Recent Changes to the Mechanics’ Law

Contributed by Steven R. Bovan

Mechanics’ Lien

• An In Rem lien (against real property).

• For the payment of all debts due by an owner to a contractor (or by a contractor to his subcontractors) for Labor or Materials furnished.

Who Can File?

• Contractors, subcontractors, suppliers (equipment and materials), subcontractors and suppliers of the subcontractors.

Bricklayers v. Scott’s Development. PA Supreme Court overturned the Superior Court decision that allowed the trustees of construction union health and welfare plans to assert a claim for a mechanics’ lien.

• A Claimant must file the mechanics’ lien claim within six months after completion of work.

Types of Lien-able Activities

• “Erection and Construction” – the erection and construction of a new improvement or a substantial addition to an existing improvement or an adaption of an existing improvement to allow for a new or distinct use and effecting a material change in the interior or on the exterior of the improvement. This includes demolition, site prep, excavation, landscaping, etc.

• “Alteration and Repair” – alteration and repair which does not constitute “Erection and Construction”.

Lien Waivers

• No lien Agreements/Stipulation of Liens are only valid in Pennsylvania on Residential Property (as defined to the Mechanics’ Lien Law), or when a payment bond is in place for the prime construction contract.

• Lien waivers for valid and actual consideration only. Obtain as you pay.

Priority of Liens

• A lien for “Erection and Construction” has priority as of the date of visible commencement of work (i.e., first shovel in the ground or first material or equipment delivered on site).

• A lien for “Alteration and Repair” has priority of the date of filing of the claim (check the Prothonotary’s office).

• Exceptions to the Rule: (i) Purchase Money Mortgages (42 Pa.C.S. §8141(1) and (ii) certain Open-End Mortgages (42 Pa.C.S. §8143(f)) have priority over mechanics’ liens.

• Open-End Mortgage where at least 60% of the proceeds are intended to pay or are used to pay all or part of the cost of completing erection, construction, alteration or repair of the costs of construction. *(2014 amendment took affect September 7, 2014).

“Costs of Construction” means all costs, expenses and reimbursements pertaining to erection, construction, alteration, repair, mandated off-site improvements, government impact fees and other construction-related costs including but not limited to soft costs such as taxes, insurance, legal fees, surveys, testing, permits, architect and engineering fees, etc.; payment of prior filed or recorded liens or mortgages; closing costs; and expenses or reimbursements related to an improvement. (49 P.S. §1201(15)) *(2014 amendment took affect September 7, 2014).

**Disclaimer. This tip sheet is intended as a basic guide as of September 2014 and does not constitute legal advice. Please consult an attorney of your choosing.