What did you do on your snow day? I woke up, got a cup of coffee, and brushed up on the changes to Pennsylvania’s Mechanics’ Lien Law in my pajamas. Anything to put off several hours of snow shoveling and to stave off the regret of not investing in a snow blower.
Anyway, back to why you’re here: mechanics’ liens. What is a mechanics’ lien? It’s a legal claim, technically a security interest, against property that has been remodeled or improved, and is typically held by subcontractors and suppliers to ensure that they get paid for the work, services or supplies that they contributed to the project.
Pennsylvania’s Mechanics’ Lien Law recently underwent some fairly significant changes. Act 142 of 2014 modified Pennsylvania’s Mechanics’ Lien Law and required the creation of a standardized online directory called the State Construction Notices Directory. For projects over a certain dollar amount, Act 142 also provides property owners the ability to limit subcontractors’ mechanics’ lien claims if they don’t comply with certain requirements.
The Directory went live as of December 29, 2016 and provides property owners, contractors and subcontractors the ability to track the start and finish of a project, view project details and download notice documents through the Directory’s website, located at https://apps.pa.gov/scnd.
Below are some frequently asked questions (and answers!) about how Act 142 may affect you as a property owner, contractor or subcontractor:
What projects are eligible for filing in the Directory?
Projects that consist of the erection and construction, or alteration and repair, of an improvement costing a minimum of one million five hundred thousand dollars ($1,500,000.00) are called “Searchable Projects” in the Act.
What must a property owner do in order to begin the process?
The Act requires the filing of a “Notice of Commencement” in the Directory prior to the commencement of labor, work or the furnishing of materials for a Searchable Project. Therefore, the new procedures set forth in the Act do not apply to projects that commenced prior to the creation of the Directory.
The property owner must also include a specific statutory notice in its contracts with contractors and subcontractors that states that failure to file a Notice of Furnishing (more on that later) will result in the loss of lien rights.
In addition, the property owner must conspicuously post a copy of the Notice of Commencement at the site of the Searchable Project and must also make reasonable efforts to ensure that the Notice of Commencement is made a part of the contract documents provided to all subcontractors who are awarded work on the Searchable Project.
By contract, the property owner may designate a contractor as its agent to file a Notice of Commencement on its behalf, however the property owner must also agree to assume responsibility for the contractor’s actions.
What information is required in a Notice of Commencement?
The following information is required in a Notice of Commencement:
- Full name, address and email address of the contractor.
- Full name and location of the Searchable Project.
- The county in which the Searchable Project is located.
- The legal description of the property upon which the improvements are being made, including the tax identification number of each parcel included in the Searchable Project.
- Full name, address and e-mail address of the Searchable Project owner of record of the property and the Searchable Project being constructed.
- If applicable, the full name, address and email address of a surety for the performance and payment bonds and the bond numbers.
- The unique identifying number that is assigned to the Notice of Commencement
What is the filing fee to file a Notice of Commencement?
The cost to file is $72 per Searchable Project.
What do subcontractors need to do in order to preserve their mechanics’ lien claims?
A subcontractor that performs work, services or provides material in furtherance of a Searchable Project must file a “Notice of Furnishing” in the Directory within 45 days after first performing the work or services at the job site or first providing materials to the job site.
The Notice of Furnishing must contain the following information:
- A general description of the labor or materials furnished.
- Full name and address of the person supplying the services or items.
- Full name and address of the person that contracted for the services or items.
- A description sufficient to identify the searchable project, based on the description in the Notice of Commencement.
If the subcontractor fails to substantially comply with the Notice of Furnishing Requirements, the subcontractor loses the right to file a lien claim.
What is the filing fee to file a Notice of Furnishing?
There is no filing fee for a Notice of Furnishing.
What happens when a Searchable Project is complete?
Within 45 days of the actual completion of work on a Searchable Project, a property owner may file a Notice of Completion. The Notice of Completion is for informational purposes only, and is sent to all subcontractors who have filed a Notice of Furnishing.
How can a subcontractor preserve its rights when they have not been paid in full for their work?
Subcontractors who have not received full payment for their work, goods or services may file a Notice of Nonpayment, which is also for informational purposes only. Failure to file a Notice of Nonpayment does not affect the rights of the subcontractor to enforce a claim for a lien, which follows the same process as before Act 142:
Formal Notice of the subcontractor’s intention to file a lien claim must be served on the owner at least 30 days before filing the lien claim, and the lien claim must be filed within 6 months of the subcontractor’s last work on the project. Notice of the filing must be served on the owner within 1 month after that, and an affidavit of service must be filed with the court within 20 days after service of the written notice on the owner.
All claimants must enforce the mechanics’ claim by filing a lawsuit within 2 years of the lien claim filing unless the owner files a praecipe compelling the claimant to file a complaint in a shorter timeframe.
What are the filing fees for a Notice of Completion and a Notice of Nonpayment?
There is no filing fee for a Notice of Completion or Notice of Nonpayment.
What other questions do you have?
Contact us, we’re here to help.