THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY BROWNE, ROBBINS, BOSCOLA, ORIE, TOMLINSON, WAUGH, WOZNIAK, VANCE, EARLL, FOLMER AND WONDERLING, MARCH 2, 2009

REFERRED TO LABOR AND INDUSTRY, MARCH 2, 2009  

AN ACT

Amending the act of August 24, 1963 (P.L.1175, No.497), entitled

"An act to codify, amend, revise and consolidate the laws

relating to mechanics' liens," further providing for

definitions, for waiver of lien by claimant, for right to

limit claims to unpaid balance of contract price and for

priority of lien.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Sections 201(14), 401, 405 and 508 of the act of

August 24, 1963 (P.L.1175, No.497), known as the Mechanics' Lien

Law of 1963, amended June 29, 2006 (P.L.210, No.52), are amended

to read:

Section 201.  Definitions.--The following words, terms and

phrases when used in this act shall have the meaning ascribed to

them in this section, except where the context clearly indicates

a different meaning:

* * *

(14)  "Residential [building] property" means property on

which there is or will be constructed a residential building not

more than three stories in height, not including any basement

level, regardless of whether any portion of that basement is at

grade level, or which is zoned or otherwise approved for

residential development on which there is or will be constructed

a residential building not more than three stories in height,

not including any basement level, regardless of whether any

portion of that basement is at grade level, planned residential 

development or agricultural use, or for which a residential

subdivision or land development plan or planned residential

development plan has received preliminary, tentative or final

approval on which there is or will be constructed a residential

building not more than three stories in height, not including

any basement level, regardless of whether any portion of that

basement is at grade level, pursuant to the act of July 31, 1968

(P.L.805, No.247), known as the "Pennsylvania Municipalities

Planning Code."

Section 401.  Waiver of Lien by Claimant.--

(a)  Residential [Buildings] Property.

[(1)]  A contractor or subcontractor may waive his right to

file a claim against residential property [for the erection,

construction, alteration or repair of a residential building, in

which the total contract price between the owner and the

contractor is less than one million dollars ($1,000,000),] by a

written instrument signed by him or by any conduct which

operates equitably to estop such contractor from filing a claim.

[(2)  (i)  A subcontractor may waive his right to file a

claim against property for the erection, construction,

alteration or repair of a residential building, in which the

total contract price between the owner and the contractor is

less than one million dollars ($1,000,000), by a written

instrument signed by him or by any conduct which operates

equitably to estop him from filing a claim.

(ii)  A subcontractor may waive his right to file a claim

against the property, irrespective of the contract price between

the owner and the contractor, of a residential building by a

written instrument signed by him or by any conduct which

operates equitably to estop him from filing a claim, provided

the contractor has posted a bond guaranteeing payment for labor

and materials provided by subcontractors.]

(b)  Nonresidential Buildings.

(1)  Except as provided in subsection [(a)(1)] (a), a waiver

by a contractor of lien rights is against public policy,

unlawful and void unless given in consideration for payment for

the work, services, materials or equipment provided and only to

the extent that such payment is actually received.

(2)  Except as provided in subsection [(a)(2)] (a), a waiver

by a subcontractor of lien rights is against public policy,

unlawful and void, unless given in consideration for payment for

the work, services, materials or equipment provided and only to

the extent that such payment is actually received, or unless the

contractor has posted a bond guaranteeing payment for labor and

materials provided by subcontractors.

Section 405.  [Right of Owner to Limit Claims to Unpaid

Balance of Contract Price.--Where the claims of subcontractors

exceed in the aggregate the unpaid balance of the contract price

specified in the contract between the owner and the contractor,

then if the subcontractor has actual notice of the total amount

of said contract price and of its provisions for the time or

times for payment thereof before any labor or materials were

furnished by him, or if such contract or the pertinent

provisions thereof were filed in the office of the prothonotary

in the time and manner provided in section 402, each claim

shall, upon application of the owner, be limited to its pro-rata

share of the contract price remaining unpaid, or which should

have remained unpaid, whichever is greatest in amount at the

time notice of intention to file a claim was first given to the

owner, such notice inuring to the benefit of all claimants.] 

Right to Limit Claims to Unpaid Balance of Contract Price.--

(a)  Contractor.  The maximum amount for which an interest in

real property may be subject to a lien under this act for one or

more lien claims filed pursuant to this act shall not be greater

than the price of the contract between the owner and the

contractor less the amount of payments made by the owner to the

contractor or to another lien claimant prior to receipt by the

owner of a notice of intention to file a lien claim pursuant to

section 501.

(b)  Subcontractors.

(1)  In the case of a lien claim filed by a subcontractor in

privity of contract with the contractor, the maximum amount for

which an interest in real property may be subject to a lien

under this act for one or more lien claims filed under this act

shall not be greater than the lesser of:

(i)  the amount provided in subsection (a); or

(ii)  the price of the contract between the contractor and

subcontractor less the amount of payments, if any, justifiably

made prior to receipt by the contractor of a copy of a notice of

intention to file a claim by the contractor to the subcontractor

or to another lien claimant in privity of contract with the

subcontractor.

(2)  In the case of a lien claim filed by a party of privity

in contract with a subcontractor, the maximum amount for which

an interest in real property may be subject to a lien under this

act for one or more lien claims filed under this act shall not

be greater than the lesser of:

(i)  the amount provided in subsection (a); or

(ii)  the price of the contract between the contractor and

subcontractor with whom the party has contracted, less the

amount of payments justifiably made, if any, prior to receipt by

the contractor of a copy of the notice of intention to file a

claim to the subcontractor or to another lien claimant; or

(iii)  the price of the contract between the subcontractor

and the party less the amount of payments justifiably made, if

any, by the subcontractor to the party.

(c)  Breach.  For purposes of determining the maximum amount

for which an interest in real property may be subject to a lien

in the event that a contractor or subcontractor is in breach

under the terms of a contract to which it is a party, the price

of the contract shall be deemed to have been reduced by the

damages incurred by the nonbreaching party to the contract as a

result of the breach.

(d)  For purposes of this section.

(1)  The term "price of the contract" shall include amounts

due for labor or material which are furnished as a result of:

(i)  a contract;

(ii)  a written amendment to a contract; or

(iii)  any change order or other directive for labor or

materials in addition to the scope of work under an initial

contract, provided that the lien claimant has notified the party

with whom it is in privity of contract within seven (7) days of

the receipt of the change order or other directive that the

furnishing is alleged to be in addition to the scope of work

under the contract; or

(2)  in the case of a supplier, "price of the contract"

includes a delivery or order slip signed by the owner,

contractor or subcontractor, or an authorized agent of any of

them.

(3)  "Price of the contract" does not include an agreement

predominantly intended to reduce the credit risk of a party,

including a joint check arrangement, payment guarantee or

similar credit agreement.

Section 508.  Priority of Lien.--The lien of a claim filed

under this act shall take effect and have priority as follows:

(a)  Except as set forth in subsection (c), in the case of

the erection or construction of an improvement, as of the date

of the visible commencement upon the ground of the work of

erecting or constructing the improvement.

(b)  Except as set forth in subsection (c), in the case of

the alteration or repair of an improvement, as of the date of

the filing of the claim.

(c)  Any lien obtained under this act by a contractor or

subcontractor shall be subordinate to the following:

(1)  A purchase money mortgage as defined in 42 Pa.C.S. §

8141(1) (relating to time from which liens have priority).

(2)  An open-end mortgage as defined in 42 Pa.C.S. § 8143(f) 

(relating to open-end mortgages), the proceeds of which are used

to pay all or part of the cost of completing erection,

construction, alteration or repair of the mortgaged premises

secured by the open-end mortgage[.] or to secure certain

advances under 42 Pa.C.S. § 8144 (relating to mortgages to

secure certain advances).

(3)  Any substitution, refinance or modification of a

mortgage referred to under paragraphs (1) and (2).

Section 2.  This act shall take effect in 60 days.