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Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20130&cosponId=10724
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House of Representatives
Session of 2013 - 2014 Regular Session

MEMORANDUM

Posted: January 9, 2013 03:40 PM
From: Representative Sheryl M. Delozier
To: All House members
Subject: Legislation to Protect Residential Home Owners from Mechanics’ Liens when Contractor Paid in Full.
 
Please find attached legislation that I plan to introduce in the near future to amend the PA Mechanics’ Lien Law to prohibit a subcontractor from filing a lien with respect to an improvement to a residential property if: 1) the owner or tenant has paid the contractor in full; 2) the property is, or is intended to be, the residence of the owner or tenant; and 3) the residential property is a building that consists of one or two dwelling units used, intended or designed to be built, used, rented, or leased for living purposes.

This legislation will protect unsuspecting residential homeowners who can face “hidden liens” that might be filed by subcontractors against them. There have been numerous occasions throughout the state where a homeowner fully pays a contractor/developer for the construction of a home, only to have liens subsequently filed against the property by subcontractors whom the contractor failed to pay. I believe that it is unfair to hold homeowners accountable for the contract disputes that might occur between a contractor and his subcontractors.

It is important to note that this same issue was considered and addressed as part of the proposed changes to the Mechanics’ Lien Law contained in House Bill 1602 (Killion) last session. This bill passed the House with a strong bi partisan vote of 190-6 and I believe that the residential lien issue was universally supported by House members.

Also included in this legislation is language dealing with lien priority for mortgages that was also included in House Bill 1602, which essentially clarifies the lien priority for the refinance of mortgages. In addition, new language is included which is intended to address the issue raised in a May, 2012 Superior Court decision (Commerce Bank/Harrisburg, N.A. v. Kessler) dealing with lien priority for open-ended mortgages; this court decision counteracted traditional interpretation of law in this area and puts at risk the lien priority of many open-ended mortgages. The language in my bill proposing to resolve this problem (defining term “construction costs”) is identical to what was negotiated to by the PA Bankers and other interest groups in SB 1495 (Ward) from last session (which is being reintroduced by Senator Ward).

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Introduced as HB982