Recon News

- March 2007 -

Alert

2006 Amedments to Pennsylvania's Mechanics Lien Law
 

By Kenneth W. Lee, Esq.

On June 29, 2006, Governor Rendell signed into law Act 57 which contained the first substantive amendments to Pennsylvania's Mechanics' Lien Law in over 40 years. THE AMENDMENTS APPLY TO CONTRACTS ENTERED INTO ON OR AFTER JANUARY 1, 2007. The amendments are:

1. Section 1201(5) definitions of "Subcontractor" has expanded the class of those permitted to file mechanics' liens to include what is known in the industry as "sub-subcontractor". A "subcontractor" and "sub-subcontractor" includes any person or entity who furnished labor, material, services, equipment OR a combination of these, including a supplier or materialman to a "subcontractor";

2. "No Lien Agreements" - There are two (2) categories which are applicable:

a. Contracts Between The Owner And Contractor for less than $1,000,000.00 for "Residential Buildings". The term "Residential Building" defined under the amendments.

(i) If the Contract is less than $1,000,000.00 then a subcontractor's lien rights can only be waived if the subcontractor has signed a "No-Lien Agreement".

(ii) Regardless of the contract price for "Residential Buildings" a subcontractor may waive its mechanics' lien rights, provided the contractor has posted a payment bond.

b. Contracts for "Non-Residential Buildings" - "No-Lien Agreements" as to a Contractor or Subcontractor are INVALID, UNLAWFUL AND AGAINST PUBLIC POLICY except:

(i) the waivers of mechanics' lien rights are in exchange for payment actually received for work, services, materials or equipment provided; or

(ii) unless the contractor has posted a payment bond guaranteeing payment to "subcontractors".

3. The time in which a mechanics' lien may be filed has been expanded from four (4) to SIX (6) MONTHS; and

4. Any mechanics' lien shall be subordinate to:

a. any "purchase money mortgage" for the property as defined by statute; and

b. any "open-end mortgage" as defined by statute the proceeds of which are used to pay for all or part

Kenneth W. Lee is Co-Chair of the firm’s RECON Industry Group. For more information or questions on this topic, please contact Ken at 717-234-4121 or via e-mail at klee@tuckerlaw.com.

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REMEMBER THE 60 DAY RULE

By Kenneth W. Lee, Esq.

Previously, this Newsletter has advised contractors, and particularly subcontractors and sub-subcontractors, that waiting until a receivable is 90 days or older could jeopardize valuable rights under payment bonds or the Mechanics' Lien Act. As the 2006 construction season now rushes to a close, it is imperative that receivables are reviewed in a timely manner so that either payment bond notices, formal mechanics' lien notices or mechanics' liens are issued, served or filed within the applicable time limits. Remember a 90 day old receivable is probably 30 days too late to protect your rights. Studies have shown that if notices are issued timely your recovery increases 300%.

Kenneth W. Lee is Co-Chair of the firm’s RECON Industry Group. For more information on this topic, please contact Ken at 717-234-4121 or via e-mail at klee@tuckerlaw.com.

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