More Changes to Pennsylvania’s Mechanic’s Lien Law May be Coming
11/30/2012 | Construction Blog
After years of doing little to change the Mechanic’s Lien Law, it seems the Pennsylvania Legislature now can’t leave it alone. Significant changes have gone into effect in the last several years, and the legislature has continued to dabble in it regularly.
First, it would add “costs of construction” to the list of definitions. The list of items included in this is strikingly broad and includes things like insurance, professional fees, and commissions. This definition is then inserted into Section 508, which deals with the priority of mechanic’s liens.
The priority given to purchase money mortgages would remain under the new statute. Likewise, open ended mortgages would still take priority over mechanic’s liens in certain circumstances. These circumstances would change, however, from those in which the proceeds from the loan are used “pay all or part of the cost of completing erection, construction, alteration, or repair of the mortgaged premises secured by the open-ended mortgage” to situations where “at least 25% of the proceeds are intended to pay or are used to pay all or part of the costs of construction.” Since “costs of construction” is defined so expansively and includes that which was covered before, it would be easier for an open-ended mortgage to take priority over a mechanic’s lien claim.
The second substantive change to the lien law would bar claims by subcontractors on residential properties where the owner or tenant can show the property is a primary residence and that the owner has paid the contractor. Similarly, it would provide a mechanism by which the owner could go to court by motion to reduce or eliminate a subcontractor lien if it could prove these two elements after the lien is filed.
The bill (SB 1495) has been tabled for now. It seems unlikely to move any further before the start of a new session in 2013. However, if it passes the Senate and moves to the House, it will be worth watching. This is especially true for subcontractors, as it will make the Mechanic’s Lien Law less useful as a mechanism to secure payment for work performed.