PA Liens Have Additional Description of Labor Requirements Under Oral Contracts

The devil is in the details when it comes to mechanics liens. Claimants need to be sure that not only is the information provided as accurate as possible, but also that enough details are provided to support the claim. In Pennsylvania, all claimants are required to provide a description of labor and/or materials furnished to the project. However, there’s an additional hurdle for those under oral contracts, where the description must be detailed and include a cost breakdown as well. This is easier said than done: A recent PA Appellate Court opinion dismissed a contractor’s failure to provide adequate details in their complaint—twice.

PA mechanics liens: description of labor or materials requirement

Although each state has their own unique requirements regarding the information that should be included in a mechanics lien claim, one of the constants is a description of labor and/or materials. This helps identify exactly what the claimant provided to the project that forms the basis of their claim. Pennsylvania is no different. However, PA lien law adds an additional requirement for those who provided labor and/or materials to a construction project under an oral contract.

The statute that governs the mechanics lien claim itself, 49 Pa. Stat. §1503, requires the following (emphasis added):

(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;

(6) in all other cases than that set forth in clause (5) of this section, a detailed statement of the kind and character of the labor or materials furnished, or both, and the prices charged for each thereof;

Thus, if the contract is oral (or otherwise without an agreed upon sum), the lien claim must include a more detailed statement of the labor/materials furnished and the prices charged for each. This requires a fair amount of organization and record keeping, which a recent PA contractor learned the hard way.

Oral contracts require more details for PA lien claimants

The case in question is Robert F. Baker t/d/b/a Baker Construction v. Bernard J. Liptak & Pranay G. Amin.

Project Snapshot:

• Owner(s): Bernard J. Liptak & Pranay G. Amin (Owners)
  • Represented by: Deanna Lyn Istik
• Contractor: Robert F. Baker t/d/b/a Baker Construction (Baker)
  • Represented by: Gary Nixon Altman

The Owners had purchased property known as the Ice Mine, a hockey and skating rink located in Fayette County, Pennsylvania. In August of 2016, Owners had entered into an oral contract with Baker to perform repair and remodel work as well as build out a restaurant. Baker had performed work on the project for approximately 9 months, handling the modifications and changes requested. However, Owners eventually stopped making payments, which prompted Baker to cease work on the project.

Baker subsequently filed a mechanics lien against the property claiming they were owed over $60K—plus interest—for labor and materials, and an additional $8K for the un-billed kitchen system. The complaint included three exhibits:

• Exhibits 1 and 2 were architectural drawings of the renovated portions of the property, and
• Exhibit 3 was an invoice for $60,304.00, broken down further into:
  • Previous unpaid balance of $49,344
  • Rental fee for electric man lift of $3,360
  • Rental fee for propane forklift of $7,600

In response, Owners challenged the claim on the basis that Baker “failed to provide a detailed statement of the kind and character of the labor and materials furnished and the prices charged for each.” The court, however, allowed Baker an opportunity to amend their complaint to meet the statutory requirements cited above. The amended complaint included to new exhibits that amounted to over 100 pages of invoices, receipts, and cost breakdowns.

Again, Owners challenged the complaint on the same grounds, claiming that Baker only “gave a broad description of the alleged money owed and a broad description of what the money was used for.” Ultimately, the court found that the defects in the claim were substantial, and dismissed the claim. Baker appealed.

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Lien claim dismissed for lack of detailed labor/materials breakdown

On appeal, Baker argued that they had substantially complied with the detailed statement requirement. The exhibits provided (1) the names and hourly rates of the employees who worked on the project, (2) the dates and hours worked by each, (3) the land involved and the character of the renovation project, (4) a description of a previously un-billed piece of kitchen equipment, and (5) the date the last work occurred. Furthermore, Baker argued that they couldn’t tell the court exactly what labor/materials were completed but not paid for because Owners “made all payments as just round number progress payments.”

The Appellate Court was not swayed by these arguments. The Court noted that the invoices included in the amended complaint only provided vague descriptions of the work performed, and likewise, the receipts for equipment and supplies provided no explanation regarding how they related to the claim at hand. Consequently, the order to dismiss Baker’s lien claim was affirmed, stating:

“…we decline to accept the procedure utilized by Appellant, whereby his amended complaint exclusively relied on the attached exhibits in lieu of providing an actual “detailed statement” as required under Section 1503(6). Without any statement “to point the way to successful inquiry,” Appellant did not substantially comply with Section 1503(6).”

PA contractors should always have a written contract, or keep organized cost breakdowns

This was an unfortunate, and harsh outcome for Baker. Courts across the country frequently state in their opinions that “mechanics liens are in derogation of common law,” and due to the extraordinary remedy that is a mechanics lien, the rules and requirements will be strictly enforced.

As we mentioned above, claimants performing under an oral contract must keep meticulous records and receipts in order to meet the detailed description requirements in Pennsylvania. How detailed you ask? Well, this is how the court in this case put it, “If the landowner can determine what work was done, materials supplied, when it occurred, what land it affects and the approximate amount of the charge, the claim meets the statute’s requirements.”

So what have we learned from this case? (A) It’s always best practice to have a written contract when it comes to construction projects, regardless of where the project is located. This is doubly important for contractors in Pennsylvania. Although a written contract isn’t a prerequisite for lien rights in PA, it definitely eases the requirements a bit when it comes time to file. (B) If not, then be sure to keep meticulous records and cost breakdowns throughout the course of the project. A drawer full of invoices and receipts just won’t cut it.