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Mechanics Lien Law Update

Some of the October 2009 changes to the PA Mechanics Lien Law apply to a contractor or subcontractor’s ability to waive the right to a mechanics lien on “residential building.”  This is important because, if the right can be waived, owners and general contractors will sometimes compel contractors to waive this right.  Prior to 2007, contractors, subcontractors and material men could waive their right to place a lien on almost any type of building.  In 2007, the Mechanics Lien Law was amended to limit contractor’s waivers to residential buildings with a total contractor price of less than $1 million while permitting a subcontractor to waive its lien rights for almost any project.   The 2007 amendment to the Mechanics Lien Law refined these issues.  

In October 2009, the Mechanics Lien Law was amended again to clarify when the right to a mechanics lien can be waived.  Now, waivers are limited to: 1) contractors who perform work on residential property, i.e., a property on which a residential building of not more than 3 stories in height has be erected; 2) subcontractors on a residential property, and; 3) subcontractors on non-residential projects if a payment bond is posted by the contractor.  In conclusion:

·    Contractors can only be compelled to waive their right to a Mechanics Lien on non-residential projects (as defined by the statute) and a contractor’s waiver is only effective for residential projects;
·    Similarly, subcontractors can only waive their rights to a mechanics lien on residential projects (as defined by the statute).  Waivers on non-residential projects are not effective against subcontractors, unless a payment bond is posted, but;
·     These limitations do not apply to residential properties of more than 3 stories. 

Please contact us if you have any questions about how these changes might apply to your business.

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