I am proud to say this blog post has nothing to do with the coronavirus pandemic, but rather a simpler time. The year was 2017. Construction was thriving, and “social distancing” was not part of the lexicon. That year, Pennsylvania rolled out its Construction Notices Directory (Directory), an online repository where owners may register their construction projects that will cost more than $1.5 million (called a Searchable Project). As my prior post explains, when an owner registers a Searchable Project, subcontractors must file a “Notice of Furnishing” on the Directory within 45 days of starting work or furnishing materials. Subcontractors who fail to do so forfeit their mechanics’ lien rights.
Why am I reminiscing about an obscure law that has been in effect for more than three years? Unfortunately, I have a “lessons learned” story for you. A subcontractor recently reached out to our firm seeking help to recover payments owed for work it performed in Pennsylvania. Given the size and notoriety of the project, I checked the Directory, which listed it as registered but showed the subcontractor had not filed a Notice of Furnishing (gulp). That meant the subcontractor could not file a mechanics’ lien on the property to help recover payment. That was a significant blow to a subcontractor. Without lien rights, a subcontractor has less leverage to exert over the owner.
Fortunately, even without the Notice of Furnishing, the subcontractor could pursue recourse directly against the general contractor. It could still file a breach of contract action against the contractor and, if available, file a payment bond claim. And such actions often lead to a recovery of payment when the contractor does not have valid defenses and has the money to pay. Nevertheless, this anecdote offers helpful reminders to all tiers of a construction project.
To Subcontractors and Suppliers:
- You must check—at the project’s start—if your project is registered.
- If the project is registered, you must file a Notice of Furnishing within 45 days of commencing work to preserve your lien rights.
- Your customers—construction managers and general contractors alike—are required under the Lien Law to advise you whether the project has been or will be registered with the Directory.
To Owners and Construction Managers:
- The Directory is a helpful tool to identify and track the subcontractors and suppliers working on your projects.
- The Directory creates an additional obstacle to subcontractor liens.
- If you choose to register a project, you must advise your subcontractors and suppliers—in your subcontracts—that the project has been or will be registered with the Directory.
While this particular example happened in Pennsylvania, it could easily happen on projects in other states. Many states have similar, front-end filing requirements like Pennsylvania Searchable Projects—Florida, Michigan, and Ohio, to name a few. The moral of the story is this: whether you are a project owner or a supplier of nuts and bolts, think about where your project is located and what the construction laws are in that jurisdiction before you break ground.
If, like me, you find this material interesting, useful, or confusing (it is!), I encourage you to reach out and continue the conversation. Also, keep an eye out for a more in-depth review of the Directory in our firm’s next issue of Construction in Brief.