I recently accepted a proposal for a gravel driveway and went through the Stip process for the first time. After the contractor and I had verbally agreed on the price and specs, I prepared a contract agreement (used a sample from the OB site) and the Stip document that the lawyer had provided. Both needed editing. For the Stip, it references the contract agreement date, contractor info, and legal description of the property which I got from my deed document. Then I went to see the contractor to get the contract agreement and Stip signed. He was fine with the contract agreement – but was very against signing the Stip. He felt it left him no recourse if I failed to pay him for the work. Actually, I think he was wrong on this. I think if I failed to pay him for work done, he could still sue me or take me to small claims court or whatever… he just would not be able to file a lien as part of that action. But to him, maybe the lien is a BIG stick he could easily implement and without it he would not bother to pay legal fees to pursue a formal suit. I’m not really sure… but at any rate, he was very opposed to signing it. I wasn’t surprised by this and explained my point of view on the topic. I tried to couch it in terms of protecting myself without implying distrust in him per se. I said that in these bad economic times if, for example, a contractor goes under after I’ve paid him and yet he hasn’t paid his laborers or material… then as the general contractor I’m liable for those bills. I would essentially be double paying. (Here is an example from the O-B site) The contractor said he understood  my POV and agreed that was a potential risk, but felt it didn’t apply to him as he wasn’t going to go out of business and this was a small job with mostly materials he already had. In truth, I think he was more right than wrong on that point… it was on the tip of my tongue to give in and just sign the agreement and forget the Stip. But on the other hand, I really wanted to work through this whole process. I wanted to set a tone for future work with this contractor and create a standard I could point to when signing on other contractors (i.e. everyone signs the Stip, and I pay as soon as work is done, check in hand, no delays). So even though it wasn’t a big deal for this particular job, I felt I wanted to set the stage for the future.

 

The contractor said we each needed to show a little trust. And you know what? I want to trust people. Contrary to what I experience when talking to lawyers about projects and risks and such, I don’t believe everyone is out to rip you off. I believe most people want to do a good job and to enjoy a good reputation. This contractor had grown up in this small town, been in business there for over 40 yrs and now had his grown children in the business. He was well known and respected. I wanted to work this out, but I also didn’t want to give up my powerful protection of the Stip. So I asked him what would help him have enough trust in me in order for him to sign the Stip. He said that a check for the job, post dated to when we expected to finish the work would be good. I agreed and on the spot wrote the check and asked him for a date that we expected to be done, so we could finish this up. I think he was a little surprised, but since it was his suggestion and I took it without a counter -- well, we’re done. Here’s your post-dated check, now sign my Stip. In a moment the paperwork was done and the conversation seemed to end amicably enough with discussion on a few details of the job.

 

Now I know some O-Bs out there might be fainting that I wrote a check out in-full for work not yet even started (and certainly no lawyer would have ever allowed it)… but I decided it was what was needed to move forward. I don’t feel this money is at too much risk because we still have a signed agreement for the scope of work to be done for the amount on that check. The check is post-dated to the finish of the job including a pad for rain delay. And I honestly don’t think this man is interested in ripping me off. I think (but I’m certainly not sure) that he wanted some concession from me. Perhaps some assurance that I wasn’t a wacko trying to get a free driveway, or maybe just something in exchange for signing the Stip. Maybe he didn’t think I would agree to the check at all and so he wouldn’t need to sign the Stip. Who knows?

 

If all goes well I get a driveway and he cashes a check -- we’ll have both gotten what we want from this transaction. Plus I will have a personal precedent (ick, I’m using legal terms). For future dealings with contractors, the deal is; you want the work, you sign the Stip. In return, I pay as soon as work is done, check in hand that day, no delays.

 

We’re set to do the driveway next week. Time will tell and it won’t be long until I find out if my first lesson in dealing with contractors was a good one or a bad one. I’ll post on my blog when I know more.


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Rachal's Forum Posts: 79
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By Rachal in Janesville, CA on 10/30/2009


What a wonderful story.  I love to hear about people who can stand their ground without personally offending people.  I had a lot of people question my ability to pull off this project.  Not a lawyer though. 

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