PA's Mechanics Lien Law is long and complex. The purpose of this guide is to simplify its most important features, for non-lawyers.
WHO CAN FILE MECHANICS LIENS, AND WHAT THEY COVER
I. Who Can File Mechanics Liens?
A. A “Contractor”. Contractor generally means one who, by contract with the owner…erects, constructs, alters or repairs an improvement or any part thereof or furnishes labor, skill or superintendence thereto…or supplies or hauls materials, fixtures, machinery or equipment reasonably necessary for and actually used therein. The term also includes an architect or engineer who… superintends or supervises any such erection, construction, alteration or repair.
1. Traditionally, the term “labor” refers “to physical labor rather than technical and professional skill and judgment ....” Regarding architects, It is the “supervision” that is considered to entail physical labor. Stratford v. Boland, 452 A.2d 824, 825–26 (Pa. Super.1982).
2. “Owner” is defined by the MLL as “an owner in fee, a tenant for life or years or one having any other estate in or title to property.” 49 P.S. § 1201(3).
a. “Any other estate in or title to” includes “equitable” interests. An “equitable owner” would include an owner that did not own property at the time the contract to do the work was signed, but was the owner at the time the lien was filed. Stratford v. Boland 452 A.2d 824 (Pa.Super.1982).
B. A “Subcontractor”. A subcontractor means one who, by contract with the contractor, or pursuant to a contract with a subcontractor in direct privity of a contract with a contractor, does the same kind of thing (erects, constructs, alters…).
II. What Does The MLL Cover?
A. General Rule: Every improvement and the estate or title of the owner in the property shall be subject to a lien…for the payment of all debts due by the owner to the contractor or by the contractor to any of his subcontractors for labor or materials furnished in the erection or construction, or the alteration or repair of the improvement, provided that the amount of the claim, other than amounts determined by apportionment under section 306(b) of this act, shall exceed five hundred dollars ($500). 49 P.S. §1301.
B. A lien can only be a filed when there has been an “Improvement” to “Property”. Both terms are defined under the law and have been interpreted by the Courts.
1. An “Improvement” is an erection or construction where the adaptation (1) is substantial enough in its own right to constitute a new structure, or (2) creates a significant change in the use of the existing structure. 49 P.S. §1201 (Definitions); Wyatt, Inc. v. Citizens Bank of Pennsylvania, et. al, 976 A.2d 557 (Pa.Super.2009); City Lighting Products Company v. The Carnegie Institute, 816 A.2d 1196, 1199–1200 (Pa.Super.2003).
a. The terms “erection,” “construction,” “alteration,” or “repair” are defined in the statute as including demolition, removal of improvements, excavation, grading, filling, paving, and landscaping when such work is incidental to erection, construction, alteration, or repair, “whether on the property improved or upon other property, in order to supply services to the improvement.” 49 P.S. §§ 1201(10) and 1201(12)(a-c) (emphasis supplied).
b. The Mechanics' Lien Law defines the term “Improvement” as including “any building, structure or other improvement of whatsoever kin
I. Timing (Subcontractor).
A. Generally, at least thirty (30) days before a claim is filed, formal written notice must be given to the owner of the intention to file a claim.
1. Contents of Formal Notice:
a. The name of the party claimant;
b. The name of the person with whom he contracted;
c. The amount claimed to be due;
d. The general nature and character of the labor or materials furnished;
e. The date of completion of the work for which his claim is made; and
f. A brief description sufficient to identify the property claimed to be subject to the lien.
2. “To effectuate a valid lien claim, the contractor/subcontractor must be in strict compliance with the notice requirements of the Mechanics' Lien Law.” Denlinger, Inc. v. Agresta, 714 A.2d 1048, 1052-1053 (Pa.Super 1998). “However, while the notice and other requirements under the Law are to be strictly construed, Pennsylvania courts apply the doctrine of substantial compliance such that if enough appears on the face of the statement to lead to successful inquiry, the claim may go forward.” Id. at 1052-1053.
3. If information is missing, claimant may ask for leave of court to amend the lien claim.
II. Service of notice.
A. “The notice provided by this section may be served by first class, registered or certified mail on the owner or his agent or by an adult in the same manner as a writ of summons…or if service cannot be so made then by posting upon a conspicuous public part of the improvement.”
III. Notices of Commencement/Furnishing
A. Projects over $1.5 Million are “searchable projects”.
1. A “searchable project” owner may file and post a “Notice of Commencement” to restrict otherwise available lien rights.
2. A subcontractor that performs work or services or provides material in furtherance of a searchable project must file a “Notice of Furnishing” to protect lien rights.
3. The excavation for the foundation of the new structure is the accepted test of its commencement, to which mechanics' liens relate. 49 P.S. § 1508.
FILING OF CLAIM
I. A lien claim must be filed with the prothonotary within six (6) months after the completion of work (49 P.S. § 1502(a)(1)).
A. A contractor's return to the premises to address homeowners' complaints did not extend start date of six-month period for filing mechanic's lien beyond the date of the termination agreement. Neelu Enterprises, Inc. v. Agarwal, 258 A.3d 828 (Pa.Super.2012). Added or changed work may extend the date of completion for purposes of determining the timeliness of its mechanics' lien claim. Id.
B. Written notice of such filing must be served upon the owner within one (1) month after filing, giving the court, term and number and date of filing of the claim.
1. Notice must be sufficient to let owner know what claim is about. E.g., notice should identify the project, the location, the claimant, the work done, the claim amount, and dates work was performed.
II. An affidavit of service of notice, or the acceptance of service, shall be filed within twenty (20) days after service setting forth the date and manner of service.
III. Where the improvement is located in more than one county, the claim may be filed in any one or more of said counties, but shall be effective only as to the part of the property in the county in which it has been filed.
IV. Service of the notice of filing of claim shall be made by an adult in the same manner as a writ of summons in assumpsit, or if service cannot be so made then by posting upon a conspicuous public part of the improvement.
A. A writ of summons “in assumpsit” must be served in the same manner as service of process in a civil action. Basically, this means by a Sheriff, in a manner and upon persons designated by Pennsylvania Rules of Civil Procedure 400 and 402.
V. Contents of Claim (§ 1503).
A. The claim shall state:
1. The name of the party claimant, and whether he files as contractor or subcontractor;
2. The name and address of the owner or reputed owner;
3. The date of completion of the claimant's work;
4. If filed by a subcontractor, the name of the person with whom he contracted, and the dates on which notice was given;
5. If filed by a contractor under a contract or contracts for an agreed sum, an identification of the contract and a general statement of the kind and character of the labor or materials furnished;
a. “Substantial compliance” is shown to exist whenever enough appears on face of statement to point the way to successful inquiry. In re Skyline Properties, Inc., , 134 B.R. 830 (Bankr. W.D. Pa. 1992).
6. The amount or sum claimed to be due; and
7. A description of the improvement and of the property claimed to be subject to the lien.
OWNER’S AND CONTRACTOR’S RIGHTS AND OBLIGATIONS UPON RECEIPT OF NOTICE FROM SUBCONTRACTOR
I. “An owner who has been served with a notice of intention to file or a notice of the filing of a claim by a subcontractor may retain out of any moneys due or to become due to the contractor named therein, a sum sufficient to protect the owner from loss until such time as the claim is resolved.” 49 P.S. § 1601.
II. An owner served with a notice of lien, if he has retained any funds due the contractor, shall give written to the contractor. 49 P.S. § 1602.
III. Upon service of this notice from the owner, the contractor shall within thirty (30) days from the contractor's receipt of notice:
A. Settle or discharge the claim of the subcontractor and furnish to the owner a written copy of a waiver, release or satisfaction thereof, signed by the claimant; or;
B. Agree in writing to undertake to defend against said claim, and if the owner has not retained sufficient funds to protect him against loss, furnish the owner additional approved security to protect the owner from loss in the event the defense should be abandoned by the contractor or should not prevail; or
C. Furnish to the owner approved security in an amount sufficient to protect the owner from loss on account of said claim.
49 P.S. § 1603.
IV. Additional remedies of owner (49 P.S. § 1604)
A. Should the contractor fail to settle, discharge or defend or secure against the claim, as provided by this act, the owner may:
1. Pay the claim of the subcontractor and “step in shoes” of subcontractor for purposes of obtaining reimbursement from owner; or
2. Undertake a defense against said claim in which case the contractor shall be liable to the owner for all costs, expenses and charges incurred in such defense, including reasonable attorneys' fees (while also retaining any funds owed the contractor).
FOLLOWING UP ON CLAIM
I. A Complaint must be filed within two (2) years from the date of filing.
II. A verdict must be recovered or judgment entered within five (5) years from the date of filing of the claim, not counting times consumed with motions, appeals, etc.
I. General rules for Nonresidential Buildings: a waiver by a contractor of lien rights is void unless given in consideration for payment for the work, services, materials or equipment provided, and only to the extent that such payment is actually received. A waiver by a subcontractor of lien is void under the same circumstances, or unless the contractor has posted a bond guaranteeing payment for labor and materials provided by subcontractors. 49 P.S. §1401.
II. Residential Property: a contractor or subcontractor may waive his right to file a claim against residential property by a written instrument signed by him or by conduct which renders a lien inequitable.
II. 49 P.S. § 1402 pertains to effect on a subcontractor of a contractor’s waiver. A contractors aiver is binding on subcontractor if there is a written contract between the owner and a contractor, or a separate written instrument signed by the contractor, which provides that no claim shall be filed by anyone IF actual notice of the waiver is given to the subcontractor before any labor or materials were furnished by him; or if such contract or separate written instrument was filed in the office of the prothonotary prior to the commencement of the work, or within ten (10) days after the execution of the principal contract or not less than ten (10) days prior to the contract with the claimant subcontractor.
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