The amended statute protects the rights of both owners and subcontractors if they register online in a timely manner.
Traditional mechanic’s lien laws allow a subcontractor who has not been paid to file a lien against the owner of a project. To protect their rights, owners require their prime contractors to provide them with waiver of lien rights forms signed by subcontractors in exchange for payment of their invoices.
The flaw in this system is that an owner is often uncertain whether all subcontractors have received and returned the lien waiver forms to the prime contractor (i.e., have, in fact, been paid).
Pennsylvania, in what appears to be well-conceived and equitable changes to its Mechanic’s Lien Law, now requires both owners and subcontractors to register online to preserve their respective rights. The changes went into effect on Dec. 31, 2016.
An article in Construction Law by William D. Wickford and Erin D. Fleury explains the provisions of the revised law.
The revisions apply to projects of over $1.5 million. The amendments “require subcontractors to comply with an earlier lien notice requirement by providing a ‘Notice of Furnishing’ within 45 days of beginning work or providing materials if the owner has filed a ‘Notice of Commencement’ to the online directory with respect to a ‘searchable project’ prior to commencement of work on the project.”
The subcontractor’s Notice of Furnishing must also be filed online.
The key words in the amendments are the term “searchable project.” The online directory assigns a “unique identifying number” to each registered Notice of Commencement. “An owner also has an obligation to make reasonable efforts to ensure that a copy of the Notice of Commencement remains posted on the project site.”
Subcontractors cannot claim in good faith that they were unaware of the filing of a Notice of Commencement.
“The statute also makes it illegal to ‘suggest, request, encourage or require’ a subcontractor to refrain from filing a Notice of Furnishing ‘as a condition of entering into, continuing, receiving or maintaining a contract for work or furnishing of materials on a searchable project.’”
The Notice of Commencement must be included in contracts between the subcontractor, and the prime contractor, or owner, along with a “statutory warning informing the subcontractor that its failure to file a Notice of Furnishing could result in a forfeiture of its lien rights.”
The amended Pennsylvania law protects the rights of both the owner and the subcontractor if they take affirmative action to register online.
Pennsylvania’s New “State Construction Notices Directory” and the Implementation of Significant Changes to Pennsylvania’s Mechanic’s Lien Law, William D. Wickford and Erin D. Fleury, Construction Law, Feb. 27, 2017.