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,

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

17Section 2. Section 301 of the act is amended to read:

18Section 301. Right to Lien; Amount; Subcontractor.--[Every]
19(a) General Rule. Except as provided under subsection (b), 
20every improvement and the estate or title of the owner in the
21property shall be subject to a lien, to be perfected as herein
22provided, for the payment of all debts due by the owner to the
23contractor or by the contractor to any of his subcontractors for
24labor or materials furnished in the erection or construction, or
25the alteration or repair of the improvement, provided that the
26amount of the claim, other than amounts determined by
27apportionment under section 306(b) of this act, shall exceed
28five hundred dollars ($500).

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

1property if:

2(1) the owner or tenant paid the full contract price to the
3contractor; <-and

4(2) the property is to be used as the residence of the owner
5or tenant.

<-6(2) the property is or is intended to be used as the
7residence of the owner or subsequent to occupation by the owner,
8a tenant of the owner; and

9(3) the residential property is a single townhouse or a
10building that consists of one or two dwelling units used,
11intended or designed to be built, used, rented or leased for
12living purposes. For the purposes of this paragraph, the term
13"townhouse" shall mean a single-family dwelling unit constructed
14in a group of three or more attached units in which each unit
15extends from foundation to roof with a yard or public way on at
16least two sides.

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

19Section 508. Priority of Lien.--The lien of a claim filed
20under this act shall take effect and have priority as follows:

21* * *

22(c) Any lien obtained under this act by a contractor or
23subcontractor shall be subordinate to the following:

24(1) A purchase money mortgage as defined in 42 Pa.C.S. §
258141(1) (relating to time from which liens have priority).

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

1(60%) of the proceeds are intended to pay or are used to pay all 
2or part of the costs of construction.

3Section 4. Section 510 heading of the act is amended and the
4section is amended by adding a subsection to read:

5Section 510. Discharge of Lien [on Payment into Court or
6Entry of Security] or Reduction of Lien.--

7* * *

8(f) Residential Property.

9(1) A claim filed under this act with respect to an 
10improvement to a residential property subject to section 301(b) 
11shall, upon a court order issued in response to a petition or 
12motion to the court by the owner or a party in interest, be 
13discharged as a lien against the property  when the owner or 
14tenant has paid the full contract price to the contractor.

15(2) Where the owner or tenant has paid a sum to the 
16contractor which is less than the sum of the full contract 
17price, a claim filed under this act with respect to an 
18improvement to a residential property subject to section 301(b), 
19shall, upon a court order issued in response to a petition or 
20motion to the court by the owner or a party in interest, cause 
21the lien to be reduced to the amount of the unpaid contract 
22price owed by the owner or tenant to the contractor.

23Section 5. The addition of the definition of "costs of
24construction" in section 201 of the act and the amendment of
25section 508(c) of the act shall apply to liens perfected on or
26after the effective date of this section, including liens
27relating to the construction of an improvement for which the
28visible commencement of work occurred prior to the effective
29date of this section, but were not perfected until on or after
30the effective date of this section.

1Section 6. This act shall take effect in 60 days.