1Amending the act of August 24, 1963 (P.L.1175, No.497), entitled
2"An act to codify, amend, revise and consolidate the laws
3relating to mechanics' liens," providing for the definition
4of "costs of construction"; and further providing for right
5to lien and amount, for priority of lien and for discharge or
6reduction of lien on payment into court or entry of security.

7The General Assembly of the Commonwealth of Pennsylvania
8hereby enacts as follows:

9Section 1. Section 201 of the act of August 24, 1963
10(P.L.1175, No.497), known as the Mechanics' Lien Law of 1963, is
11amended by adding a definition to read:

12Section 201. Definitions.--The following words, terms and
13phrases when used in this act shall have the meaning ascribed to
14them in this section, except where the context clearly indicates
15a different meaning:

16* * *

17(15) "Costs of construction" means all costs, expenses and
18reimbursements pertaining to erection, construction, alteration,
19repair, mandated off-site improvements, government impact fees

1and <-soft other costs, including, but not limited to, costs,
2expenses and reimbursements in the nature of taxes, insurance,
3bonding, inspections, surveys, testing, permits, legal fees,
4architect fees, engineering fees, consulting fees, accounting
5fees, management fees, utility fees, tenant improvements,
6leasing commissions, payment of prior <-loans or filed mechanics'
7liens or mortgages, mortgage origination fees and commissions,
8finance costs, closing fees, recording fees, title insurance or
9escrow fees, or any similar or comparable costs, expenses or
10reimbursements related to an improvement, made or intended to be
11made, to the property. For purposes of this definition,
12reimbursement includes any such disbursements made to the
13borrower, any person acting for the benefit or on behalf of the
14borrower, or to an affiliate of the borrower.

15Section 2. Section 301 of the act is amended to read:

16Section 301. Right to Lien; Amount; Subcontractor.--[Every]
17(a) General Rule. Except as provided under subsection (b), 
18every improvement and the estate or title of the owner in the
19property shall be subject to a lien, to be perfected as herein
20provided, for the payment of all debts due by the owner to the
21contractor or by the contractor to any of his subcontractors for
22labor or materials furnished in the erection or construction, or
23the alteration or repair of the improvement, provided that the
24amount of the claim, other than amounts determined by
25apportionment under section 306(b) of this act, shall exceed
26five hundred dollars ($500).

27(b) Subcontractor. A subcontractor does not have the right
28to a lien with respect to an improvement to a residential
29property if:

30(1) the owner or tenant paid the full contract price to the

1contractor; and

2(2) the property is <-or is intended to be used as the
3residence of the owner or tenant.

4Section 3. Section 508(c) of the act, amended June 29, 2006
5(P.L.210, No.52), is amended to read:

6Section 508. Priority of Lien.--The lien of a claim filed
7under this act shall take effect and have priority as follows:

8* * *

9(c) Any lien obtained under this act by a contractor or
10subcontractor shall be subordinate to the following:

11(1) A purchase money mortgage as defined in 42 Pa.C.S. §
128141(1) (relating to time from which liens have priority).

13(2) An open-end mortgage as defined in 42 Pa.C.S. § 8143(f)
14(relating to open-end mortgages), [the proceeds of which are
15used to pay all or part of the cost of completing erection,
16construction, alteration or repair of the mortgaged premises
17secured by the open-end mortgage.] where at least <-twenty-five 
18percent (25%) <-sixty percent (60%) of the proceeds are intended 
19to pay or are used to pay all or part of the costs of 
20construction.

21(3) The <-refinance or modification of a purchase money
22mortgage as set forth in paragraph (1) or open-end mortgage as
23set forth in paragraph (2), notwithstanding that:

24(i) the new principal amount of the mortgage may exceed the
25stated amount of the original mortgage; <-or

26(ii) advances made under the mortgage may be used for
27purposes unrelated to the costs of construction<-; or

28(iii) all liens, including mechanics' liens, shall be paid 
29at the time of the modification.

30Section 4. Section 510 heading of the act is amended and the

1section is amended by adding a subsection to read:

2Section 510. Discharge of Lien [on Payment into Court or
3Entry of Security] or Reduction of Lien.--

4* * *

5(f) Residential Property.

6(1) A claim filed under this act with respect to an 
7improvement to a residential property subject to section 301(b) 
8shall, upon petition or motion to the court by the owner or a 
9party in interest, be discharged as a lien against the property 
10when the owner or tenant has paid the full contract price to the 
11contractor.

12(2) Where the owner or tenant has paid a sum to the 
13contractor which is less than the sum of the full contract 
14price, a claim filed under this act with respect to an 
15improvement to a residential property subject to section 301(b), 
16shall upon petition or motion to the court by the owner or a 
17party in interest cause the lien to be reduced to the amount of 
18the unpaid contract price owed by the owner or tenant to the 
19contractor.

20Section 5. The addition of the definition of "costs of
21construction" in section 201 of the act and the amendment of
22section 508(c) of the act shall apply to liens perfected on or
23after the effective date of this section, including liens
24relating to the construction of an improvement for which the
25visible commencement of work occurred prior to the effective
26date of this section, but were not perfected until on or after
27the effective date of this section.

28Section 6. This act shall take effect <-immediately in 60 
29days.