For years construction lawyers in Pennsylvania have been taught that the requirements of the Mechanics Lien Law must be strictly followed or a mechanics lien claim will be stricken and lost.  In decades of precedent, it has been repeatedly stated that the Pennsylvania Mechanics Lien Law is a “creature of statute in derogation of the common law” and, therefore, in order for a lien claim to be valid it  must be filed in strict compliance with the Mechanics Lien Law.

Construction attorneys representing owners, whose property became subject to a mechanics lien, have used this well established principal to dismiss mechanics liens for any variety of deviations from the Mechanics Lien Law. Failing to attach a written copy of the construction contract to the lien; failing to properly identify the owner of the property; failing to properly serve the lien; and failing to give proper notice are some examples of deviations from the strict requirements of the Mechanics Lien Law that have resulted in mechanics liens being dismissed.

However, on January 6, 2012, the Superior Court in Bricklayers of Western Pennsylvania Combined Funds, Inc. v. Scott’s Development Company, 2012 WL 29299. overturned decades of precedent and held that “[p]ursuant to the plain language of 1 Pa .C.S.A. § 1928(a) and (c), the Mechanic’s Lien Law of 1963 cannot be strictly construed on the basis that it is in derogation of the common law. See 1 Pa.C.S.A. § 1928(a), (c).”  A copy of the decision is available here.

In Bricklayers, the Superior Court addressed the viability of mechanics lien claims that the trustees of employee benefit funds filed  for unpaid contributions owed to union members under collective bargaining agreements between a contractor and the unions.    The trial court concluded that the union members were not “subcontractors” under the Mechanics Lien Law because the collective bargaining agreements were not traditional subcontractor agreements, and the union members were employees and/or laborers of a contractor. The Superior Court overruled the trial court and concluded “that under the specific facts presented in this case, the unions are subcontractors and given the unique legal relationship that exists between the trustee and the union, the trustee has standing to assert a mechanics’ lien claim on behalf of the union.”

The Court refused to strictly construe the Mechanics Lien Law as it had done in the past because “the ‘derogation of common law’ precept violates the commands of 1 Pa.C.S.A. § 1928(a) and (c)”   Thus,  “[it] should no longer be used in connection with the Mechanics Lien Law of 1963.”    Moreover, the Court held  “[t]his is especially true since Sampson–Miller,the source of the strict construction rule, erroneously rested on case law interpreting the Mechanics’ Lien Law of 1901 and inaccurately transposed it to the successor statute, the Mechanics’ Lien Law of 1963.”  Therefore, the Court concluded, “the statute must be liberally construed to effect [its] objects and to promote justice.”  Based upon its holding, the Superior Court for the first time permitted unpaid unions – through their trustee fiduciaries – to assert a mechanics lien claim for unpaid benefit funds.

Obviously, the Bricklayer decision is groundbreaking simply because it creates a new class of lien claimants and another headache for owners of projects using union labor.  However, the Court’s decision that the Mechanics Lien Law should not be strictly construed is what will reverberate for years. Certainly, the Bricklayer holding will be used to counter any challenge to a mechanics lien claim based on a deviation from the requirements of the Mechanics Lien Law.  While the Superior Court seems to indicate that strict compliance with the notice and service provisions of the law are still required, it did so with a less than resounding endorsement stating “although strict compliance standard may be used to determine certain issues of notice and/or service, we conclude that a liberal construction of the definition of “subcontractor” is necessary to effectuate the Mechanics’ Lien Law’s remedial purpose of protecting pre-payment of labor and materials.”
Takeaway for Owners and Lenders
The Bricklayer decision impacts owners and lenders the most.  The decision combined with the 2006 Amendments to the Mechanics Lien Law, which outlawed (in most cases) pre-contract lien waivers , mean owners and lenders must be more proactive in order to insure a lien free project.  Owners and lenders should be requiring labor and material payment bonds from general contractors.  When a payment bond is posted, pre-contract lien waivers are still valid.  Also, owners and lenders should be obtaining affidavits from the benefit funds of the various trade unions working on the project attesting that a subcontractor is current on all fund contributions for members of the trades working on the project.    Proof of payment of benefit funds should be a condition precedent to payment.
Takeaway for Contractors
General contractors who have agreed to indemnify an owner against any lien claims should also be obtaining affidavits from the various trade unions attesting that all benefit fund contributions are current as a condition of payment.  Moreover, anyone who potential could classify as a “subcontractor” under the new broad definition of “subcontractor” should be filing liens for non-payment. The Bricklayer case probably clarified the unsettled question of whether equipment rental companies have lien rights and means equipment rental companies are probably clear to file a mechanics lien.
Will courts limit the Bricklayer’s liberal interpretation holding to certain areas of the lien law, such as the definition section?  Or will courts expand the liberally apply the lien law in other areas as well, such as with the potential need to file separate lien claims on condominium projects?   These issues will be sure to play out over the next few years as the courts determine the applicability of the Bricklayer decision to challenges to mechanics lien claims based upon deviations from the requirements of the Lien Law.  I would also not be surprised if the Legislature steps in at some point.  Of course, we will report on any decisions that we hear about on this issue.

 

 

 

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Wally Zimolong

Wally represents contractors (and subcontractors) and developers. His clients build and develop residential, commercial, and industrial properties nationwide. Wally enjoys working with the owners of the businesses he represents because they tend to be entrepreneurs and all around interesting people.

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