On October 14, 2014, Governor Corbett signed into law a bill amending the Pennsylvania Mechanics’ Lien Law which is designed to provide additional protections to commercial and residential property owners when general contractors fail to pay their subcontractors.
The new law will create a centralized construction notice registry in Pennsylvania known as the State Construction Notices Directory (“Directory”). The Directory will be an internet-based database providing extensive details of each registered construction project. The Directory is to be maintained by the Pennsylvania Department of General Services and provides that the DGS is to have this website operational by December 31, 2016. An owner would then have the option of registering a project by filing a “Notice of Commencement” on the Directory website and posting a copy at the site of the project prior to the start of physical construction. This Notice must be filed before any labor, work or materials are furnished on the project. Further, this Notice gives any subcontractor who wishes to be protected against non-payment by a general contractor, the opportunity to let the property owner know that he or she is performing work on the project. This subcontractor accomplishes this by filing a “Notice of Furnishing” with the Directory within 45 days after first supplying labor or materials at the project site. This enables the property owner to ensure all subcontractors are paid before the owner makes final payment to the general contractor. The Act provides a form for completing the Notice of Furnishing and provides that the subcontractor must comply with the statutory notice requirements or lose its lien rights. Once a party files a Notice with the Directory, it will receive future notices of any subsequent filings on that particular project.
The new law places a duty on the subcontractor to vigilantly monitor notices of commencement and file timely notices of furnishing before starting work to avoid forfeiting lien claim rights. The law makes it unlawful for a general contractor to require a subcontractor to refrain from filing a Notice of Furnishing as a condition to entering into a contract to furnish labor or materials on a particular project. Criminal sanctions are also provided for under the statute, as well as providing subcontractors the right to file a civil suit to recover actual damages, plus costs and attorneys’ fees, against anyone dissuading a subcontractor from not filing a Notice of Furnishing in order to secure work on a project. Lien rights are also preserved should this unlawful activity occur by a general contractor.
The Notice Requirements of the Act only apply to projects commenced on or after the operational date of the Directory which is currently set at December 31, 2016. While the Notice Requirements will significantly impact current lien filing procedures, its purpose is to provide owners with the identity of the universe of subcontractors working on a project. It is designed to enable a general contractor to make sure that all subcontractors have been paid in full before making final payment on the project, as well as protecting property owners from having to pay subcontractors twice for the same work.
This material is for informational purposes only. It is not and should not be solely relied on as legal advice in dealing with any specific situation.