As this blog as been reporting, significant amendments to Pennsylvania’s Mechanics’ Lien Law will become effective on December 31, 2016, creating new rights and obligations for owners, contractors, and subcontractors. These additional requirements are the result of the passage of Act 142 in 2014.
Specifically, Act 142 establishes a structured notice procedure for owners, contractors, and subcontractors to follow, as well as a central repository to file notices under the Mechanics’ Lien Law. The specific notices established by Act 142 must be filed on an internet-based directory that will be maintained by the Pennsylvania Department of General Services. These amendments apply only to “searchable projects,” or projects consisting of the construction, alternation or repair of an improvement costing at least $1.5 million.
Before the amendments set forth in Act 142 become effective on December 31, 2016, owners, contractors and first-tier subcontractors should evaluate their form contracts to ensure compliance with a number of new requirements for applicable projects. Notably, all contracts for searchable projects must include a written notice stating that a subcontractor’s failure to comply with the Act’s notice requirements will result in the loss of lien rights. Act 142 sets forth the exact language that must be included in the contract. Furthermore, the owner and general contractor on a searchable project must now make reasonable efforts to ensure the “Notice of Commencement” – a new type of notice filed by the owner or its agent – is made a part of the contract documents provided to all subcontractors awarded work on the project. Failure to comply with these requirements could potentially constitute a violation of the amended Mechanics’ Lien Law. Owners and contractors should also consider adding flowdown clauses in their contracts that impose requirements on contracting parties to include the necessary written notice in subcontracts and include the Notice of Commencement as a contract document for any subcontract.
Any person who requests, encourages or requires a subcontractor not to comply with the Act’s notice provisions may face civil and criminal penalties, including payment of attorneys’ fees and court costs. The person may also be liable for actual damages resulting from the subcontractor’s resulting failure to comply with the new notice provisions.
With the effective date of the amendments to the Lien Law fast approaching, Babst Calland recommends that owners, contractors, and subcontractors review the amendments and update their standard form contracts to ensure compliance with the Act. Failure to comply with Act 142 could have significant consequences and create exposure to unanticipated liabilities.
Babst Calland is offering a seminar to help those in the construction industry navigate these new obligations and begin using the new notice directory website. This seminar will provide a more comprehensive overview of the Lien Law amendments.
For more information on the changes to the Lien Law or modifying your standard contracts to comply with the amendments please contact D. Matthew Jameson III at firstname.lastname@example.org or (412) 395-5491.