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
18reimbursements pertaining to erection, construction, alteration,

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

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

3(2) the property is or is intended to be used as the
4residence of the owner or subsequent to occupation by the owner,
5a tenant of the owner; and

6(3) the residential property is a single townhouse or a
7building that consists of one or two dwelling units used,
8intended or designed to be built, used, rented or leased for
9living purposes. For the purposes of this paragraph, the term
10"townhouse" shall mean a single-family dwelling unit constructed
11in a group of three or more attached units in which each unit
12extends from foundation to roof with a yard or public way on at
13least two sides.

14Section 3. Section 508(c) of the act, amended June 29, 2006
15(P.L.210, No.52), is amended to read:

16Section 508. Priority of Lien.--The lien of a claim filed
17under this act shall take effect and have priority as follows:

18* * *

19(c) Any lien obtained under this act by a contractor or
20subcontractor shall be subordinate to the following:

21(1) A purchase money mortgage as defined in 42 Pa.C.S. §
228141(1) (relating to time from which liens have priority).

23(2) An open-end mortgage as defined in 42 Pa.C.S. § 8143(f)
24(relating to open-end mortgages), [the proceeds of which are
25used to pay all or part of the cost of completing erection,
26construction, alteration or repair of the mortgaged premises
27secured by the open-end mortgage.] where at least twenty-five 
28per cent of the proceeds are intended to pay or are used to pay 
29all or part of the costs of construction.

30(3) The refinance or modification of a purchase money

1mortgage as set forth in paragraph (1) or open-end mortgage as
2set forth in paragraph (2), notwithstanding that:

3(i) the new principal amount of the mortgage may exceed the
4stated amount of the original mortgage; or

5(ii) advances made under the mortgage may be used for
6purposes unrelated to the costs of construction.

7Section 4. Section 510 heading of the act is amended and the
8section is amended by adding a subsection to read:

9Section 510. Discharge of Lien [on Payment into Court or
10Entry of Security].--

11* * *

12(f) Residential property. A claim filed under this act with
13respect to an improvement to a residential property subject to
14section 301(b) shall, upon petition or motion to the court by
15the owner or a party in interest, be discharged as a lien
16against the property when:

17(1) the owner or tenant has paid the full contract price to
18the contractor; or

19(2) the lien shall be reduced to the amount of the unpaid
20contract price owed by the owner or tenant to the contractor.

21Section 5. The amendment of sections 301 and 510 of the act
22shall apply to contracts entered into on or after the effective
23date of this section.

24Section 6. This act shall take effect in 30 days.