PRINTER'S NO. 4660
No. 2959 Session of 2006
INTRODUCED BY LEH, SEPTEMBER 27, 2006
REFERRED TO COMMITTEE ON LABOR RELATIONS, SEPTEMBER 27, 2006
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," further providing for
4 definitions, for right of owner to limit claims to unpaid
5 balance of contract price and for formal notice by
6 subcontractor as condition precedent.
7 The General Assembly of the Commonwealth of Pennsylvania
8 hereby enacts as follows:
9 Section 1. Sections 201, 405 and 501 of the act of August
10 24, 1963 (P.L.1175, No.497), known as the Mechanics' Lien Law of
11 1963, amended June 29, 2006 (P.L.210, No.52), are amended to
12 read:
13 Section 201. Definitions.--The following words, terms and
14 phrases when used in this act shall have the meaning ascribed to
15 them in this section, except where the context clearly indicates
16 a different meaning:
17 (1) "Improvement" includes any building, structure or other
18 improvement of whatsoever kind or character erected or
19 constructed on land, together with the fixtures and other
20 personal property used in fitting up and equipping the same for
1 the purpose for which it is intended.
2 (2) "Property" means the improvement, the land covered
3 thereby and the lot or curtilage appurtenant thereto belonging
4 to the same legal or equitable owner reasonably needed for the
5 general purposes thereof and forming a part of a single business
6 or residential plant.
7 (3) "Owner" means an owner in fee, a tenant for life or
8 years or one having any other estate in or title to property.
9 (3.1) "Contract" means a written agreement, or a written
10 amendment to a written agreement, evidencing the respective
11 responsibilities of the contracting parties that is signed by
12 each of the parties to the agreement. In the case of a supplier,
13 the term includes a delivery or order slip signed by the owner,
14 contractor or subcontractor, or an authorized agent of any of
15 them. The term includes a written agreement between a labor
16 benefit fund and a contractor or a subcontractor. The term does
17 not include an agreement predominantly intended to reduce the
18 credit risk of a party, including a joint check arrangement,
19 payment guarantee or similar credit agreement.
20 (4) "Contractor" means [one who, by contract with the owner,
21 express or implied, erects, constructs, alters or repairs an
22 improvement or any part thereof or furnishes labor, skill or
23 superintendence thereto; or supplies or hauls materials,
24 fixtures, machinery or equipment reasonably necessary for and
25 actually used therein; or any or all of the foregoing, whether
26 as superintendent, builder or materialman. The term also
27 includes an architect or engineer who, by contract with the
28 owner, express or implied, in addition to the preparation of
29 drawings, specifications and contract documents also
30 superintends or supervises any such erection, construction,
20060H2959B4660 - 2 -
1 alteration or repair.] a person in direct privity of contract
2 with the owner of real property for improvements to the real
3 property. The term includes a construction manager who enters
4 into a single contract with an owner for the performance of all
5 construction work within the scope of a construction manager's
6 contract, a construction manager who enters into a subcontract,
7 a construction manager who is designated as an owner's agent
8 without entering into a subcontract, a licensed architect,
9 landscape architect, professional engineer or land surveyor who
10 is in direct privity of contract with the owner, is not a
11 salaried employee of the owner and provides services in
12 connection with a proposed or actual improvement of real
13 property.
14 (5) "Subcontractor" means [one who, by contract with the
15 contractor, or pursuant to a contract with a subcontractor in
16 direct privity of a contract with a contractor, express or
17 implied, erects, constructs, alters or repairs an improvement or
18 any part thereof; or furnishes labor, skill or superintendence
19 thereto; or supplies or hauls materials, fixtures, machinery or
20 equipment reasonably necessary for and actually used therein; or
21 any or all of the foregoing, whether as superintendent, builder
22 or materialman. The term does not include an architect or
23 engineer who contracts with a contractor or subcontractor, or a
24 person who contracts with a materialman or a person who
25 contracts with a subcontractor not in direct privity of a
26 contract with a contractor.] a person who provides work in
27 connection with the improvement of real property pursuant to a
28 contract with a contractor. The term includes a labor benefit
29 fund.
30 (5.1) "Sub-subcontractor" means a person who provides work
20060H2959B4660 - 3 -
1 in connection with the improvement of real property pursuant to
2 a contract with a subcontractor. The term includes a labor
3 benefit fund.
4 (5.2) "Supplier" means a supplier of material or equipment,
5 including rental equipment, pursuant to a contract with an
6 owner, contractor or subcontractor. The term does not include a
7 person who supplies fuel for use in motor vehicles or equipment
8 delivered to or used on a site to be improved or a seller of
9 personal property who has a lien against a motor vehicle
10 pursuant to applicable law.
11 (6) "Claimant" means a contractor or subcontractor who has
12 filed or may file a claim under this act for a lien against
13 property.
14 (7) "Materials" means building materials and supplies of all
15 kinds, and also includes fixtures, machinery and equipment
16 reasonably necessary to and incorporated into the improvement.
17 (8) "Completion of the work" means performance of the last
18 of the labor or delivery of the last of the materials required
19 by the terms of the claimant's contract or agreement, whichever
20 last occurs.
21 (9) "Labor" includes the furnishing of skill or
22 superintendence.
23 (10) "Erection and construction" means the erection and
24 construction of a new improvement or of a substantial addition
25 to an existing improvement or any adaptation of an existing
26 improvement rendering the same fit for a new or distinct use and
27 effecting a material change in the interior or exterior thereof.
28 (11) "Alteration and repair" means any alteration or repair
29 of an existing improvement which does not constitute erection or
30 construction as defined herein.
20060H2959B4660 - 4 -
1 (12) "Erection, construction, alteration or repair"
2 includes:
3 (a) Demolition, removal of improvements, excavation,
4 grading, filling, paving and landscaping, when such work is
5 incidental to the erection, construction, alteration or repair;
6 (b) Initial fitting up and equipping of the improvement with
7 fixtures, machinery and equipment suitable to the purposes for
8 which the erection, construction, alteration or repair was
9 intended; and
10 (c) Furnishing, excavating for, laying, relaying, stringing
11 and restringing rails, ties, pipes, poles and wires, whether on
12 the property improved or upon other property, in order to supply
13 services to the improvement.
14 (13) "Prothonotary" means the prothonotary of the court or
15 courts of common pleas of the county or counties in which the
16 improvement is situate.
17 (14) "Residential building" means property on which there is
18 a residential building, or which is zoned or otherwise approved
19 for residential development, planned development or agricultural
20 use, or for which a residential subdivision plan or planned
21 residential development plan has received preliminary, tentative
22 or final approval pursuant to the act of July 31, 1968 (P.L.805,
23 No.247), known as the "Pennsylvania Municipalities Planning
24 Code."
25 Section 405. [Right of Owner to Limit Claims to Unpaid
26 Balance of Contract Price.--Where the claims of subcontractors
27 exceed in the aggregate the unpaid balance of the contract price
28 specified in the contract between the owner and the contractor,
29 then if the subcontractor has actual notice of the total amount
30 of said contract price and of its provisions for the time or
20060H2959B4660 - 5 -
1 times for payment thereof before any labor or materials were
2 furnished by him, or if such contract or the pertinent
3 provisions thereof were filed in the office of the prothonotary
4 in the time and manner provided in section 402, each claim
5 shall, upon application of the owner, be limited to its pro-rata
6 share of the contract price remaining unpaid, or which should
7 have remained unpaid, whichever is greatest in amount at the
8 time notice of intention to file a claim was first given to the
9 owner, such notice inuring to the benefit of all claimants.]
10 Maximum Liens.--(a) General Rule. Subject to subsections (b)
11 and (c), the maximum amount for which an interest in real
12 property may be subject to a lien under this act for one or more
13 lien claims filed under this act shall not be greater than the
14 contract price of the contract between the owner and the
15 contractor less the amount of payments made, if any, prior to
16 receipt by the owner of a copy of the lien claim, by the owner
17 to the contractor or to another lien claimant.
18 (b) Subcontractors and Suppliers. In the case of a lien
19 claim filed by a subcontractor or supplier in direct privity of
20 contract with the contractor, the maximum amount for which an
21 interest in real property may be subject to a lien under this
22 act for one or more lien claims filed under this act shall not
23 be greater than the lesser of:
24 (1) the amount provided in subsection (a); or
25 (2) the contract price of the contract between the
26 contractor and the subcontractor or supplier, less the amount of
27 payments made, if any, prior to receipt of a copy of the lien
28 claim, by the contractor to the subcontractor or supplier or to
29 another lien claimant in direct privity of contract with the
30 subcontractor.
20060H2959B4660 - 6 -
1 (c) Sub-subcontractors and Their Suppliers. In the case of a
2 lien claim filed by a sub-subcontractor or supplier in direct
3 privity of contract with a subcontractor, the maximum amount for
4 which an interest in real property may be subject to a lien
5 under this act for one or more lien claims filed under this act
6 shall not be greater than the lesser of:
7 (1) the amount provided in subsection (a);
8 (2) the contract price of the contract between the
9 contractor and subcontractor with whom the sub-subcontractor or
10 supplier has contracted, less the amount of payment made, if
11 any, prior to receipt by the contractor of a copy of the lien
12 claim, to the subcontractor or to another lien claimant; or
13 (3) the contract price of the contract between the
14 subcontractor and the sub-subcontractor or supplier less the
15 amount of payments made, if any, by the subcontractor to the
16 sub-subcontractor or supplier.
17 (d) Effect of Breach of Contract. For purposes of
18 determining the maximum amount for which an interest in real
19 property may be subject to a lien, in the event a contractor,
20 subcontractor, sub-subcontractor or supplier is in breach under
21 the terms of a contract to which it is a party, the contract
22 price of the contract shall be deemed to have been reduced by
23 the damages incurred by the nonbreaching party to the contract
24 as a result of the breach.
25 Section 501. [Formal Notice by Subcontractor as Condition
26 Precedent.--
27 (b.1) Time Period of Formal Notice. No claim by a
28 subcontractor, whether for erection or construction or for
29 alterations or repairs, shall be valid unless, at least thirty
30 (30) days before the same is filed, he shall have given to the
20060H2959B4660 - 7 -
1 owner a formal written notice of his intention to file a claim,
2 except that such notice shall not be required where the claim is
3 filed pursuant to a rule to do so as provided by section 506.
4 (c) Contents of Formal Notice. The formal notice shall
5 state:
6 (1) the name of the party claimant;
7 (2) the name of the person with whom he contracted;
8 (3) the amount claimed to be due;
9 (4) the general nature and character of the labor or
10 materials furnished;
11 (5) the date of completion of the work for which his claim
12 is made;
13 (6) a brief description sufficient to identify the property
14 claimed to be subject to the lien.
15 (d) Service of Notice. The notice provided by this section
16 may be served by first class, registered or certified mail on
17 the owner or his agent or by an adult in the same manner as a
18 writ of summons in assumpsit, or if service cannot be so made
19 then by posting upon a conspicuous public part of the
20 improvement.] Notices of Commencement and Furnishings.--(a)
21 Notice of Commencement.
22 (1) Owner's Right to File.
23 (i) Within thirty (30) days following execution of a
24 contract with a contractor, the owner may file with the
25 prothonotary a notice of commencement that does all of the
26 following:
27 (A) Identifies with reasonable specificity the real property
28 upon which the improvement will be constructed.
29 (B) Sets forth the name of the contractor, the name of the
30 owner and the address at which the owner may be served with
20060H2959B4660 - 8 -
1 claims and notices pursuant to this act.
2 (ii) The prothonotary shall index the notice of commencement
3 on the construction lien docket in the name of the contractor as
4 plaintiff and in the name of the owner as defendant.
5 (2) Delivery of notice.
6 (i) The owner shall deliver a copy of the notice of
7 commencement to the contractor within seven (7) days after the
8 notice is filed.
9 (ii) Within seven (7) days following receipt of a written
10 request from a subcontractor, sub-subcontractor or supplier, the
11 contractor shall deliver a copy of the notice of commencement to
12 the requesting party.
13 (b) Notice of Furnishing.
14 (1) Service of Notice. If a notice of commencement has been
15 filed under subsection (a), a subcontractor, sub-subcontractor
16 or supplier who performs work or services or provides material
17 or equipment in furtherance of an improvement to real property
18 and who wishes to preserve his lien rights shall serve a notice
19 of furnishing upon the owner named in the notice of commencement
20 at the address listed in the notice of commencement within the
21 later of:
22 (i) thirty (30) days after the filing of the notice of
23 commencement; or
24 (ii) thirty (30) days after first performing work or
25 services or first providing materials or equipment in connection
26 with the improvement of the real property.
27 (2) Preservation of Rights. A notice of furnishing served
28 within the applicable period under paragraph (1) preserves the
29 subcontractor's, sub-subcontractor's or supplier's lien rights
30 for amounts owing for work and services performed and materials
20060H2959B4660 - 9 -
1 and equipment furnished from the date the work or services were
2 first performed or materials or equipment were first furnished
3 through the date of service of the notice of furnishing and
4 thereafter.
5 (3) Forfeiture of Rights. If a subcontractor, sub-
6 subcontractor or supplier fails to serve a notice of furnishing
7 within the applicable period under paragraph (1), the
8 subcontractor, sub-subcontractor or supplier shall be deemed to
9 have forfeited its right to file a lien claim.
10 (4) Absence of Notice of Commencement. If the owner fails to
11 file a notice of commencement in accordance with subsection (a),
12 no subcontractor, sub-subcontractor or supplier shall be
13 required to serve a notice of furnishing in order to preserve
14 the subcontractor's, sub-subcontractor's or supplier's lien
15 rights.
16 Section 2. This act shall take effect January 1, 2007.
I25L49AJM/20060H2959B4660 - 10 -