Long Answer:  It’s extremely common for folks to not quite understand the differences between preliminary notices and notices of intent to lien; and further, to not quite understand when a state requires notices of intent to be sent.

Generally speaking, the states that require a “Notice of Intent to Lien” are in the minority. We wrote a blog post listing out the states that require notices and when these notices must be filed.  While every state is a little different, the “Notice of Intent to Lien” states typically require the lien claimant to notify the property owner 10-30 days before moving forward to file the lien.

However, the majority of states do not have any such requirement, and those unpaid on a construction project can proceed to file their lien without ever sending a “notice of intent” or warning anyone immediately before filing.  You can check out a summary of the 50-State Mechanic Lien Laws at Zlien.com/Lien-Law/ to get details about the requirements in your state.  Also, if you want to order a mechanics lien or notice of intent, you can do so on the LienWizard.

Site Work Does Qualify for Mechanic Lien Rights

As I’ve written previously, it is very important to understand just who can and cannot file a mechanic’s lien.  Each state restricts which work qualifies for the lien rights.  Check out this post for a quick overview of this problem:  FAQ: What Work Qualifies Me To File A Mechanic’s Lien?

In Pennsylvania, the Mechanic’s Lien Law establishes that a lien may be filed for work “when such work is incidental to…erection, construction, alteration or repair.” 49 P.S. §1201(12)(a). As explained by Fox Rothschild’s Construction Law Blog, this language made it “unclear…if a contractor performing site work to property (or similar work) could file a mechanic’s lien against that property.”

The Pennsylvania court ruled that site work does qualify for mechanic lien protection, regardless of whether the planned work is completed or not:

[W]e decline to equate the phrase “incidental to the erection [or] construction” with the requirement that a structure actually exist, particularly where, as here, excavation clearly was performed in preparation for planned construction…

..[W]hen excavation and related site work is performed as part of a “continuous scheme to erect” a structure, the Mechanic’s Lien Law would permit the lien to attach.

Read the full text of the court’s opinion (and the dissent) in B.N. Excavating, Inc. v. PBC Hallow-A, L.P. and PBC Hollow-B, L.P., No. 1704 EDA 2010, 2011 PA Super 120.

Pending PA Bill Will Shorten Lien Period and Increase Notice Burden

Pennsylvania is considering a change to its Mechanic’s Lien Law with House Bill 1602, which would reduce the lien period from six months to four months, and would increase the notice burden on contractors and suppliers.  As reported by Construction Law Signal, the bill was considered last week by the state’s House Labor and Industry Committee…and according to the author there, would have “negative implications for the construction industry as a whole.”

Read House Bill 1602 Full Text

Track House Bill 1602

Prime sponsored by Rep. Killion, the bill would allow property owners or prime contractors to file a Notice of Commencement at the start of construction.  If the notice is filed, those who did not contract with the property owner would be required to serve a “Notice of Furnishing” within 20 days of first furnishing labor or materials to a project. This notice provision is very similar to notice requirements elsewhere in the United States.

In addition to substantially altering the notice scheme in Pennsylvania, there is another tiny – but important – change proposed by the bill.  If it becomes law, HB 1602 would reduce the lien period for all claimants from 6 months to 4 months after completion of the work.

The blog post does an excellent job of summarizing three 2010 cases that construe Pennsylvania lien laws. Review on case law on Pennsylvania mechanic lien law is important for contractors and suppliers in the state, because of this reason well-explained by the folks at Harmon & Davies:

These opinions give us a pulse on how courts will interpret similar mechanic’s lien issues. Moreover, in light of the 2007 and 2009 amendments to the Mechanic’s Lien Law, construction industry insiders should stay abreast of how courts are interpreting the anti-waiver provisions of the amendments as this is a developing area of law.

If you do any work in Pennsylvania, I highly recommend reviewing this blog post, and taking some time to think about these three 2010 cases interpreting PA laws. It doesn’t appear that anything groundbreaking or law-changing happened in these cases, but it does give the reader a big picture understanding of how the PA lien laws will be enforced and read.

The existence of these laws can undermine a contractor’s true security in getting paid on a job, while providing assurances to consumers and builders that financing will not be held up by downstream contractors.

In Nevada, recent law effectively made it possible to limit lien rights during contracting. John Foust and John Ralls of Howrey LLP offer the case of Dayside, Inc. v. First Judicial District Court, 75 P.3d 384 (Nev. 2003) as an example of this unique legal protection. In that case, a contractor signing a standard form contract, which contained a waiver of lien rights clause was prevented from asserting its lien claim. The court found that a knowing assent to a clear and unambiguous term, waiving lien rights, was an enforceable clause which was not adverse to public policy.

In the book Fifty State Construction Lien and Bond Law By Robert Frank Cushman, Stephen D. Butler, Laurence Schor, the authors illustrate that the State of Alabama has permitted contractual waiver of lien rights prior to the work being initiated. The book, which can be found on Google Books, illustrates that Alabama further provides builders with the right to obtain a list of all other contractors working on the job from the general contractor.

On the contrary, states such as Pennsylvania have taken steps to ensure that contractors’ rights are not upended through contract. Joshua Lorenz of Meyer, Unkovic and Scott addresses the effect of a 2006 law, taking effect January 1, 2007, which unanimously passed through the state legislature with the intent to prevent contractual waiver of lien rights. Joshua’s analysis was that the law would have an immediate impact upon construction lending, title insurance and delays on projects.

A second opinion by Michael Zukowski, of Kirkpatrick & Lockhart states that in some instances, where contractors post a payment bond, or for residential construction under $1,000,000.00, a contractor may still expressly waive its lien rights prior to beginning work. Regardless, Pennsylvania’s stance clearly prevents builders from running amuck of the mechanic’s lien statutes.

Florida also prevents the pre-performance waiver of lien rights. An article by Jeffery Wertzman indicates that contractors cannot contractually release these rights until after they have actually performed the work to be released.

In 1994, New Jersey’s legislature passed sweeping reform to its mechanic’s lien statutes. The effect of these laws, among other things, abolished lien waivers during contracting as against public policy. Peter J. Smith of Connell Foley, LLP opines further in his article which can be found in the firm’s publications section.

Similarly, Illinois law expressly prohibits the waiver of lien rights during contracting. Heidi Hennig Rowe, of Schiff Hardin LLP’s Chicago practice, opines that the Illinois mechanic lien statute provides no avenue for a project owner to prevent a contractor from liening its project during contracting. Seemingly becoming the majority position, contractors’ rights are once again protected in the Midwest.