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

16Section 2. Section 301 of the act is amended to read:

17Section 301. Right to Lien; Amount; Subcontractor.--[Every]
18(a) General Rule. Except as provided under subsection (b), 
19every improvement and the estate or title of the owner in the
20property shall be subject to a lien, to be perfected as herein
21provided, for the payment of all debts due by the owner to the
22contractor or by the contractor to any of his subcontractors for
23labor or materials furnished in the erection or construction, or
24the alteration or repair of the improvement, provided that the
25amount of the claim, other than amounts determined by
26apportionment under section 306(b) of this act, shall exceed
27five hundred dollars ($500).

28(b) Subcontractor. A subcontractor does not have the right
29to a lien with respect to an improvement to a residential
30property if:

1(1) the owner or tenant paid the full contract price to the
2contractor; and

3(2) the property is to be used as the residence of the owner
4or tenant.

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

7Section 508. Priority of Lien.--The lien of a claim filed
8under this act shall take effect and have priority as follows:

9* * *

10(c) Any lien obtained under this act by a contractor or
11subcontractor shall be subordinate to the following:

12(1) A purchase money mortgage as defined in 42 Pa.C.S. §
138141(1) (relating to time from which liens have priority).

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

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

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

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 <-a court order issued in response to a petition or 
9motion to the court by the owner or a party in interest, be 
10discharged as a lien against the property  when the owner or 
11tenant has paid the full contract price to the contractor.

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 <-a court order issued in response to a petition or 
17motion to the court by the owner or a party in interest<-, cause 
18the lien to be reduced to the amount of the unpaid contract 
19price owed by the owner or tenant to the contractor.

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 in 60 days.