PRIOR PRINTER'S NO. 4660 PRINTER'S NO. 4733
No. 2959 Session of 2006
INTRODUCED BY LEH, SEPTEMBER 27, 2006
AS REPORTED FROM COMMITTEE ON LABOR RELATIONS, HOUSE OF
REPRESENTATIVES, AS AMENDED, OCTOBER 4, 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 AMENDING THE ACT OF AUGUST 24, 1963 (P.L.1175, NO.497), ENTITLED <--
8 "AN ACT TO CODIFY, AMEND, REVISE AND CONSOLIDATE THE LAWS
9 RELATING TO MECHANICS' LIENS," FURTHER PROVIDING FOR RIGHT OF
10 OWNER TO LIMIT CLAIMS TO UNPAID BALANCE OF CONTRACT PRICE.
11 The General Assembly of the Commonwealth of Pennsylvania
12 hereby enacts as follows:
13 Section 1. Sections 201, 405 and 501 of the act of August <--
14 24, 1963 (P.L.1175, No.497), known as the Mechanics' Lien Law of
15 1963, amended June 29, 2006 (P.L.210, No.52), are amended to
16 read:
17 Section 201. Definitions.--The following words, terms and
18 phrases when used in this act shall have the meaning ascribed to
19 them in this section, except where the context clearly indicates
20 a different meaning:
21 (1) "Improvement" includes any building, structure or other
1 improvement of whatsoever kind or character erected or
2 constructed on land, together with the fixtures and other
3 personal property used in fitting up and equipping the same for
4 the purpose for which it is intended.
5 (2) "Property" means the improvement, the land covered
6 thereby and the lot or curtilage appurtenant thereto belonging
7 to the same legal or equitable owner reasonably needed for the
8 general purposes thereof and forming a part of a single business
9 or residential plant.
10 (3) "Owner" means an owner in fee, a tenant for life or
11 years or one having any other estate in or title to property.
12 (3.1) "Contract" means a written agreement, or a written
13 amendment to a written agreement, evidencing the respective
14 responsibilities of the contracting parties that is signed by
15 each of the parties to the agreement. In the case of a supplier,
16 the term includes a delivery or order slip signed by the owner,
17 contractor or subcontractor, or an authorized agent of any of
18 them. The term includes a written agreement between a labor
19 benefit fund and a contractor or a subcontractor. The term does
20 not include an agreement predominantly intended to reduce the
21 credit risk of a party, including a joint check arrangement,
22 payment guarantee or similar credit agreement.
23 (4) "Contractor" means [one who, by contract with the owner,
24 express or implied, erects, constructs, alters or repairs an
25 improvement or any part thereof or furnishes labor, skill or
26 superintendence thereto; or supplies or hauls materials,
27 fixtures, machinery or equipment reasonably necessary for and
28 actually used therein; or any or all of the foregoing, whether
29 as superintendent, builder or materialman. The term also
30 includes an architect or engineer who, by contract with the
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1 owner, express or implied, in addition to the preparation of
2 drawings, specifications and contract documents also
3 superintends or supervises any such erection, construction,
4 alteration or repair.] a person in direct privity of contract
5 with the owner of real property for improvements to the real
6 property. The term includes a construction manager who enters
7 into a single contract with an owner for the performance of all
8 construction work within the scope of a construction manager's
9 contract, a construction manager who enters into a subcontract,
10 a construction manager who is designated as an owner's agent
11 without entering into a subcontract, a licensed architect,
12 landscape architect, professional engineer or land surveyor who
13 is in direct privity of contract with the owner, is not a
14 salaried employee of the owner and provides services in
15 connection with a proposed or actual improvement of real
16 property.
17 (5) "Subcontractor" means [one who, by contract with the
18 contractor, or pursuant to a contract with a subcontractor in
19 direct privity of a contract with a contractor, express or
20 implied, erects, constructs, alters or repairs an improvement or
21 any part thereof; or furnishes labor, skill or superintendence
22 thereto; or supplies or hauls materials, fixtures, machinery or
23 equipment reasonably necessary for and actually used therein; or
24 any or all of the foregoing, whether as superintendent, builder
25 or materialman. The term does not include an architect or
26 engineer who contracts with a contractor or subcontractor, or a
27 person who contracts with a materialman or a person who
28 contracts with a subcontractor not in direct privity of a
29 contract with a contractor.] a person who provides work in
30 connection with the improvement of real property pursuant to a
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1 contract with a contractor. The term includes a labor benefit
2 fund.
3 (5.1) "Sub-subcontractor" means a person who provides work
4 in connection with the improvement of real property pursuant to
5 a contract with a subcontractor. The term includes a labor
6 benefit fund.
7 (5.2) "Supplier" means a supplier of material or equipment,
8 including rental equipment, pursuant to a contract with an
9 owner, contractor or subcontractor. The term does not include a
10 person who supplies fuel for use in motor vehicles or equipment
11 delivered to or used on a site to be improved or a seller of
12 personal property who has a lien against a motor vehicle
13 pursuant to applicable law.
14 (6) "Claimant" means a contractor or subcontractor who has
15 filed or may file a claim under this act for a lien against
16 property.
17 (7) "Materials" means building materials and supplies of all
18 kinds, and also includes fixtures, machinery and equipment
19 reasonably necessary to and incorporated into the improvement.
20 (8) "Completion of the work" means performance of the last
21 of the labor or delivery of the last of the materials required
22 by the terms of the claimant's contract or agreement, whichever
23 last occurs.
24 (9) "Labor" includes the furnishing of skill or
25 superintendence.
26 (10) "Erection and construction" means the erection and
27 construction of a new improvement or of a substantial addition
28 to an existing improvement or any adaptation of an existing
29 improvement rendering the same fit for a new or distinct use and
30 effecting a material change in the interior or exterior thereof.
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1 (11) "Alteration and repair" means any alteration or repair
2 of an existing improvement which does not constitute erection or
3 construction as defined herein.
4 (12) "Erection, construction, alteration or repair"
5 includes:
6 (a) Demolition, removal of improvements, excavation,
7 grading, filling, paving and landscaping, when such work is
8 incidental to the erection, construction, alteration or repair;
9 (b) Initial fitting up and equipping of the improvement with
10 fixtures, machinery and equipment suitable to the purposes for
11 which the erection, construction, alteration or repair was
12 intended; and
13 (c) Furnishing, excavating for, laying, relaying, stringing
14 and restringing rails, ties, pipes, poles and wires, whether on
15 the property improved or upon other property, in order to supply
16 services to the improvement.
17 (13) "Prothonotary" means the prothonotary of the court or
18 courts of common pleas of the county or counties in which the
19 improvement is situate.
20 (14) "Residential building" means property on which there is
21 a residential building, or which is zoned or otherwise approved
22 for residential development, planned development or agricultural
23 use, or for which a residential subdivision plan or planned
24 residential development plan has received preliminary, tentative
25 or final approval pursuant to the act of July 31, 1968 (P.L.805,
26 No.247), known as the "Pennsylvania Municipalities Planning
27 Code."
28 Section 405. [Right of Owner to Limit Claims to Unpaid
29 Balance of Contract Price.--Where the claims of subcontractors
30 exceed in the aggregate the unpaid balance of the contract price
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1 specified in the contract between the owner and the contractor,
2 then if the subcontractor has actual notice of the total amount
3 of said contract price and of its provisions for the time or
4 times for payment thereof before any labor or materials were
5 furnished by him, or if such contract or the pertinent
6 provisions thereof were filed in the office of the prothonotary
7 in the time and manner provided in section 402, each claim
8 shall, upon application of the owner, be limited to its pro-rata
9 share of the contract price remaining unpaid, or which should
10 have remained unpaid, whichever is greatest in amount at the
11 time notice of intention to file a claim was first given to the
12 owner, such notice inuring to the benefit of all claimants.]
13 Maximum Liens.--(a) General Rule. Subject to subsections (b)
14 and (c), the maximum amount for which an interest in real
15 property may be subject to a lien under this act for one or more
16 lien claims filed under this act shall not be greater than the
17 contract price of the contract between the owner and the
18 contractor less the amount of payments made, if any, prior to
19 receipt by the owner of a copy of the lien claim, by the owner
20 to the contractor or to another lien claimant.
21 (b) Subcontractors and Suppliers. In the case of a lien
22 claim filed by a subcontractor or supplier in direct privity of
23 contract with the contractor, the maximum amount for which an
24 interest in real property may be subject to a lien under this
25 act for one or more lien claims filed under this act shall not
26 be greater than the lesser of:
27 (1) the amount provided in subsection (a); or
28 (2) the contract price of the contract between the
29 contractor and the subcontractor or supplier, less the amount of
30 payments made, if any, prior to receipt of a copy of the lien
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1 claim, by the contractor to the subcontractor or supplier or to
2 another lien claimant in direct privity of contract with the
3 subcontractor.
4 (c) Sub-subcontractors and Their Suppliers. In the case of a
5 lien claim filed by a sub-subcontractor or supplier in direct
6 privity of contract with a subcontractor, the maximum amount for
7 which an interest in real property may be subject to a lien
8 under this act for one or more lien claims filed under this act
9 shall not be greater than the lesser of:
10 (1) the amount provided in subsection (a);
11 (2) the contract price of the contract between the
12 contractor and subcontractor with whom the sub-subcontractor or
13 supplier has contracted, less the amount of payment made, if
14 any, prior to receipt by the contractor of a copy of the lien
15 claim, to the subcontractor or to another lien claimant; or
16 (3) the contract price of the contract between the
17 subcontractor and the sub-subcontractor or supplier less the
18 amount of payments made, if any, by the subcontractor to the
19 sub-subcontractor or supplier.
20 (d) Effect of Breach of Contract. For purposes of
21 determining the maximum amount for which an interest in real
22 property may be subject to a lien, in the event a contractor,
23 subcontractor, sub-subcontractor or supplier is in breach under
24 the terms of a contract to which it is a party, the contract
25 price of the contract shall be deemed to have been reduced by
26 the damages incurred by the nonbreaching party to the contract
27 as a result of the breach.
28 Section 501. [Formal Notice by Subcontractor as Condition
29 Precedent.--
30 (b.1) Time Period of Formal Notice. No claim by a
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1 subcontractor, whether for erection or construction or for
2 alterations or repairs, shall be valid unless, at least thirty
3 (30) days before the same is filed, he shall have given to the
4 owner a formal written notice of his intention to file a claim,
5 except that such notice shall not be required where the claim is
6 filed pursuant to a rule to do so as provided by section 506.
7 (c) Contents of Formal Notice. The formal notice shall
8 state:
9 (1) the name of the party claimant;
10 (2) the name of the person with whom he contracted;
11 (3) the amount claimed to be due;
12 (4) the general nature and character of the labor or
13 materials furnished;
14 (5) the date of completion of the work for which his claim
15 is made;
16 (6) a brief description sufficient to identify the property
17 claimed to be subject to the lien.
18 (d) Service of Notice. The notice provided by this section
19 may be served by first class, registered or certified mail on
20 the owner or his agent or by an adult in the same manner as a
21 writ of summons in assumpsit, or if service cannot be so made
22 then by posting upon a conspicuous public part of the
23 improvement.] Notices of Commencement and Furnishings.--(a)
24 Notice of Commencement.
25 (1) Owner's Right to File.
26 (i) Within thirty (30) days following execution of a
27 contract with a contractor, the owner may file with the
28 prothonotary a notice of commencement that does all of the
29 following:
30 (A) Identifies with reasonable specificity the real property
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1 upon which the improvement will be constructed.
2 (B) Sets forth the name of the contractor, the name of the
3 owner and the address at which the owner may be served with
4 claims and notices pursuant to this act.
5 (ii) The prothonotary shall index the notice of commencement
6 on the construction lien docket in the name of the contractor as
7 plaintiff and in the name of the owner as defendant.
8 (2) Delivery of notice.
9 (i) The owner shall deliver a copy of the notice of
10 commencement to the contractor within seven (7) days after the
11 notice is filed.
12 (ii) Within seven (7) days following receipt of a written
13 request from a subcontractor, sub-subcontractor or supplier, the
14 contractor shall deliver a copy of the notice of commencement to
15 the requesting party.
16 (b) Notice of Furnishing.
17 (1) Service of Notice. If a notice of commencement has been
18 filed under subsection (a), a subcontractor, sub-subcontractor
19 or supplier who performs work or services or provides material
20 or equipment in furtherance of an improvement to real property
21 and who wishes to preserve his lien rights shall serve a notice
22 of furnishing upon the owner named in the notice of commencement
23 at the address listed in the notice of commencement within the
24 later of:
25 (i) thirty (30) days after the filing of the notice of
26 commencement; or
27 (ii) thirty (30) days after first performing work or
28 services or first providing materials or equipment in connection
29 with the improvement of the real property.
30 (2) Preservation of Rights. A notice of furnishing served
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1 within the applicable period under paragraph (1) preserves the
2 subcontractor's, sub-subcontractor's or supplier's lien rights
3 for amounts owing for work and services performed and materials
4 and equipment furnished from the date the work or services were
5 first performed or materials or equipment were first furnished
6 through the date of service of the notice of furnishing and
7 thereafter.
8 (3) Forfeiture of Rights. If a subcontractor, sub-
9 subcontractor or supplier fails to serve a notice of furnishing
10 within the applicable period under paragraph (1), the
11 subcontractor, sub-subcontractor or supplier shall be deemed to
12 have forfeited its right to file a lien claim.
13 (4) Absence of Notice of Commencement. If the owner fails to
14 file a notice of commencement in accordance with subsection (a),
15 no subcontractor, sub-subcontractor or supplier shall be
16 required to serve a notice of furnishing in order to preserve
17 the subcontractor's, sub-subcontractor's or supplier's lien
18 rights.
19 SECTION 1. SECTION 405 OF THE ACT OF AUGUST 24, 1963 <--
20 (P.L.1175, NO.497), KNOWN AS THE MECHANICS' LIEN LAW OF 1963,
21 AMENDED JUNE 29, 2006 (P.L.210, NO.52), IS AMENDED TO READ:
22 SECTION 405. [RIGHT OF OWNER TO LIMIT CLAIMS TO UNPAID
23 BALANCE OF CONTRACT PRICE.--WHERE THE CLAIMS OF SUBCONTRACTORS
24 EXCEED IN THE AGGREGATE THE UNPAID BALANCE OF THE CONTRACT PRICE
25 SPECIFIED IN THE CONTRACT BETWEEN THE OWNER AND THE CONTRACTOR,
26 THEN IF THE SUBCONTRACTOR HAS ACTUAL NOTICE OF THE TOTAL AMOUNT
27 OF SAID CONTRACT PRICE AND OF ITS PROVISIONS FOR THE TIME OR
28 TIMES FOR PAYMENT THEREOF BEFORE ANY LABOR OR MATERIALS WERE
29 FURNISHED BY HIM, OR IF SUCH CONTRACT OR THE PERTINENT
30 PROVISIONS THEREOF WERE FILED IN THE OFFICE OF THE PROTHONOTARY
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1 IN THE TIME AND MANNER PROVIDED IN SECTION 402, EACH CLAIM
2 SHALL, UPON APPLICATION OF THE OWNER, BE LIMITED TO ITS PRO-RATA
3 SHARE OF THE CONTRACT PRICE REMAINING UNPAID, OR WHICH SHOULD
4 HAVE REMAINED UNPAID, WHICHEVER IS GREATEST IN AMOUNT AT THE
5 TIME NOTICE OF INTENTION TO FILE A CLAIM WAS FIRST GIVEN TO THE
6 OWNER, SUCH NOTICE INURING TO THE BENEFIT OF ALL CLAIMANTS.]
7 MAXIMUM LIENS.--
8 (A) GENERAL RULE. SUBJECT TO SUBSECTIONS (B) AND (C), THE
9 MAXIMUM AMOUNT FOR WHICH AN INTEREST IN REAL PROPERTY MAY BE
10 SUBJECT TO A LIEN UNDER THIS ACT FOR ONE OR MORE LIEN CLAIMS
11 FILED UNDER THIS ACT SHALL NOT BE GREATER THAN THE PRICE OF THE
12 CONTRACT BETWEEN THE OWNER AND THE CONTRACTOR LESS THE AMOUNT OF
13 PAYMENTS MADE, IF ANY, PRIOR TO RECEIPT BY THE OWNER OF A COPY
14 OF THE LIEN CLAIM BY THE OWNER TO THE CONTRACTOR OR TO ANOTHER
15 LIEN CLAIMANT.
16 (B) SUBCONTACTORS. IN THE CASE OF A LIEN CLAIM FILED BY A
17 SUBCONTRACTOR IN PRIVITY OF CONTRACT WITH THE CONTRACTOR, THE
18 MAXIMUM AMOUNT FOR WHICH AN INTEREST IN REAL PROPERTY MAY BE
19 SUBJECT TO A LIEN UNDER THIS ACT FOR ONE OR MORE LIEN CLAIMS
20 FILED UNDER THIS ACT SHALL NOT BE GREATER THAN THE LESSER OF:
21 (1) THE AMOUNT PROVIDED IN SUBSECTION (A); OR
22 (2) THE CONTRACT PRICE OF THE CONTRACT BETWEEN THE
23 CONTRACTOR AND SUBCONTRACTOR LESS THE AMOUNT OF PAYMENTS MADE,
24 IF ANY, PRIOR TO RECEIPT OF A COPY OF THE LIEN CLAIM, BY THE
25 CONTRACTOR TO THE SUBCONTRACTOR OR TO ANOTHER LIEN CLAIMANT IN
26 PRIVITY OF CONTRACT WITH THE SUBCONTRACTOR.
27 (C) OTHER LIEN CLAIMS. IN THE CASE OF A LIEN CLAIM FILED BY
28 A PARTY IN PRIVITY OF CONTRACT WITH A SUBCONTRACTOR, THE MAXIMUM
29 AMOUNT FOR WHICH AN INTEREST IN REAL PROPERTY MAY BE SUBJECT TO
30 A LIEN UNDER THIS ACT FOR ONE OR MORE LIEN CLAIMS FILED UNDER
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1 THIS ACT SHALL NOT BE GREATER THAN THE LESSER OF:
2 (1) THE AMOUNT PROVIDED IN SUBSECTION (A);
3 (2) THE PRICE OF THE CONTRACT BETWEEN THE CONTRACTOR AND
4 SUBCONTRACTOR WITH WHOM THE PARTY HAS CONTRACTED, LESS THE
5 AMOUNT OF PAYMENT MADE, IF ANY, PRIOR TO RECEIPT BY THE
6 CONTRACTOR OF A COPY OF THE LIEN CLAIM, TO THE SUBCONTRACTOR OR
7 TO ANOTHER LIEN CLAIMANT; OR
8 (3) THE PRICE OF THE CONTRACT BETWEEN THE SUBCONTRACTOR AND
9 THE PARTY LESS THE AMOUNT OF PAYMENTS MADE, IF ANY, BY THE
10 SUBCONTRACTOR TO THE PARTY.
11 (D) EFFECT OF BREACH OF CONTRACT. FOR PURPOSES OF
12 DETERMINING THE MAXIMUM AMOUNT FOR WHICH AN INTEREST IN REAL
13 PROPERTY MAY BE SUBJECT TO A LIEN, IN THE EVENT A CONTRACTOR OR
14 SUBCONTRACTOR IS IN BREACH UNDER THE TERMS OF A CONTRACT TO
15 WHICH IT IS A PARTY, THE PRICE OF THE CONTRACT SHALL BE DEEMED
16 TO HAVE BEEN REDUCED BY THE DAMAGES INCURRED BY THE NONBREACHING
17 PARTY TO THE CONTRACT AS A RESULT OF THE BREACH.
18 (E) DEFINITION. AS USED IN THIS SECTION, THE TERM "OTHER
19 PARTIES" HAS THE SAME MEANING AS THE TERM "SUBCONTRACTOR" IN
20 SECTION 201(5).
21 Section 2. This act shall take effect January 1, 2007.
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