Big Changes Coming to Mechanic’s Lien Law

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In 2014, the Pennsylvania legislature took steps to address issues in the construction process, spurred by frustration of project owners and general contractors who were being served Mechanic’s Liens for nonpayment by subcontractors with whom they had no contract. A deeper look into the issue found that a frequent practice was to sub-subcontract work, creating a growing divide between project owners and professionals actually performing the work. To address the issue, the legislature passed Act 142 of 2014, which takes effect on January 1, 2017, and could have much bigger consequences than ever imagined.

Act 142 established the State Construction Notices Directory, a searchable online database of current construction projects and the entities furnishing labor and/or materials to those projects. The law’s intent was to afford construction professionals the ability to maintain their rights to a Mechanic’s Lien claim by self-declaring their role on a project, which in turn notified owners of that entity’s involvement in their projects. The project was assigned to the Department of General Services (DGS), who was given two years to complete the online database. That two-year window expires on December 31, 2016, and as DGS nears the end of their development timeframe, more concerns have appeared.

First, the statute identifies the database as a publicly accessible portal, meaning that, potentially, anyone has the ability to discover the exact location of projects of which any construction professional is currently involved. While projects built for public owners already require this transparency, the portal may now extend that openness to private projects as well. Through discussions between ABC and DGS, concerns about the readily accessible project locations have been addressed and remedies to limit the scope of discoverability are in progress.  Secondly, the statute allows for a posting of Notice of Nonpayment, the vehicle which typically is delivered to a county court to signify a nonpayment or Mechanic’s Lien dispute. As the database continues to develop, construction entities are encouraging the inclusion of a permanent record of Notice of Nonpayment, meaning that any owner or prime contractor who is charged with nonpayment would be labeled as such in perpetuity, regardless of the outcome of a Mechanic’s Lien claim. While this notice would only be accessible to the posting furnisher, general contractor, and owner, this permanent stain could not only alert potential subcontractors to a habitual offender, but it could also cause irreparable damage at the hand of a disgruntled construction professional.

ABC continues to play a major role in the development of the site through our work with DGS and will help ensure fairness and equity throughout the payment chain. ABC will also be working to provide detailed information on how the new law will change your responsibilities in maintaining your rights. If you have questions about Mechanic’s Liens or Act 142, please don’t hesitate to contact ABC.