Before entering into a contract for construction services for residential or commercial property, it is critical for the property Owner and Contractor to be aware of the implications of the Pennsylvania Mechanics' Lien Law of 1963.

The Mechanics' Lien Law enables the Contractor or Subcontractor (which includes material suppliers) to place a lien on the improved property for the payment of debts due by the Owner to the Contractor or by the Contractor to any of its Subcontractors for labor or materials furnished in the erection or construction, or the alteration or repair of the property provided when the claim exceeds $500. In other words, if the Owner does not make payment to the Contractor, or if any Contractor defaults in his payments to the Subcontractors or suppliers, a lien can be placed on the property requiring the Owner to pay the claim to release the lien. Placing a lien on the property to insure payment for labor and materials has a dramatic effect on the rights of the Owner, and serves as security for payment to contractors and suppliers. Therefore, understanding the procedural nuances of Mechanics' Lien Law is crucial to protecting the rights of the Owner, Contractor, or Subcontractor.

The Mechanics' Lien Law is comprised of three major subparts: (1) Parties with Right to Lien; (2) Filing and Perfection of Claim; and (3) Waiver of Lien.

  1. Parties With Right To Lien
  2. Due to the dramatic effect of the Mechanics' Lien on the Owner's property, only certain parties are permitted to file a Mechanics' Lien. A Contractor, who by contract with the Owner, performs construction services on the property including but not limited to furnishing labor or supervising the construction may file a claim. Also, a Subcontractor, under agreement with the Contractor to furnish labor or materials may issue a lien. No lien is allowed in favor of any person other than a Contractor or Subcontractor, as defined in the Act, even though such person furnishes labor or materials for improvement. However, while Mechanics' Liens are limited to Contractors and Subcontractors, the definitions of these terms are expansive and a determination of whether the Contractor or Subcontractor may file a lien should be made prior to entering into a contract for construction. Property leased by the owner may also be subject to a Mechanics' Lien, however, a lien shall not be allowed against an Owner unless the Owner agrees in writing that the improvement was for the immediate use and benefit of the Owner.

  3. Filing And Perfection Of Claim
  4. The Mechanics' Lien Law requires strict compliance with formal notice requirements and filing provisions. The failure to properly serve notice of the lien and comply with the requirements to perfect the lien will result in the lien being stricken by the Court. A Subcontractor must issue a written preliminary notice of intention to file a claim before the date of completion of his work, as well as the formal notice of intention to file a claim. The Contractor does not have to serve a preliminary notice, because the purpose of the notice is to advise the Owner that the Contractor has not paid the Subcontractor. Nevertheless, failure to conform to notice requirements will result in a dismissal of the claim.

    To perfect a Mechanics' Lien, the Contractor and/or Subcontractor must file a claim with the Prothonotary within four months after completion of the work and serve a written notice of such filing upon the Owner within one month after filing. The claim contains at least six subparts identifying the Claimant, the Owner, date of completion of work, detailed statement of labor, amount due to Claimant, formal description of the improvement, and detailed description of the property, among other things. A claim filing is a complex technical instrument that is strictly scrutinized by the Court and failure to properly address these aforementioned items in the claim form will result in the claim being dismissed.

  5. Waiver Of Lien
  6. A Contractor may waive his right to file a claim by executing a written "Waiver of Lien" form. This form can also provide that no claim shall be filed by anyone including the Subcontractors, but the Subcontractors are not bound to the waiver unless they have notice of the waiver. Therefore, this form should be filed in the Prothonotary's office. Regardless, the filing in the Prothonotary's office may not result in a waiver by the Subcontractor due to the complex requirements for a filing and proper indexing. Thus, it is advisable to require a Subcontractor to assent in writing to the Waiver of Lien.

Conclusion

A Mechanics' Lien is a legal claim to real property until a debt is paid for construction services provided to the Owner. Therefore, it is essential to be aware of the implications and the applicability of the Mechanics' Lien Act before beginning any construction. The effect of the Act can be addressed and tempered prior to signing a contract to protect an Owner's interest. Alternatively, the Mechanic's Lien Act can be utilized by a Contractor to enforce payment when an Owner defaults on a construction contract.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.