When it comes to the Pennsylvania Mechanics’ Lien Law (Lien Statute), the Pennsylvania legislature was quite active in 2014. In July, Governor Corbett signed into law certain changes to the Lien Statute affecting residential lien rights and lien priority. We previously covered these changes.
On October 14, 2014, Governor Corbett signed into law additional changes to the Lien Statute in the form of House Bill 473 (HB473). HB473 had been written, voted against, rewritten, and voted against some more going all the way back to June 2013 when we first covered the proposed changes.
The new amendments to the Lien Statute provide for the creation of a State Construction Notices Directory (the Directory) that will serve as a statewide system for registering and tracking construction projects within the Commonwealth costing in excess of 1.5 million dollars. The legislation is designed to provide a centralized system for owners, contractors, subcontractors, and suppliers to notify each other that projects registered on the Directory have commenced and that furnishings of labor, materials, and equipment are being made by subcontractors.
Now, if an owner elects to register a project on the Directory (by filing a Notice of Commencement), subcontractors will be required to file a Notice of Furnishing with the Directory within 45 days after commencing work or first providing materials to the jobsite. Under the changes, subcontractors that fail to substantially comply with these requirements forfeit their lien rights. This front-end notice requirement is in addition to the existing back-end notice requirement in the Lien Statute requiring subcontractors to serve the owner with a notice of intent to lien at least 30 days before filing.
As we previously reported, one touted benefit of the law is that owners and contractors will be able to reconcile their payments with the list of subcontractors and suppliers registered on the Directory. This centralized system will help owners and contractors ensure that lower-tiered contractors and suppliers have been paid.
As a product of the new amendments, subcontractors must carefully review their contracts for notice that the project in question will be registered with the Directory. If the subcontract does not contain such a notice, subcontractors should nonetheless check the Directory out of an abundance of caution. Suppliers will also need to monitor the Directory vigilantly for Notices of Commencement so that they file timely Notices of Furnishing and protect their lien rights.
With the Directory to be operational by December 31, 2016, members of the Pennsylvania construction industry have some time to study the new changes to the Lien Statute and modify their business practices accordingly. We welcome your comments and questions on these new changes to the Lien Statute.
Jason A. Copley is the Managing Partner at Cohen Seglias and a Partner in the Construction Group. His practice is focused on representing contractors, subcontractors and owners in the areas of construction and commercial litigation.
Daniel E. Fierstein is an Associate in the Construction Group of Cohen Seglias and focuses his practice on construction law. Dan counsels clients at all tiers of the construction industry, including general contractors, subcontractors, owners, developers, and design professionals.