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Apparently, there will be no fee to potential lien claimants to file a Notice of Furnishing. Potential lien claimants should be able to file Notices of Furnishing or Nonpayment without legal assistance and must commit the resources to train personnel to perform this function.
Claimants cannot tack on additional material or labor to a contract for the purpose of extending the time to file a claim. The courts seem to use a case-by-case analysis to determine whether work was performed solely for the purpose of extending the time limitation or was provided to complete work provided by the contract.
It is prudent to count deadlines from the last substantial new work. Warranty work and repair work may not extend the filing deadlines. If no notice is given, the lien will be stricken. However, substantial compliance is sufficient as to the form of the notice. The Formal Notice must be given to the owner at least 30 days before the Lien Claim is actually filed with the court. It is impossible to give a Formal Notice too soon.
Providing notice to an owner and the construction lender early will freeze money to the owner, general contractor and subcontractors.
Filing the Formal Notice early will also allow the claimants to file the Lien Claim sooner, accelerating the entire process. If the claim is filed by a contractor pursuant to a contract for an agreed sum, an identification of the contract and a general statement of the kind and character of the labor and materials furnished.
Within one month after filing the Lien Claim, the claimant must serve written notice of such filing on the owner. The notice must state the court term and number and the date of filing the claim. It must be served in the same manner as a lawsuit: by the sheriff. The Lien Claim must state the name and the address of the owner or reputed owner.
A claimant who completes tenant improvements can obtain a lien on the leasehold interest. If a property has multiple owners and only one owner orders the work, the claimant may obtain a lien only in the partial interest of the one ordering the work.
A lien will attach, although the owner of the lots on which the houses are built has only an equitable interest. A lien claimant should perform a title search to properly identify the lien property  and property owner. A description of an entire planned subdivision development is a sufficient description of the property for a Lien Claim for paving roads and the establishment of storm water drainage areas. If the claimant works on multiple structures, the Lien Claim should identify the structures and the specific labor or material supplied to each structure.
If the multiple improvements do not form a single business or residential plant, however, then the claimant must file multiple apportioned liens. The mere fact that products have been supplied under a contract that includes material for construction does not entitle the supplier to a lien for the material.
Fixtures and personal property can provide lien rights if they are permanent and become part of the real estate. A claimant must provide either a detailed statement of the kind and character of the labor and materials furnished and the prices charged for each, or if the claimant had a contract for an agreed sum, the claimant must identify the contract and provide a general statement of the kind and character of the labor or materials furnished. In order to qualify as labor, services must be connected to the actual construction of a building.
Suppliers of rental equipment appear to have lien rights. Houses or other buildings must be a part of the construction plan. The erection of machinery in an existing building does provide lien rights, however, if there were also incidental improvements necessary to allow for the machinery to operate which created a distinct new use for the building and effected a material change in the interior.
Remote Contractors and Suppliers. Anyone who has a contract, express or implied, with the owner of the property is a contractor, provided they supply labor and materials for the erection, construction, alteration or repair of an improvement on the property. A subcontractor has an express or implied contract directly with a general contractor for the supply of labor or materials to the property or has an express or implied contract with a subcontractor, who in turn had a contract directly with the general contractor.
Architects or engineers who contract with a contractor are not subcontractors within the definition provided by the code. All entities below sub-subcontractors have no lien rights. A Lien Claim may be amended without prejudice to intervening rights if both parties agree or if the claimant is granted leave of court,  A claim may not be amended after the time for filing has expired if the amendment:. Amount Claimed. Allocation concerns getting the correct property liened for the correct dollar amount.
These are obviously related concepts. Allocation issues involve multiple pieces of property. A townhouse building, for example, includes multiple townhouse units. Each townhouse unit is a separate parcel of real estate. The claimant must file a separate Lien Claim for each property.
If more than one property is involved, however, it is still necessary to allocate the claim among properties. Form of Enforcement. To enforce a claim, the claimant must eventually obtain a judgment upon the claim filed. The action is commenced by filing a complaint with the prothonotary clerk of the court. The procedure to obtain a judgment on a claim is essentially the same as the procedure for any civil court action.
The claim must be enforced by filing a complaint within two years of the date the claim was filed, unless the time is extended by the owner in writing. A defendant cannot bring a counterclaim but may seek a set-off that is limited to the amount of the Lien Claim. There is no automatic defense of payment for most commercial Pennsylvania project owners. The basic rule is that most commercial owners can be required to pay for the project twice.
Even if the owner has paid the general contractor in full, a subcontractor will be able to establish a lien and eventually foreclose on the property. The burden is on commercial owners to make sure that all subcontractors are paid or take affirmative steps to create a defense of payment.
If an owner can withhold payment from the contractor, it is more likely the claimant will be paid without the time and expense of filing suit to enforce the Lien Claim.
An owner will fight a Lien Claim much harder if the owner faces the possibility of paying for the project a second time.
Once an owner has been served with a notice of intention to file a claim, the owner is allowed to withhold funds from the contractor. Most Pennsylvania construction lenders require it. Any owner can also give the subcontractor written notice of the contract payment provisions to create a defense of payment,  although this is more difficult and less common.
In most owner-occupied residential projects, the owner will have a defense of payment to a subcontractor lien. This would also seem to rule out any builder or developer-owned residential properties. However, subcontractors would normally have no way to know whether the owner had paid the general contractor or whether the owner intended to use the property for their own residence.
Accordingly, it appears that subcontractors can and should file their Lien Claims if they are not paid. The statute seems to recognize this, stating that a court can issue an order discharging the lien against the property when the owner or tenant has paid the full contract price to the general contractor in response to a petition or motion to the court by the owner or a party in interest.
It is not clear who has the burden of proof on each condition. However, a subcontractor would not be in possession of evidence regarding payments by the owner or the intended use of the property, so the owner should have the burden.
An owner can also have a partial defense of payment. Where the owner or tenant has paid the contractor less than the full contract price, a court can also reduce the lien to the amount of the unpaid contract price owed.
Various types of liens can be placed on a piece of real estate. These are placed on the property purposefully by the property owner. The general rule is that all liens have priority in the order that they are filed in the land records. If the property is foreclosed upon, the first trust holder receives all of the proceeds of sale, until the first trust holder has been paid in full.
If there are any sales proceeds left, they go to the second trust holder, until the second trust holder is paid in full, and so on. The priority of any type of lien is extremely important. Priority will determine whether or not the lienholder gets paid upon foreclosure. A lien with low priority can easily be worthless. The lien exists from the moment labor and material are supplied to the property, as long as the claimant eventually perfects the lien by filing. Given the broad language in the statute, even purchase money mortgages and construction loans filed after a Lien Claim may have priority over the Lien Claim.
For this reason, it is all the more important for alteration and repair contractors to promptly file their Lien Claim. Before settling on any real estate loan, a lender without a properly drafted purchase money mortgage or construction loan should investigate whether any construction activity has recently occurred on the security property. With open-end mortgages construction loans , the lender may advance additional funds days, months or even years after the mortgage has been filed in the land records.
In addition, the lender may have priority for advances made for the payment of taxes, assessments, maintenance charges, insurance premiums or costs incurred for the protection of the mortgaged premises, or expenses incurred by a construction lender because of default or advances made under a construction loan to enable completion of the improvements for which the construction loan was originally made, if such mortgage states that it shall secure such unpaid balances.
Although not required by any statute, this may freeze construction draws. A purchase money loan is used to acquire real estate. The most obvious difference in priority will come from validity. The lien of a subcontractor will be preferred to the lien of the general contractor. This may not be enough protection if the real estate seller is insolvent.
Real estate purchasers, therefore, may want to independently inquire about whether labor and materials have been recently supplied to the property and whether all persons supplying labor and materials have been paid. If property is conveyed in good faith and for valuable consideration prior to filing a claim for alterations or repairs not new construction , then the lien is lost.
The perfection of the lien just gives public notice of this fact. In the case of new construction, the claimant is a secured creditor from the moment labor and material are supplied to the property and retains secured status even though lien enforcement proceedings are filed long after bankruptcy. Filing a Lien Claim for alteration or repair work after a bankruptcy petition would violate the automatic stay. It is clear that a claimant can serve the initial Notice of Intent on the Owner after the general contractor files bankruptcy without seeking the permission of the United States Bankruptcy Court.
In fact, it is important to keep in mind that the Notice must still be served and the Lien Claim filed within the normal time limits. It is still possible, but unlikely, that a bankruptcy by an owner would stay service of a Notice of Intent. It is also is not clear whether a bankruptcy by the owner or an upstream contractor would stay the filing of the Lien Claim with the court clerk. The safest course would be to obtain relief from the stay and file the claim before the time limit expires.
It is probable that the bankruptcy of the project owner,  or the general contractor  or any other upstream contractor will delay the time for filing the lawsuit. Only a general contractor has any statutory authority to waive the lien rights of lower tier subcontractors. Subcontractors cannot waive the lien rights of their lower tier sub-subcontractors, who must each sign a release in exchange for payment. All contractors should also be careful to review waivers signed for progress payments.
It is still possible to inadvertently waive lien rights for future deliveries in a progress payment waiver. Subcontractors on residential projects should check whether lien stipulations have been or will be filed when considering whether to supply labor and materials. Even if an owner has required a Stipulation Against Liens, a claimant may still be able to establish lien rights if the Stipulation was improperly filed. A Stipulation Against Liens may also be ineffective if it is in bad faith or the owner and general contractor are related parties.
The Stipulation must be filed under one of the following circumstances:. For this reason, the law requires owners to make sure that the Stipulation is filed and properly indexed. The Stipulation must be indexed in the names of both the general contractor and the owner of the property. If the Stipulation is not properly indexed, the waiver will fail and the subcontractors will have lien rights. This is one way that lien rights can still exist, even though the owner or lender required a Stipulation Against Liens.
However, if a lien claimant has actual knowledge of a lien waiver by the general contractor before the subcontractor claimant supplies labor and materials, the claimant will have no lien rights, regardless of whether the lien waiver was properly filed.
If the project includes land located in more than one county, the waiver must be filed in both county courts. Instead of filing a separate Stipulation Against Liens, the owner can simply file the entire general contract. Filing the general contract may also create a defense of payment, although it is more effective to have the general contract simply waive lien rights altogether on projects on which lien waivers are permissible.
If a general contract is filed, however, the Lien Claims of subcontractors can be limited to a pro rata share of the amount still owed to the general contractor at the time the Lien Claim is filed and served on the owner. Subcontractors and suppliers should always be aware of their security rights in determining whether to supply labor and materials to a project, at what price and whether some form of consensual security should be required.
If payment problems arise on a residential project with a lien waiver, however, claimants may still have lien rights. First, claimants should check whether lien waivers have been properly filed in a timely manner and properly indexed, as discussed in the section above on Filing of Stipulation. If a general contract is made between the owner and someone not intending in good faith to be the contractor, any lien waiver in that general contract is invalid. Subcontractors should also be careful to review waivers signed for progress payments.
Contractors are usually requested to sign waivers of lien at the time of each progress payment. Waiver forms presented for signature at that time vary greatly in their wording and effect. This may not be true, and a contractor should be careful to inspect the waiver form to determine the extent of rights waived.
Common lien waiver language is effective to waive future lien rights in other states. This is discussed in greater detail in greater detail in the chapter on Contracts and Preserving Rights, Contract Administration, Waiver Forms. An owner can make sure no liens are filed on residential projects by requiring a Stipulation Against Liens from the general contractor and making sure that it is properly filed.
Alternatively, the owner can create a defense of payment by filing a copy of the general contract. To do so, however, the owner must give written notice to the general contractor that contains the following:. After the general contractor receives such a notice, he has 30 days to complete one of the following:.
If the general contractor does not settle, discharge, defend or bond off the claim, the owner is permitted to:. Owners or general contractors may want to use this procedure instead of paying off a lien claimant if they intend to defend against the Lien Claim.
Instead of paying cash into court, the petitioner can post a bond for double the amount of the required deposit or in such lesser amount as the court approves. Carey , Pa. Ben Thompson Enterprises , B. Abernethy , Pa. 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].
It is not clear whether a failure to include the building permit number invalidates the Notice of Commencement and means that there is no loss of lien rights to potential claimants. The filing of a Notice of Completion is purely precatory advisory and is not dispositive of any relationship among the parties]. Building Contractors and Developers, Inc. Perry Brewing Co. Jarvis , 87 Pa.
Nenoff, et. Amin , Pa. County Ct. Baird , Pa. Williams , 32 Pa. Hardick , 60 Pa. Yorston , Pa. Means , Pa. Kenver Corp. Nitrochem L. Traditions of Am. Kessler , PA Super , 46 A. Weyant, et. Hommer Lumber Company, Inc. Dively , Pa. Yorston , PA Super , A. Hoza , 43 Pa. Cabinet Corp. Summit Square Apartments, Inc.
Century III Assoc. City of Philadelphia , Pa. Green , 25 Monroe L. Cresko , 54 Luz. Gaso , 69 Pa. Abeloff , 75 Pa. Midwest Supply Co. Luzerne County Housing Authority, Pa. LEXIS Street Road Shopping Center , 50 Pa. Lower Macungie Twp. McClure , Pa. Cross Realty Co. Moss Creek, Inc. Caste , Pa. Luzerne County Housing Authority , Pa. Philadelphia , Pa. Northwestern Pa. Philadelphia, Pa. Excavating, Inc. Rental Corp. On Site. It represents how we do business and the value we bring to your project.
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