Changes to Pennsylvania’s Mechanic’s Lien Law
Dramatic new changes to the Pennsylvania Mechanic’s Lien Law, 49 Pa.C.S.A. §101, et seq., will take effect on January 1, 2017 provided that the Department of General Services is able to go live with a new website known as the “State Construction Notices Directory.” This website is intended to streamline the manner in which notices are given on non-residential construction projects valued at $1,500,000 or more. These changes will require owners, contractors, subcontractors and material suppliers to be conversant with the new filing requirements and to include certain critical language in their construction contracts. There are sure to be growing pains with both the interpretation of the amended lien statute and use of the new website.
The website is due to be operational by December 31, 2016. It is not yet up and running; however, when it is accessible on the Department of General Services website, project owners and contractors will begin using it on searchable projects to provide four new types of notices: commencement, furnishing, completion and nonpayment. Section 501.3 allows an owner or the owner’s authorized contractor to file with the directory a Notice of Commencement in a prescribed format before any work or materials are supplied to a searchable project. Each searchable project will be assigned a unique identifying number. The Notice of Commencement must also be posted conspicuously at the job site. Any party preparing a Notice of Commencement must make reasonable effort to include the Notice in contract documents relating to the project. This will require project participants to carefully review, and in some cases, revise their standard contract documents.
If a voluntary Notice of Commencement has been filed, contractors and subcontractors must then file a Notice of Furnishing with the directory within 45 days of beginning work or supplying materials to the project. The Notice of Furnishing must contain specific language. Failure to file the Notice of Furnishing and substantially comply with the statutory requirements forfeits the right to file a lien claim.
Within 45 days after actual completion of work on a searchable project, the owner may file a Notice of Completion in the directory. The directory will theoretically transmit this notice to all subcontractors that have filed Notices of Furnishing. Then, any Claimant that has not been paid in full for work performed or materials supplied may file in the directory a Notice of Nonpayment with the owner or the party with whom it contracted “for informational purposes only.” This notice is not mandatory. To perfect a lien claim, Claimants must still comply with all other mandatory notice and procedural requirements that have long been in effect under the Mechanic’s Lien Law.
The directory must provide notification by email, fax or mailing of a filing of any notice to any party that has filed a Notice of Commencement, Notice of Furnishing or Notice of Completion. The various notice requirements shall apply to all projects commenced on or after the date on which the directory becomes operational. Keep your eyes peeled for the directory. It is not yet operational, so parties and counsel must follow the Department of General Services website to know when these requirements become effective. The amendments impose certain civil and criminal penalties on parties who fail to comply with or attempt to manipulate the new statutory requirements.
If an owner fails to register a project in the website database in the first place, the above notice provisions will not apply, and the project participants will be left to pursue and defend against mechanic’s liens in the manner to which they have become accustomed under Pennsylvania’s lien law. The amendments do not otherwise change Pennsylvania’s lien law.
So how do these amendments really change the game on private, commercial construction projects in Pennsylvania? If an owner files a Notice of Commencement, that forces Claimants to begin thinking immediately of and preserving potential lien claims far earlier in a project than they normally would (usually at a time when no real payment dispute exists and attorneys are not involved) and to file the required Notice of Furnishing so that potential lien claims are not lost. The amendments benefit Claimants in some respects. Contractors will continue to obtain bonds, but Owners must now include certain payment bond information in the Notice of Commencement that has historically been difficult for some subcontractors and material suppliers to obtain at the back end of a project. Having the information early may actually facilitate a Claimant’s payment bond claims against the surety.
For More Information
Know your lien rights. If you are involved in a commercial project commencing on or after December 31, 2016 and would like more information about these statutory changes, contact Marianne J. Gilmartin or the Stevens & Lee attorney with whom you normally consult.
This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer.