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Negative PA Mechanic’s Lien Change Goes into Affect in September
August 11, 2014
With the summer signing by Pennsylvania Gov. Tom Corbett, the mandates within the state's SB 145 will go into effect on Sept. 7 and usher in some fairly significant changes for subcontractors and material suppliers working on residential projects. NACM Secured Transaction Services’ Chris Ring and some prominent Pennsylvania attorneys characterize the new law as a lose-lose for subs and suppliers pretty much all around.
In essence, the change affects the dollar amount of the lien that a subcontractor or material supplier can file, basing it on the amount of the funds owed from the property owner to the general contractor. The subcontractor’s lien rights will now be limited to the amount still owed to the contractor, general contractor. Nicholas Krawec, Esq., of Bernstein-Burkley PC, noted that the amount could, and usually will be, less than the amount owed to the sub or supplier. He added that “it’s a big deal” for subs and suppliers. But it’s even worse if the homeowner has made full payment.
“Essentially, subcontractors and material suppliers have no lien rights if the property is or is intended to be used as the residence of the owner or subsequent to occupation by the owner or a tenant of the owner,” said Ring.Read more...
Shale 'Revolution' and the Impact on Mechanic’s Liens
July 28, 2014
As noted by a growing number of sources, natural gas, specifically shale gas, is booming in the United States like few other industries have in some time. But as people count on future money and positive trends, seemingly all growth areas have their bumps in the road, at best, and, at worst, watch bubbles burst spectacularly. There is little historic evidence to say there won’t be problems on some projects related to gas, specifically construction-related improvements that could affect service providers and materialmen. It begs the question: will mechanic's liens play a role in future line and well improvements?
"I certainly would not tell a client that it is not an option. I think there is an argument that you can, in fact, file a mechanic’s lien on such a project," said Kit Pettit, a senior associate with the Pennsylvania firm Bernstein-Burkley PC. "Yes, there is a certainly a lot of money in the industry right now and typically there is plenty of cash flow to pay vendors and contractors performing well. At the same time, there are a number of new entities or startups looking to get work. You may very well have companies that fail to perform properly. You may have companies that don’t know what they’re doing or perhaps expanded too quickly or don’t have employees with enough skill or training."
Mechanic's liens vary greatly from state to state, even among high-production states, according to Chris Ring, of NACM’s Secured Transaction Services. For example, the lien laws of Pennsylvania seem significantly more vague than those of Texas or Oklahoma (all three are among the top five in US states producing natural gas). As noted by Pettit, there still exists sparse case law available on the topic that is applicable to the current situation, in part because the boom conditions mean there have been few problems to date.Read more...
STS Roundup: Missouri, Colorado and Ohio
June 30, 2014
Missouri will have a new retainage statute starting in August after Governor Jay Nixon signed SCS SB 529 into law last week. Under current law contractors in Missouri must pay subcontractors and suppliers when they receive payment on a public project less any retention not exceeding 10% of the value. SB 529 lowers that retention threshold to 5%. It also provides that a public owner may retain up to 10% if the contractor is not required to obtain a surety bond on the project, which is to say if the value of the project is ,000 or less. The new statute also provides that if a public owner determines that certain aspects of a public project are not substantially or satisfactorily completed, the owner must provide a written explanation within 14 calendar days to the contractor, which must then inform any subcontractor or supplier that might be held responsible. Failing to provide this notice means the public body must pay at least 98% of the retainage within 30 calendar days.Read more...