When is a property owner’s fee interest subject to the lien of an unpaid contractor renovating the property for tenant?
11/28/2017 | Construction Blog
Section 1303(d) of the Mechanics’ Lien Law of 1963 provides that “No lien shall be allowed against the estate of an owner in fee by reason of any consent given by such owner to a tenant to improve the leased premises unless it shall appear in writing signed by such owner that the erection, construction, alteration or repair was in fact for the immediate use and benefit of the owner.” However, the terms of the owner’s lease with the tenant may establish the necessary writing to permit the lien. On November 17, 2017, the Superior Court of Pennsylvania decided Lobar Associates, Inc. v. Edward J. O’Neill, et al., and affirmed the trial court’s order granting summary judgment on mechanics’ lien claim in favor of a contractor who renovated property for the owner’s tenant. The Court held that the provisions of the lease satisfied the “immediate use and benefit standard” of the statute because those provisions made clear the purpose of the lease was to improve the property for mutual benefit, and (a) called for collaboration of landlord and tenant in the renovation project of the Property, (b) required landlord’s prior written approval for changes, alterations and additions to the Property which would negatively impact the value of the Property, and (c) declared all improvements would be property of landlord expiration of the lease term or earlier termination. Because the evaluation of such claims are complicated, legal counsel should be consulted before filing or in connection with defending a lien claim against a landlord for work done for a tenant.