Mechanics’ Lien

• An In Rem lien (against real property).

• For the payment of all debts due by an owner to a contractor (or by a contractor to his subcontractors) for Labor or Materials furnished.

Who Can File?

• Contractors, subcontractors, suppliers (equipment and materials), subcontractors and suppliers of the subcontractors.

• Bricklayers v. Scott’s Development. PA Supreme Court overturned the Superior Court decision that allowed the trustees of construction union health and welfare plans to assert a claim for a mechanics’ lien.

• A Claimant must file the mechanics’ lien claim within six months after completion of work.

Types of Lien-able Activities

• “Erection and Construction” – the erection and construction of a new improvement or a substantial addition to an existing improvement or an adaption of an existing improvement to allow for a new or distinct use and effecting a material change in the interior or on the exterior of the improvement. This includes demolition, site prep, excavation, landscaping, etc.

• “Alteration and Repair” – alteration and repair which does not constitute “Erection and Construction”.

Lien Waivers

• No lien Agreements/Stipulation of Liens are only valid in Pennsylvania on Residential Property (as defined to the Mechanics’ Lien Law), or when a payment bond is in place for the prime construction contract.

• Lien waivers for valid and actual consideration only. Obtain as you pay.

Priority of Liens

• A lien for “Erection and Construction” has priority as of the date of visible commencement of work (i.e., first shovel in the ground or first material or equipment delivered on site).

• A lien for “Alteration and Repair” has priority of the date of filing of the claim (check the Prothonotary’s office).

• Exceptions to the Rule: (i) Purchase Money Mortgages (42 Pa.C.S. §8141(1) and (ii) certain Open-End Mortgages (42 Pa.C.S. §8143(f)) have priority over mechanics’ liens.

• Open-End Mortgage where at least 60% of the proceeds are intended to pay or are used to pay all or part of the cost of completing erection, construction, alteration or repair of the costs of construction. *(2014 amendment took affect September 7, 2014).

• “Costs of Construction” means all costs, expenses and reimbursements pertaining to erection, construction, alteration, repair, mandated off-site improvements, government impact fees and other construction-related costs including but not limited to soft costs such as taxes, insurance, legal fees, surveys, testing, permits, architect and engineering fees, etc.; payment of prior filed or recorded liens or mortgages; closing costs; and expenses or reimbursements related to an improvement. (49 P.S. §1201(15)) *(2014 amendment took affect September 7, 2014).