On June 7, 2011, the Pennsylvania Superior Court, in what appears to be a departure from past rulings and conventional interpretations of Pennsylvania’s Mechanic’s Lien Law (Lien Law), issued a ruling that permits an excavating contractor to pursue a mechanic’s lien claim for work it performed on a project even though the two planned structures were never erected. This ruling is particularly important in today’s construction market where many projects continue to be plagued with financial problems that subject them to cancellation after work has begun.
B.N. Excavating, Inc. v. PBC Hollow-A, L.P.
B.N. Excavating performed excavation work as a subcontractor for a project in Phoenixville, Pennsylvania that included the planned construction of two office buildings. However, the project was canceled before the buildings were constructed. B.N. Excavating filed a mechanic’s lien claim (Lien) against the property after the general contractor failed to pay for the excavation work it performed. The owner of the property objected to the Lien on the basis that the Lien was barred because the planned buildings were never erected, and therefore, B.N. Excavating’s work was not related to the construction of an improvement on the property. The lower court agreed, and dismissed the Lien. However, on appeal, the Pennsylvania Superior Court overruled the lower court’s ruling, and allowed B.N. Excavating to pursue the enforcement of its Lien.
Pursuant to Section 1201(12)(a) of the Lien Law, a lien for excavation work (as well as liens for demolition work grading, paving and other site-preparation work) is only permitted when the work is “incidental” to the erection, construction, alteration or repair of an improvement on the property. Pennsylvania Courts interpreting the Lien Law have made it clear that liens for site preparation work are only permitted where the work is “incidental” to construction as opposed to when the work is performed “independent” of construction. Said another way, the site preparation work must be “connected to, and an integral part of” the construction of a structure. However, previous court decisions never indicated that lien rights existed when a planned structure was not constructed. In fact, the most relevant Pennsylvania case on the issue suggests, without specifically stating so, that a lien should not be allowed where a building or permanent structure is not erected. The Superior Court, in allowing B.N. Excavting’s lien claim, disregarded this “suggestion” and differentiated the B.N. Excavating case from prior cases by stating that the Lien was permitted because the work was performed in preparation for “planned” construction.
In light of this decision, a contractor that performs site preparation work should be confident that a properly filed lien will be allowed even where the planned structures are never erected.
Cohen Seglias attorney Ashling A. Ehrhardt contributed to this post.