THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY WARD, BAKER, EARLL, WAUGH, SOLOBAY, FOLMER, ALLOWAY, McILHINNEY, EICHELBERGER, FONTANA, FERLO, SMUCKER, MENSCH AND RAFFERTY, MAY 31, 2012

SENATOR GORDNER, LABOR AND INDUSTRY, AS AMENDED, OCTOBER 1, 2012   

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," providing for the definition

<--

of "costs of construction"; and further providing for right

to lien and amount and priority of lien and for discharge or

<--

reduction of lien on payment into court or entry of security.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 301 of the act of August 24, 1963

<--

(P.L.1175, No.497), known as the Mechanics' Lien Law of 1963, is

amended to read:

Section 1.  Section 201 of the act of August 24, 1963

<--

(P.L.1175, No.497), known as the Mechanics' Lien Law of 1963, is

amended by adding a definition 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:

* * *

(15)  "Costs of construction" means all costs, expenses and

reimbursements pertaining to erection, construction, alteration,

repair, mandated off-site improvements, government impact fees

and soft costs, including, but not limited to, costs, expenses

and reimbursements in the nature of taxes, insurance, bonding,

inspections, surveys, testing, permits, legal fees, architect

fees, engineering fees, consulting fees, accounting fees,

management fees, utility fees, tenant improvements, leasing

commissions, payment of prior loans or mortgages, mortgage

origination fees and commissions, finance costs, closing fees,

recording fees, title insurance or escrow fees, or any similar

or comparable costs, expenses or reimbursements related to an

improvement, made or intended to be made, to the property. For

purposes of this definition, reimbursement includes any such

disbursements made to the borrower, any person acting for the

benefit or on behalf of the borrower, or to an affiliate of the

borrower.

Section 2.  Section 301 of the act is amended to read:

Section 301.  Right to Lien; Amount; Subcontractor.--[Every] 

(a)  General rule. Except as provided under subsection (b),

every improvement and the estate or title of the owner in the

property shall be subject to a lien, to be perfected as herein

provided, for the payment of all debts due by the owner to the

contractor or by the contractor to any of his subcontractors for

labor or materials furnished in the erection or construction, or

the alteration or repair of the improvement, provided that the

amount of the claim, other than amounts determined by

apportionment under section 306(b) of this act, shall exceed

five hundred dollars ($500).

(b)  Subcontractor. A subcontractor does not have the right

to a lien with respect to an improvement to a residential

property if:

(1)  the owner or tenant paid the full contract price to the

contractor; and

(2)  the property is or is intended to be used as the

residence of the owner or tenant.

Section 3.  Section 508(c) of the act, amended June 29, 2006

<--

(P.L.210, No.52), is amended to read:

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

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

* * *

(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.] where at least twenty-five

percent (25%) of the proceeds are intended to pay or are used to

pay all or part of the costs of construction.

(3)  The refinance or modification of a purchase money

mortgage as set forth in paragraph (1) or open-end mortgage as

set forth in paragraph (2), notwithstanding that:

(i)  the new principal amount of the mortgage may exceed the

stated amount of the original mortgage; or

(ii)  advances made under the mortgage may be used for

purposes unrelated to the costs of construction.

Section 2 4.  Section 510 heading of the act is amended and

<--

the section is amended by adding a subsection to read:

Section 510.  Discharge of Lien [on Payment into Court or

Entry of Security] or Reduction of Lien.--

<--

* * *

(f)  Residential property. A claim filed under this act with

<--

(f)  Residential property.

<--

(1)  A claim filed under this act with respect to an

improvement to a residential property subject to section 301(b)

shall, upon petition or motion to the court by the owner or a

party in interest, be discharged as a lien against the property

when:

<--

(1)  the owner or tenant has paid the full contract price to

the contractor; or

(2)  the lien shall when the owner or tenant has paid the

<--

full contract price to the contractor.

(2)  Where the owner or tenant has paid a sum to the

contractor which is less than the sum of the full contract

price, a claim filed under this act with respect to an

improvement to a residential property subject to section 301(b),

shall upon petition or motion to the court by the owner or a

party in interest cause the lien to be reduced to the amount of

the unpaid contract price owed by the owner or tenant to the

contractor.

Section 5.  The amendment of sections 301 and 510 of the act

<--

shall apply to all mechanics' liens perfected after December 31,

2012.

Section 3.  This act shall take effect in 60 days.

<--

Section 6.  This act shall take effect immediately.

<--