What do changes to Mechanics lien laws mean for you?
Act 42, an updated and amended version of the mechanic's lien law of 1963 recently took effect and has given new rights and obligations to property owners, contractors, subcontractors and suppliers of qualifying construction projects.
The most notable changes to the law have come in the form of updated technology. Mainly a new database that streamlines forms and notifies all parties involved in a construction project. To qualify a new construction project and add it to the database, the project must meet a minimum $1.5M in value. Once a project is qualified, the property owner can then add it to the database which will prompt the owner to complete a series of detailed questions about the project, including the proposed start date of construction.
The most important requirement of Act 42 is the notice of commencement that is filed by the property owner after the project is completed. Once this notice is filed, all contractors, subcontractors, and suppliers will be automatically notified. At this point, they can submit a notice of furnishing to the database to receive payment for their work. If the contractor does not receive payment, they have the option to file a notice of nonpayment. However, if they fail to do so it will not affect their right to file a future lien.
Under the new system enacted by Act 42, property owners are now better equipped to avoid double payments that arise when a property owner pays a contractor but then is confronted by a mechanic's lien from a sub-contractor. It also benefits contractors who receive nonpayment claims from sub-contractor and suppliers. Before act 42 was enacted it was often extremely difficult if not impossible to track the chain of contracts and determine who had been paid in full.
Act 42 also includes provisions for criminal charges that can be filed against property owners, their agents, contractors, or subcontractors who suggest, request, encourage or require that a party does not file a notice of furnishing. It also leaves violators of mechanic's lien law open to future civil actions.