In the not so distant future, participants on construction projects in Pennsylvania can look forward to navigating radically new notice procedures necessary to allow, preserve and execute on mechanic’s lien rights.
In October of this year the Mechanic’s Lien Law was changed by amendment providing for a mandatory on-line registration process for project owners and potential claimants on projects exceeding $1.5 Million. Owners must comply with the process or risk statutory and possibly criminal penalties, and subs and suppliers must comply to preserve their lien rights.
House Bill No. 473 provides that on or before December 31, 2016, the Pennsylvania Department of General Services is required to create and maintain an “internet website” called the “State Construction Notices Directory” for these projects. The following protocols will apply:
- Mandatory Notice of Commencement. A project owner (or contractor on its behalf) must file a “Notice of Commencement” prior to the supply of any labor or material to the project. This notice must contain important information including a description of the project, a legal description of the premises, the identity of the record owners and any payment bond information. To ensure that everyone aware that the project is subject to the new requirements, the Owner must post the notice “conspicuously” at the project site for its duration. The notice is to be part of the contract documents.
- Mandatory Notice of Furnishing. Once the Notice of Commencement is filed and poosted, the subcontractor or supplier must file a “Notice of Furnishing” no later than 45 days after their work or service commences (contents include a description of project, the materials or labor provided, the entity that contracted for the work). This notice is a condition precedent to any lien rights, and must be filed online.
- Optional Notice of Completion. Within 45 days of the project completion, an optional “Notice of Completion” can be filed by the Owner “for informational purposes.” Presumably this allows the owner to prompt any potential claimants to step forward, but it’s difficult to imagine a scenario where this would benefit the owner.
- Optional Notice of Nonpayment. Similarly, the supplier or subs are permitted (not mandated) to file a “Notice of Nonpayment” if they haven’t been paid. Again, perhaps this is included as a means to reconcile a potential claim, but making the procedure optional is as ineffectual as providing for optional mediation.
Waivers of rights under the amendment are, to put it mildly, frowned upon. If a sub/supplier is forced, as a condition of its contract, to restrain from filing a Notice of Furnishing, and doesn’t file one, really, really bad things happen to the general/sub that required it – most notable statutory liability for attorney fees and criminal sanctions. And yes, the lien rights are reinstated. Similarly, if a sub or supplier tries to manipulate the system they can expect nasty consequences. Notices of Furnishing filed in bad faith, or to get more than is due, or gain an “unjustified advantage or benefit” subject the sub or supplier to actual damages statutory damages, whichever is greater.
Take away: Yes, 2016 is clearly irrelevant to most who are trying to profitably execute work now. But the DGS has the prerogative to implement the database at any time subject to 120 day notice. When, not if this happens, hopefully there will be an abundance of qualifying projects. One thing is certain however – failure to comply with a fairly straightforward on-line process will be costly moving forward.