The Superior Court of Pennsylvania concluded 2023 by issuing two opinions that clarify (1) the costs recoverable under the Lien Law and (2) the requirements for perfecting service of a lien claim. Two key takeaways are:

• A lien claimant cannot recover replacement and rental costs associated with equipment and materials not incorporated into the final structure; and
• Proper service does not require the person served to be in charge of the business, so long as a sufficient connection exists between the person served and the defendant to show that service was reasonably calculated.

First, in R.A. Greig Equipment Company v. Mark Erie Hospitality, LLC, the appellate court reiterated that materials must be incorporated into a final structure in order for the associated costs to be recoverable in a lien claim. There, a subcontractor filed a claim to recover costs to replace its telescopic forklift that was damaged during the project and the rental charges it incurred while the equipment was unusable. In resolving the property owner’s preliminary objections, the trial court concluded that the replacement and rental costs did not constitute “materials” within the definition of the Lien Law and thus were not the proper subject of a lien claim. The trial court sustained the preliminary objections and dismissed the lien.

On appeal, the appellate court affirmed the trial court’s order. The appellate court explained that the Lien Law defines “materials” as “building materials and supplies of all kinds, and also includes fixtures, machinery and equipment reasonably necessary to and incorporated into the improvement.” The court noted that few cases interpret the term “materials” under the Lien Law and referred to the Supreme Court of Pennsylvania’s interpretation of a prior version of the Lien Law for insight. The Supreme Court previously concluded that lumber delivered to a project for temporary use was not the proper subject of a lien claim because the lumber was not reasonably necessary in the construction of the project and did not become part of the permanent structure.

Relying on this prior precedent, the appellate court concluded that to constitute “materials,” the fixtures, machinery and equipment must be reasonably necessary and incorporated into the improvement such that they are actually used in the building structure. Accordingly, the appellate court concluded that because the forklift and rental payments were not incorporated into the improvement, they did not constitute “materials” that could be the subject of a lien under the Lien Law.

Second, in Belfor Prop. Restoration v. Ravenwood Manor, LLC, the appellate court clarified the requirements associated with service of lien claims by addressing (1) who can constitute a “person in charge” of a corporation or similar entity to be served; and (2) the location that can constitute a “regular place of business” for the purposes of perfecting service. There, a contractor filed and enforced a lien against the owner of a vacant, partially damaged residence, to recover costs for labor and materials used to repair the property. The deputy sheriff of the county in which the project was located delivered the lien notice to the on-site security guard, who stated that he would accept notice and inform the owner. The owner moved to strike the lien, asserting that service was inadequate for two reasons (1) the property did not qualify as a regular place of business because it was vacant and partially demolished, and (2) the security guard was not in charge of the business. The trial court concluded that the security guard could not accept service because he did not qualify as a person in charge of the owner’s business and dismissed the lien claim.

On appeal, the appellate court reversed the trial court’s decision. The appellate court concluded that, despite the vacancy of the residence, the property was the owner’s place of business because the owner’s only business was to acquire and operate the residence. Further, the appellate court explained that the purpose of proper service was to satisfy due process requirements and give defendants adequate notice of litigation. Relying on the Supreme Court of Pennsylvania precedent, the appellate court reiterated that the person served need not be in charge of the business for service to be proper. Rather, a sufficient connection must exist between the person served and the defendant to show that service was reasonably calculated. Relying on this rationale, the appellate court held that the contractor had perfected service on the property owner because the security guard stated that he could accept service on the owner’s behalf.