AN ACT

 

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 of
6lien 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

1reimbursements pertaining to erection, construction, alteration,
2repair, mandated off-site improvements, government impact fees
3and <-soft other construction-related costs, including, but not
4limited to, costs, expenses and reimbursements in the nature of
5taxes, insurance, bonding, inspections, surveys, testing,
6permits, legal fees, architect fees, engineering fees,
7consulting fees, accounting fees, management fees, utility fees,
8tenant improvements, leasing commissions, payment of prior <-loans
9filed or recorded liens or mortgages, <-including mechanics'
10liens, municipal claims, mortgage origination fees and
11commissions, finance costs, closing fees, recording fees, title
12insurance or escrow fees, or any similar or comparable costs,
13expenses or reimbursements related to an improvement, made or
14intended to be made, to the property. For purposes of this
15definition, reimbursement includes any such disbursements made
16to the borrower, any person acting for the benefit or on behalf
17of the borrower, or to an affiliate of the borrower.

18Section 2. Section 301 of the act is amended to read:

19Section 301. Right to Lien; Amount; Subcontractor.--[Every]

20(a) General Rule. Except as provided under subsection (b), 
21every improvement and the estate or title of the owner in the
22property shall be subject to a lien, to be perfected as herein
23provided, for the payment of all debts due by the owner to the
24contractor or by the contractor to any of his subcontractors for
25labor or materials furnished in the erection or construction, or
26the alteration or repair of the improvement, provided that the
27amount of the claim, other than amounts determined by
28apportionment under section 306(b) of this act, shall exceed
29five hundred dollars ($500).

30(b) Subcontractor. A subcontractor does not have the right

1to a lien with respect to an improvement to a residential
2property if:

3(1) the owner or tenant paid the full contract price to the
4contractor;

5(2) the property is or is intended to be used as the
6residence of the owner or subsequent to occupation by the owner,
7a tenant of the owner; and

8(3) the residential property is a single townhouse or a
9building that consists of one or two dwelling units used,
10intended or designed to be built, used, rented or leased for
11living purposes. For the purposes of this paragraph, the term
12"townhouse" shall mean a single-family dwelling unit constructed
13in a group of three or more attached units in which each unit
14extends from foundation to roof with a yard or public way on at
15least two sides.

16Section 3. Section 508(c) of the act, amended June 29, 2006
17(P.L.210, No.52), is amended to read:

18Section 508. Priority of Lien.--The lien of a claim filed
19under this act shall take effect and have priority as follows:

20* * *

21(c) Any lien obtained under this act by a contractor or
22subcontractor shall be subordinate to the following:

23(1) A purchase money mortgage as defined in 42 Pa.C.S. §
248141(1) (relating to time from which liens have priority).

25(2) An open-end mortgage as defined in 42 Pa.C.S. § 8143(f)
26(relating to open-end mortgages), [the proceeds of which are
27used to pay all or part of the cost of completing erection,
28construction, alteration or repair of the mortgaged premises
29secured by the open-end mortgage.] where at least <-twenty-five 
30per cent <-sixty per cent (60%) of the proceeds are intended to
 

1pay or are used to pay all or part of the costs of construction.

<-2(3) The refinance or modification of a purchase money
3mortgage as set forth in paragraph (1) or open-end mortgage as
4set forth in paragraph (2), notwithstanding that:

5(i) the new principal amount of the mortgage may exceed the
6stated amount of the original mortgage; or

7(ii) advances made under the mortgage may be used for
8purposes unrelated to the costs of construction.

9Section 4. Section 510 heading of the act is amended and the
10section is amended by adding a subsection to read:

11Section 510. Discharge of Lien [on Payment into Court or
12Entry of Security] <-or Reduction of Lien.--

13* * *

<-14(f) Residential property. A claim filed under this act with
15respect to an improvement to a residential property subject to
16section 301(b) shall, upon petition or motion to the court by
17the owner or a party in interest, be discharged as a lien
18against the property when:

19(1) the owner or tenant has paid the full contract price to
20the contractor; or

21(2) the lien shall be reduced to the amount of the unpaid
22contract price owed by the owner or tenant to the contractor.

<-23(f) Residential Property.

24(1) A claim filed under this act with respect to an 
25improvement to a residential property subject to section 301(b) 
26shall, upon a court order issued in response to a petition or 
27motion to the court by the owner or a party in interest, be 
28discharged as a lien against the property when the owner or 
29tenant has paid the full contract price to the contractor.

30(2) Where the owner or tenant has paid a sum to the
 

1contractor which is less than the sum of the full contract 
2price, a claim filed under this act with respect to an 
3improvement to a residential property subject to section 301(b), 
4shall, upon a court order issued in response to a petition or 
5motion to the court by the owner or a party in interest, cause 
6the lien to be reduced to the amount of the unpaid contract 
7price owed by the owner or tenant to the contractor.

<-8Section 5. The amendment of sections 301 and 510 of the act
9shall apply to contracts entered into on or after the effective
10date of this section.

<-11Section 5. The addition of the definition of "costs of
12construction" in section 201 of the act and the amendment of
13section 508(c) of the act shall apply to liens perfected on or
14after the effective date of this section, including liens
15relating to the construction of an improvement for which the
16visible commencement of work occurred prior to the effective
17date of this section, but were not perfected until on or after
18the effective date of this section.

19Section 6. This act shall take effect in <-30 60 days.