PRINTER'S NO. 385
No. 364 Session of 1991
INTRODUCED BY COHEN, BUNT, McGEEHAN, J. TAYLOR, BELARDI, ITKIN, KUKOVICH, SALOOM, McNALLY, KOSINSKI, TIGUE, HALUSKA, VEON, WOZNIAK, CAWLEY, PESCI, TRELLO, FEE, JOSEPHS, CORRIGAN, BATTISTO, STABACK, MICHLOVIC, MELIO, OLASZ, ROBINSON, GIGLIOTTI, KRUSZEWSKI, R. C. WRIGHT, LAUGHLIN AND RICHARDSON, FEBRUARY 11, 1991
REFERRED TO COMMITTEE ON LABOR RELATIONS, FEBRUARY 11, 1991
AN ACT 1 Amending the act of August 24, 1963 (P.L.1175, No.497), entitled 2 "An act to codify, amend, revise and consolidate the laws 3 relating to mechanics' liens," adding and amending 4 definitions; further providing for rights to a lien, for 5 certain cases when a lien is not allowed, for assignment of 6 claims, for waivers of liens, for owner's right to limit 7 claims, for contents of claims, for owner's right to retain 8 funds, for notice of claims, for contractor's duties, and for 9 owner's additional remedies; and requiring notice of claim by 10 a laborer. 11 The General Assembly of the Commonwealth of Pennsylvania 12 hereby enacts as follows: 13 Section 1. Section 201(5) and (6) of the act of August 24, 14 1963 (P.L.1175, No.497), known as the Mechanics' Lien Law of 15 1963, are amended and the section is amended by adding clauses 16 to read: 17 Section 201. Definitions.--The following words, terms and 18 phrases when used in this act shall have the meaning ascribed to 19 them in this section, except where the context clearly indicates 20 a different meaning:
1 * * * 2 (5) "Subcontractor" means one who, by contract with the 3 contractor, express or implied, erects, constructs, alters or 4 repairs an improvement or any part thereof; or furnishes labor, 5 skill or superintendence thereto; or supplies or hauls 6 materials, fixtures, machinery or equipment reasonably necessary 7 for and actually used therein; or any or all of the foregoing, 8 whether as superintendent, builder or materialman. The term does 9 not include an architect or engineer who contracts with a 10 contractor or subcontractor, or a person who contracts with a 11 subcontractor, other than a sub-subcontractor or a laborer, or 12 with a materialman. 13 (6) "Claimant" means a contractor [or], subcontractor, sub- 14 subcontractor or laborer who has filed or may file a claim under 15 this act for a lien against property. 16 * * * 17 (14) "Sub-subcontractor" means one who, by contract with a 18 subcontractor, express or implied, erects, constructs, alters or 19 repairs an improvement or any part thereof; supplies or hauls 20 materials, fixtures, machinery or equipment reasonably necessary 21 for and actually used therein; or any or all of the foregoing, 22 whether as superintendent, builder or materialman. The term does 23 not include an architect or engineer who contracts with a sub- 24 subcontractor or a person who contracts with a sub- 25 subcontractor, other than a laborer, or with a materialman. 26 (15) "Laborer" means a person who, acting as an employe of a 27 contractor, subcontractor or sub-subcontractor, performs labor 28 upon or bestows skills or other necessary services in connection 29 with the erection, construction, alteration or repair of an 30 improvement. 19910H0364B0385 - 2 -
1 Section 2. Sections 301 and 303 of the act are amended to 2 read: 3 Section 301. Right to Lien; Amount.--Every improvement and 4 the estate or title of the owner in the property shall be 5 subject to a lien, to be perfected as herein provided, for the 6 payment of all debts due by the owner to the contractor [or], by 7 the contractor to any of his subcontractors, by the 8 subcontractor to any of his sub-subcontractors or by an owner, 9 contractor, subcontractor or sub-subcontractor to a laborer for 10 labor or materials furnished in the erection or construction, or 11 the alteration or repair of the improvement, provided that the 12 amount of the claim, other than amounts determined by 13 apportionment under section 306(b) of this act, shall exceed 14 five hundred dollars ($500). Laborers' claims against an owner, 15 contractor, subcontractor or sub-subcontractor may be 16 consolidated, and the five hundred dollar ($500) threshold shall 17 apply to laborers' claims in the aggregate. 18 Section 303. Lien Not Allowed in Certain Cases.-- 19 [(a) Persons Other Than Contractors or Subcontractors. No 20 lien shall be allowed in favor of any person other than a 21 contractor or subcontractor, as defined herein, even though such 22 person furnishes labor or materials to an improvement.] 23 (b) Public Purpose. No lien shall be allowed for labor or 24 materials furnished for a purely public purpose. 25 (c) Conveyance Prior to Lien. If the property be conveyed in 26 good faith and for a valuable consideration prior to the filing 27 of a claim for alterations or repairs, the lien shall be wholly 28 lost. 29 (d) Leasehold Premises. No lien shall be allowed against the 30 estate of an owner in fee by reason of any consent given by such 19910H0364B0385 - 3 -
1 owner to a tenant to improve the leased premises except to the 2 extent the improvements enhance the value of the owner's estate, 3 or unless it shall appear in writing signed by such owner that 4 the erection, construction, alteration or repair was in fact for 5 the immediate use and benefit of the owner. 6 (e) Security Interests. No lien shall be allowed for that 7 portion of a debt representing the contract price of any 8 materials against which the claimant holds or has claimed a 9 security interest under the Pennsylvania Uniform Commercial Code 10 or to which he has reserved title or the right to reacquire 11 title. 12 Section 3. The act is amended by adding a section to read: 13 Section 308. Assignment of Claims.--A lien and the right to 14 recover therefor are assignable. Notice, in writing, of the 15 assignment may be served on the owner of the property affected. 16 Payments made by the owner before service of the notice shall 17 discharge the debt up to the amount paid. The assignee may file 18 claims for the liens and may bring an action to enforce them. 19 Section 4. Sections 401, 402 and 405 of the act are amended 20 to read: 21 Section 401. Waiver of Lien by Claimant.--A contractor [or], 22 subcontractor, sub-subcontractor or laborer may waive his right 23 to file a claim by a written instrument signed by him or by any 24 conduct which operates equitably to estop [such contractor or 25 subcontractor] him from filing a claim. A waiver by a laborer 26 who is represented by a labor union is not binding unless it is 27 also agreed to, in writing, by his union. 28 Section 402. Waiver by Contractor; Effect on Subcontractor 29 or Laborer.-- 30 (a) Proof of Notice of Waiver. A written contract between 19910H0364B0385 - 4 -
1 the owner and contractor, or a separate written instrument 2 signed by the contractor, which provides that no claim shall be 3 filed by anyone, shall be binding[; but the] on each party other 4 than a laborer, so long as payments are made from the owner to 5 the contractor, from the contractor to the subcontractor, from 6 the subcontractor to the sub-subcontractor in accordance with 7 the contract. A payment withheld in violation of the contract 8 renders the waiver null and void with respect to an adversely 9 affected party to the extent of the withheld payment. The only 10 admissible evidence [thereof] of a waiver, as against a 11 subcontractor or sub-subcontractor, shall be proof of actual 12 notice thereof to him before any labor or materials were 13 furnished by him; or proof that such contract or separate 14 written instrument was filed in the office of the prothonotary 15 prior to the commencement of the work upon the ground or within 16 ten (10) days after the execution of the principal contract or 17 not less than ten (10) days prior to the contract with the 18 claimant subcontractor, indexed in the name of the contractor as 19 defendant and the owner as plaintiff and also in the name of the 20 contractor as plaintiff and the owner as defendant. The only 21 admissible evidence that such a provision has, notwithstanding 22 its filing, been waived in favor of any subcontractor or sub- 23 subcontractor, shall be a written agreement to that effect 24 signed by all those who, under the contract, have an adverse 25 interest to the subcontractor's or sub-subcontractor's 26 allegation. 27 (b) Proof of Notice to Laborer. A waiver such as described 28 in subsection (a) shall be binding upon a laborer; but the only 29 admissible evidence thereof, as against a laborer, shall be 30 proof of actual notice thereof to him before he performs any 19910H0364B0385 - 5 -
1 labor. 2 Section 405. Right of Owner to Limit Claims to Unpaid 3 Balance of Contract Price.-- 4 (a) Excessive Claims. Where there has been no waiver of 5 liens and the claims of subcontractors, sub-subcontractors or 6 laborers exceed in the aggregate the unpaid balance of the 7 contract price specified in the contract between the owner and 8 the contractor, then if the subcontractor, sub-subcontractor or 9 laborer has actual notice of the total amount of said contract 10 price and of its provisions for the time or times for payment 11 thereof before any labor or materials were furnished by him, or 12 if such contract or the pertinent provisions thereof were filed 13 in the office of the prothonotary in the time and manner 14 provided in section 402, each claim shall, upon application of 15 the owner, be limited to its pro-rata share of the contract 16 price remaining unpaid, or which should have remained unpaid, 17 whichever is greatest in amount at the time notice of intention 18 to file a claim was first given to the owner, such notice 19 inuring to the benefit of all claimants. 20 (b) Claims of Laborers. Claims of laborers shall be limited 21 to the contract price remaining unpaid, or which should have 22 remained unpaid, whichever is greatest in amount at the time 23 notice of intention to file a claim was first given to the 24 owner, on the contract between the owner and contractor for 25 laborers employed by the contractor or on the contract between 26 the contractor and subcontractor for laborers employed by the 27 subcontractor. 28 Section 5. The act is amended by adding sections to read: 29 Section 501.1. Notice by Sub-Subcontractor as Condition 30 Precedent.-- 19910H0364B0385 - 6 -
1 (a) Preliminary Notice in the Case of Alteration and Repair. 2 No claim by a sub-subcontractor for alterations or repairs shall 3 be valid unless, in addition to the formal notice required by 4 subsection (b), he shall have given to the owner, on or before 5 the date of completion of his work, a written preliminary notice 6 of his intention to file a claim of the amount due or to become 7 due is not paid. The notice need set forth only the name of the 8 sub-subcontractor, the subcontractor, the contractor, a general 9 description of the property against which the claim is to be 10 filed, the amount then due or to become due and a statement of 11 intention to file a claim therefor. 12 (b) Formal Notice in All Cases by Sub-Subcontractor. No 13 claim by a sub-subcontractor, whether for erection or 14 construction or for alterations or repairs, shall be valid 15 unless, at least thirty (30) days before the same is filed, he 16 shall have given to the owner a formal written notice of his 17 intention to file a claim, except that such notice is not 18 required if the claim is filed under a rule to do so as provided 19 by section 506. 20 (c) Contents of Formal Notice. The formal notice shall 21 contain: 22 (1) The name of the party claimant. 23 (2) The name of the person with whom he contracted. 24 (3) The amount claimed to be due. 25 (4) The general nature and character of the labor or 26 materials furnished. 27 (5) The date of completion of the work for which his claim 28 is made. 29 (6) A brief description sufficient to identify the property 30 claimed to be subject to the lien. 19910H0364B0385 - 7 -
1 (7) The date when preliminary notice of intention to file a 2 claim was given, if preliminary notice is required under 3 subsection (a), along with a copy of the preliminary notice. 4 (d) Optional Form of Formal Notice. The notice required 5 under subsection (c) may consist of a copy of the claim intended 6 to be filed and a statement that the claimant intends to file 7 the original claim on a date specified. 8 (e) Service of Notice. A notice required under this section 9 may be served by mail on the owner or his agent, by an adult in 10 the same manner as a writ of summons in assumpsit, or by posting 11 upon a conspicuous public part of the improvement. 12 Section 501.2. Notice by Laborer as Condition Precedent. 13 (a) Formal Notice in All Cases by Laborer. No claim by a 14 laborer shall be valid unless, at least thirty (30) days before 15 the same is filed, he shall have given to the owner a formal 16 written notice of his intention to file a claim, except that 17 such notice shall not be required where the claim is filed 18 pursuant to a rule to do so as provided by section 506. 19 (b) Contents of Formal Notice. The formal notice shall 20 state: 21 (1) The name of the party claimant. 22 (2) The name of the contractor, subcontractor or sub- 23 subcontractor by whom he was employed. 24 (3) The amount claimed to be due. 25 (4) The general nature and character of the labor he 26 performed. 27 (5) The date of completion of the work for which his claim 28 is made. 29 (6) A brief description sufficient to identify the property 30 claimed to be subject to the lien. 19910H0364B0385 - 8 -
1 (c) Service of Notice. The notices provided by this section 2 may be served by first class, registered or certified mail on 3 the owner or his agent or by an adult in the same manner as a 4 writ of summons in assumpsit, or, if service cannot be so made, 5 then by posting upon a conspicuous public part of the 6 improvement. 7 Section 6. Sections 503, 506, 601, 602, 603 and 604 of the 8 act are amended to read: 9 Section 503. Contents of Claim.--The claim shall state: 10 (1) the name of the party claimant, and whether he files as 11 contractor [or], subcontractor or sub-subcontractor; 12 (2) the name and address of the owner or reputed owner; 13 (3) the date of completion of the claimant's work; 14 (4) if filed by a subcontractor, the name of the person with 15 whom he contracted, and the dates on which preliminary notice, 16 if required, and of formal notice of intention to file a claim 17 was given; 18 (5) if filed by a contractor under a contract or contracts 19 for an agreed sum, an identification of the contract and a 20 general statement of the kind and character of the labor or 21 materials furnished; 22 (6) in all other cases than that set forth in clause (5) of 23 this section, a detailed statement of the kind and character of 24 the labor or materials furnished, or both, and the prices 25 charged for each thereof; 26 (7) the amount or sum claimed to be due; [and] 27 (8) such description of the improvement and of the property 28 claimed to be subject to the lien as may be reasonably necessary 29 to identify them[.]; 30 (9) if filed by a sub-subcontractor, the name of the 19910H0364B0385 - 9 -
1 subcontractor by whom he was employed and the date on which 2 preliminary notice, if required, and formal notice of intention 3 to file a claim were given; and 4 (10) if filed by a laborer, the name of the contractor, 5 subcontractor or sub-subcontractor by whom he was employed and 6 the date on which formal notice of intention to file a claim was 7 given. 8 Section 506. Rule to File Claim.-- 9 (a) Entry of Rule; Effect. At any time after the completion 10 of the work by a subcontractor or by a sub-subcontractor, any 11 owner or contractor may file a rule or rules, as of course, in 12 the court in which said claim may be filed requiring the party 13 named therein to file his claim within thirty (30) days after 14 notice of said rule or be forever barred from so doing. The rule 15 shall be entered by the prothonotary upon the judgment index and 16 in the mechanics' lien docket. Failure to file a claim within 17 the time specified shall operate to wholly defeat the right to 18 do so. If a claim be filed, it shall be entered as of the court, 19 term and number of the rule to file the same. 20 (b) Effect of Claim Filed by Subcontractor or by Sub- 21 Subcontractor. Where a claim is filed by a subcontractor or by a 22 sub-subcontractor in response to such rule, the owner may give 23 written notice thereof to the contractor in the manner set forth 24 by section 602 of this act, and upon the giving of such notice 25 the owner may avail himself of the remedies provided by sections 26 601 and 604 of this act and the contractor shall be subject to 27 the duties set forth by section 603 of this act. 28 Section 601. Owner's Right to Retain Funds of Contractor.-- 29 An owner who has been served with a notice of intention to file 30 or a notice of the filing of a claim by a subcontractor, sub- 19910H0364B0385 - 10 -
1 subcontractor or a laborer may retain out of any moneys due or 2 to become due to the contractor named therein, a sum sufficient 3 to protect the owner from loss until such time as the claim is 4 finally settled, released, defeated or discharged. 5 Section 602. Notice to Contractor of Claim.-- 6 (a) An owner served with a notice as provided by section 601 7 may, and if he has retained any funds due the contractor shall, 8 give written notice thereof to the contractor named. 9 (b) The notice shall state: 10 (1) the name of the subcontractor, sub-subcontractor or 11 laborer, the amount of the claim and the amount withheld, if 12 any, by the owner; 13 (2) that unless the contractor within thirty (30) days from 14 service of the notice settles, undertakes to defend, or secures 15 against the claim as provided by section 603, the owner may 16 avail himself of the remedies provided by section 604. 17 (c) The notice may be given by the owner or his agent to the 18 contractor personally, or to the contractor's manager, executive 19 or principal officer or other agent, or if none of these persons 20 can be found, by sending a copy of the notice by first class, 21 registered or certified mail to the contractor at his last known 22 office address. 23 Section 603. Contractor's Duties on Receipt of Notice.--Upon 24 service of the notice provided by section 602, the contractor 25 shall within thirty (30) days from the contractor's receipt of 26 notice: 27 (1) settle or discharge the claim of the subcontractor, sub- 28 subcontractor or laborer and furnish to the owner a written copy 29 of a waiver, release or satisfaction thereof, signed by the 30 claimant; or 19910H0364B0385 - 11 -
1 (2) agree in writing to undertake to defend against said 2 claim, and if the owner has not retained sufficient funds to 3 protect him against loss, furnish the owner additional approved 4 security to protect the owner from loss in the event the defense 5 should be abandoned by the contractor or should not prevail; or 6 (3) furnish to the owner approved security in an amount 7 sufficient to protect the owner from loss on account of said 8 claim. 9 Section 604. Additional Remedies of Owner.--Should the 10 contractor fail to settle, discharge or defend or secure against 11 the claim, as provided by this act, the owner may: 12 (1) pay the claim of the subcontractor, sub-subcontractor or 13 laborer, upon which payment the owner shall be subrogated to the 14 rights of the subcontractor against the contractor; to the 15 rights of the sub-subcontractor against the contractor or 16 subcontractor, as the case may be; or to the rights of the 17 laborer against the contractor, subcontractor or sub- 18 subcontractor, as the case may be, together with any instrument 19 or other collateral security held by the subcontractor, sub- 20 subcontractor or laborer for the payment thereof; or 21 (2) undertake a defense against said claim in which case the 22 contractor shall be liable to the owner for all costs, expenses 23 and charges incurred in such defense, including reasonable 24 attorneys' fees, whether said defense be successful or not, but 25 the undertaking of such defense shall not affect the right of 26 the owner to retain funds of the contractor under section 601 27 until the subcontractor's, sub-subcontractor's or laborer's 28 claim is finally defeated or discharged. 29 Section 7. This act shall take effect in 60 days. A14L49JAM/19910H0364B0385 - 12 -