In just a little over a year, the new provisions of Act 142 of 2014, which substantially amend Pennsylvania’s Mechanic’s Lien Law, will go into effect. As if the filing and timing requirements of the Mechanic’s Lien Law weren’t already complicated enough, now four (4) more notices have been established which either must or may be filed within appropriate time frames to secure mechanic’s liens.
Under Act 142, the new notice provisions become effective on December 31, 2016. Prior to Act 142, owners had no means to identify what subcontractors may have been working on a project in order to contact them to determine if they had received payment, before the owner would make payment in full to the contractor. General contractors faced the same problem with respect to second-tier subcontractors or materialmen. The intent of the new notice provisions of Act 142 is to give owners a better opportunity to protect against the danger of facing double payment which arises when they pay their direct contractor and then are faced with a mechanic’s lien when that contractor has failed to pay its subs. Often a contractor will be called upon to defend and indemnify its owner from a lien claim filed by a second tier subcontractor whose has not been paid by a first tier subcontractor. Accordingly, general contractors also will benefit from having second-tier subcontractors identified through this new process so they can avoid the double payment problem arising from these defense and indemnification claims.
Initially, under Act 142 of 2014, The Pennsylvania Department of General Services will be required to establish and maintain an ON LINE Construction Notices Directory by December 31, 2016 where these new notices will be filed. The Act only applies to projects whose costs exceed $1.5 million.
The four (4) new notices that can be filed in the internet based Directory are 1. A Notice of Commencement by an owner (or its proxy); 2. A Notice of Furnishing by sub-contractors; 3. A Notice of Completion by an Owner; and 4. A notice of Nonpayment by subcontractors. As with all notices under the Mechanic’s Lien Laws, the requirements for the information to be included in this notices are very specific and can be found in the provisions of the Act 142 amendments.
Any owner or contractor who wishes to take advantage of the protections of these new provisions may file a Notice of Commencement before any work or materials are supplied to the project. At this point the project becomes subject to the provisions of the Act 142 provisions. If a Notice of Commencement has been filed, all subcontractors will be “required” to file Notices of Furnishing within forty five (45) days of their first performing work or supplying materials to the site. If a subcontractor fails to timely file a Notice of Furnishing with the Directory in a timely manner, it forfeits its Mechanic’s Lien rights.
The Act 142 provisions then “permit” an owner to file a Notice of Completion with the Directory within forty five (45) days after all work on the project is done. This notice is purely for information purposes and will be supplied to all subcontractors who have filed Notices of Furnishing. Accordingly, if a subcontractor has not been paid, and receives a Notice of Completion, it would be prudent to contact the Owner. Finally, subcontractors are “permitted” to file Notices of Nonpayment with the Directory. Although these Notices are not required to preserve Mechanic’s Lien rights, they are precisely the type of notification that a prudent subcontractor would provide to an owner upon receipt of a Notice of Completion, to allow the owner to withhold final payment to the general contractor until it receives assurances that all subcontractors have been paid.