- Managing Partner
A few weeks ago, I shared part one of this blog post on mechanic's liens. It was more of an introduction to the "what" and "why" of mechanic's liens, with a bit of legal description thrown in for good measure. In part two, I go into greater detail on the process for claiming a lien, who can file and how Pennsylvania has made the process more user friendly.
TIMING FOR CLAIMING THE LIEN
Owners, contractors, subcontractors, material suppliers and design professionals. All these folks have a right to claim a lien if they’ve provided labor or materials and have not been paid. But there are different requirements for each.
Contractors, meaning those with a direct contractual relationship with the project owner, have six months from the last day they provided labor or materials to the project in order to file their mechanic's lien. File your lien a day late and you lose it. And don’t think that you can wait until the last day to file the lien. There is specific information you or your lawyer will need to have on hand in order to prepare the lien documents, and some of it takes a while to assemble. A good rule of thumb is that if you have a mechanic's lien deadline, start preparing the information at least six weeks in advance. That means if you’re a contractor and the owner has not paid your final bill four months after you finished your job, it’s time to get your attorney involved and to explore enforcing your lien rights.
If you’re a subcontractor, meaning someone who has a contract with the contractor as opposed to the owner, your rights and timelines operate a little differently. As a subcontractor, you must give written notice of your intention to file a lien to the contractor and the owner at least 30 days before you can file. The lien itself must still be filed within six months of the last day you provided labor or materials to the project. If you give your written notice of intention to file your lien on January 31, and then want to file your lien on February 28, guess what? It’s too early to file the lien. Now, your six-month period for filing expires and tomorrow is too late to file the lien.
As they say, timing is everything. Remember the following when it comes to filing a mechanic's lien:
- Don’t pursue lien claims at the last minute.
- Send your notice early.
- File your lien early.
- Don’t let the passage of time destroy your mechanics lien rights.
WHO CAN FILE A LIEN?
Contractors who have a direct contract with the owner can file a lien. Subcontractors who have a direct contract with the contractor (“first-tier subcontractors”) can file a lien. Those who have a direct contract with a first-tier subcontractor (a “second-tier subcontractor”) can file a lien. Third-tier subcontractors? Sorry, no lien rights.
It is important to know exactly who you are contracting with. Sometimes you might be providing materials and labor to the subcontractor who is providing the HVAC work to the Construction Manager who has the prime contract with the owner. You’re second tier and good to go. But what about the guy who rented cranes to you? Or sold you the heat pumps? He’s a third-tier supplier. Does he have mechanics lien rights? Not a chance.
There are differing rules for different project participants. For instance, design professionals can have lien rights, but only if they have a direct contract with the owner. If they are hired by a construction manager or contractor, they have no lien rights. In addition, an architect or engineer only has lien rights if, in addition to preparing drawings, he or she engages in on-site supervision of the work. One doesn’t need to be on site directing the work every day, but some work must be on site. Supervising startup of equipment, for instance, would provide a good argument.
In Pennsylvania, the state has created a construction project directory that is meant to streamline the mechanic's lien process. You can answer the question of whether the goal has been met yourself. However, the basics of the plan are as follows:
An owner or prime contractor can cause a construction project with a value in excess of $1,500,000 to be registered in the database. That will make it a searchable project. The owner (or his agent, including the prime contractor) can then file a “Notice of Commencement” with the directory. The Notice of Commencement must be filed on the directory and posted at the project site before work commences on the project.
The filing of the Notice of Commencement triggers an obligation on the subcontractors who might otherwise have mechanics lien rights in the future. Those subcontractors must now, within 45 days of providing labor or materials to the project, file a “Notice of Furnishing” on the database. Failure to file the Notice of Furnishing waives your mechanics lien rights for that project.
WRAP – UP
To give you the full legal schematic for mechanic's liens and all their intricacies, exceptions and arguments, would be the subject of a rather lengthy book, not a blog post. The intent here is simply to help you get your head around a few important concepts:
- The mechanics lien is a very potent tool to help you get paid. It’s not the only way, but it is very powerful.
- To take advantage of this powerful too, you must act timely. If someone owes you money on a job for 90 days, it’s time to get your attorney involved and determine your mechanics lien rights.
- Be aware of the State Construction Notices Directory on the PA Department of State’s website, and make sure that you don’t unintentionally waive your lien rights by failing to file your Notice of Commencement.
There are too many requirements and traps to fully list here. Most lien claims require a little bit of investigation and analysis, but if you’re entitled to the lien and if you file it correctly, your chances of getting paid go up exponentially. If you need help on any lien questions, visit our Construction Law webpage or feel free to contact me for more information.