Buying New Construction: The Lien Risk

Buying new construction feels like the clean option. No previous owners, no decades of accumulated liens, no estates. But new builds carry one risk that resale homes largely do not.

Mechanics liens

Everyone who supplies labour or materials to improve a property — the framer, the electrician, the concrete supplier — can file a lien against it if they are not paid. Crucially, that right generally runs against the property, not against the builder personally.

So if a builder takes your money at closing and fails to pay a subcontractor, the subcontractor's claim can attach to the house you now own.

Why it is not theoretical

Both Pennsylvania and Alabama allow liens to be filed for a period after the work is completed. That means a lien can appear on the record after your closing, for work done before it. A search on closing day cannot show you a lien that has not been filed yet.

What protects you

• Lien waivers. We collect signed waivers from subcontractors confirming they have been paid. This is the primary protection and it is why builder closings involve more paperwork.
• An owner's policy with the mechanics lien exception removed. Standard commitments except mechanics liens; on a new build, removing that exception is the coverage that matters most.
• Paying the builder through escrow rather than directly.

The question to ask

Ask whether your policy will cover mechanics liens, or whether the commitment excepts them. If it excepts them, ask what it would take to remove the exception. On new construction that is the single most valuable coverage question you can ask, and most buyers never ask it.

Note: general information for Pennsylvania and Alabama property owners, not legal or tax advice. Rates, taxes, eligibility and deadlines are set by statute and by each state’s filed rate schedules and can change. Confirm the specifics with us and with a qualified professional before relying on them for a transaction.