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Thursday 24 August 2017
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How the Pennsylvania Construction Notices Directory Affects Mechanic’s Liens

Jenna Bickford is an associate attorney in the Business Transactions Group of MacDonald Illig Attorneys. She represents clients across a number of practice areas including Business Transactions, Real Estate, Government Services and Public Finance, and Health Care.

The Pennsylvania State Construction Notices Directory (“Directory”) is now operating, pursuant to Act 142 of 2014, which amends the Pennsylvania Mechanic’s Lien Law of 1963 (“Lien Law”). The online Directory, available at https://apps.pa.gov/scnd since it went live on December 31, 2016, allows for the filing of four new types of lien notices. Project owners, contractors and subcontractors should all be aware of these notices, as they will affect the ability for subcontractors to file liens.

The Lien Law
The Lien Law provides for the filing of real estate liens by claimants who have provided labor or supplies to improve the real estate. Generally, mechanic’s liens can be filed by contractors, subcontractors, sub-subcontractors and suppliers. A claimant must file a lien within six months of last supplying work or materials to the property.

For residential projects, a contractor may sign a mechanic’s lien waiver, which waives the right of the contractor, subcontractors and suppliers to file a lien, if filed before work begins. In commercial projects, mechanic’s lien waivers may be filed only if the contractor posts a bond in an amount sufficient to cover the value of the labor and materials involved in the project.

Act 142 Amendments
The Directory accepts filings with respect to private residential or commercial projects in Pennsylvania that cost at least $1.5 million. The following four types of notices may be filed:

1) Notice of Commencement: This notice may be filed by the project owner prior to the commencement of work or furnishing of materials. If filed, the project owner is required to conspicuously post a copy of the notice at the project site before work commences and take reasonable measures to ensure the notice remains posted. The project owner and contractor also are required to take reasonable efforts to ensure the Notice of Commencement is made part of the contract provided to subcontractors working on the project.

2) Notice of Furnishing: If a Notice of Commencement is filed, a subcontractor must file a Notice of Furnishing in order to preserve its right to file a lien. The notice must be filed within 45 days of first performing work or providing materials at the project site. The notice must describe the labor or materials provided, the name and address of the person supplying the labor or materials, the name and address of the person contracted for the items or services, and a description of the project.

3) Notice of Completion: Within 45 days of completion of the work, the project owner may, but is not required to, file a Notice of Completion. This notice is for informational purposes only but, as a practical matter, can document the start of the six-month period for recording liens.

4) Notice of Nonpayment: Subcontractors who have not been fully paid may, but are not required to, file a Notice of Nonpayment. The filing is for informational purposes only and the failure to file does not affect the subcontractor’s rights, or obligations, under the Lien Law.

What This Means to You
Project Owners:

  • Project owners should file a Notice of Commencement as a strategy to reduce the possibility of a lien being filed, by eliminating the ability of subcontractors to file liens unless they timely file a Notice of Furnishing. Note that Act 142 makes it illegal to request or encourage a subcontractor not to file a Notice of Furnishing.
  • Project owners should revise their contracts to incorporate the Notice of Commencement and be sure to post it at the project site.
  • If a Notice of Furnishing is filed, it at least provides advance notice of the identity of a subcontractor who may, if unpaid, file a lien.

Subcontractors:

  • Subcontractors should get in the habit of searching the Directory at the start of any new project of $1.5 million or more.
  • For any project with a filed Notice of Commencement, subcontractors must file a Notice of Furnishing in order to protect the right to file a lien.
  • The Notice of Furnishing is an additional requirement — subcontractors are still required to comply with the other notice provisions set forth in the Lien Law.