As we noted in a recent post, state legislatures are constantly amending their lien laws. While that post discussed Oklahoma’s potential modification of the mechanic’s lien law, this post examines a proposed amendment to the Pennsylvania mechanics lien law scheme.
Proposed Amendments to Pennsylvania Mechanics Lien Law Change Notice Requirements
The proposed amendment would have a significant effect on Pennsylvania mechanics lien law. Namely, the proposed amendment imposes new notice requirements, and sets up a state notice directory, similar to that used in Utah and Iowa. Distinct from the state directory in those states, however, the Pennsylvania directory would not be the sole required destination for notices. Giving the notice to the state directory would be only one of multiple options sufficient to preserve lien rights, or notify parties of project commencement. The “Internet website known as the State Construction Notices Directory” would serve as an online directory of notices of commencement of new construction projects filed by the projects’ owners, as well as a sufficient recipient for subcontractor’s notices of furnishing.
While the notice of commencement is a voluntary filing under the proposed amendment, the filing and posting of the notice triggers additional notice requirements from subcontractors. If the owner (or the owner’s agent) chooses to file the notice of commencement, it must contain the following information:
- name, address, and e-mail address of the contractor
- name and location of the project
- legal description of the project
- name, address, and legal address of the property owner
- names of other parties “directing” the improvements
- name, address, and e-mail address of the surety, if applicable (on a public contract)
In addition to outlining the required information, the proposed amendments also describe the process for providing the notice; the notice must be filed online in the state registry, and also “conspicuously” placed at the construction site before any work commences.
The Proposed Changes to Pennsylvania Mechanics Lien Law Create New Duties for Subcontractors
The online directory of notices of commencement essentially creates two new duties for subcontractors. First, every Pennsylvania subcontractor would have an “affirmative duty to monitor” the online directory. Second, if the owner has filed a notice of commencement, then the subcontractor must file a notice of furnishing within “20 days after first performing work or services or first providing materials” to the project in order to preserve its lien rights. In other words, if an owner has filed a notice of commencement, then in order to file a valid mechanics lien later, every subcontractor must first file a notice of furnishing. If an owner has filed a notice of commencement, then in order to file a valid mechanics lien later, every subcontractor must first file a notice of furnishing.
Notice of Furnishing
The proposed notice of furnishing would have to follow an extremely specific template laid out in the proposed statutory amendment. Among other requirements, the notice of furnishing must contain “at a minimum” a description of the labor or materials furnished, the name and address of the subcontractor, and the date of first furnishing. The notice would also have to be sent by certified mail to the owner’s address or by personal delivery with signature confirmation of receipt by the owner.
If the notice of furnishing is properly filed, any amounts for work or services performed both before and after the notice of furnishing would be protected if the subcontractor must later file a mechanics lien. However, one of the last provisions of the amendment is also the most important for subcontractors:
“If a subcontractor does not substantially comply with this subsection, the subcontractor forfeits the right to file a lien claim.”
In other words, if a subcontractor does not comply with the specific requirements of the proposed amendment, [and that non-compliance was not the direct fault of the general contractor] that subcontractor is prevented from later filing a mechanics lien and getting paid for any unpaid invoices. If a contractor or higher-tier subcontractor attempts to require that a lower-tier subcontractor not file a notice of furnishing as required by the proposed amendment in order to enter into a contract, the notice requirement for that subcontractor is waived. Also, if the owner or contractor does not file a notice of commencement in both the online directory and the project site itself, the subcontractor does not have any duty to file a notice of furnishing in order to later file a valid mechanics lien.
The bill was already introduced and subsequently failed to be enacted in the last legislative session. The proposed amendment, if adopted, would clearly have a major impact on owners, general contractors, and subcontractors in Pennsylvania. However, not only would the new law not go into effect until July 1, 2015, at the earliest, the bill is still working its way through the House Committee on Labor and Industry and has not yet come up for a vote. Finally, as the bill was already introduced shot down in the last legislative session, it is not clear if – and unlikely that – the bill will make it past committee this time.