A major concern any contractor or sub-contractor has when working on a project is being paid for the materials and services that they have provided. When the project is progressing without any financial difficulties, payments are timely issued and the sub-contractor or contractor is paid for all the work that they perform.
Of paramount importance to determining the deadline to file a Mechanics’ Lien Claim is the date of last work performed by the prospective claimant. A lien claim must be filed no later than six months after the claimant’s date of last work – lien claims filed after six months are time barred and will be stricken by any Court. As a result, the question of what constitutes “work” within the Law’s definition of “last work” has been the subject of much litigation, but without much guidance in the form of binding precedents from Pennsylvania’s Appellate Courts.
This blog is part of an ongoing series discussing the Pennsylvania Mechanics’ Lien Law. For more information on Mechanics’ Liens in Pennsylvania, click here.
For decades in Pennsylvania, there was a lack of clarity as to when Mechanics’ Lien Claim rights attached to a project where the work and materials provided were for the demolition, removal of improvements, excavation, grading and the like. The text of the Pennsylvania Mechanics’ Lien Law of 1963 is clear that lien rights attach for such work and materials furnished “incidental to the erection, construction, alteration or repair” of a permanent structure. What was unclear was whether or not lien rights would attach to a project where such work was performed and materials furnished as part of the contemplated erection or construction of a permanent structure that is never actually erected or constructed. For a multitude of reasons, a construction project may be initiated but fail to progress through the initiation of construction of the structure, including the failure of construction financing and poor financial planning on the part of the owner or prime contractor. In such cases, a contractor or subcontractor may have already performed demolition, excavation, or site work that in and of itself does not constitute a permanent structure. In B.N. Excavating, Inc. v. PBC Hollow-A, L.P., 2013 Pa.Super. 120 (2013), the Pennsylvania Superior Court held that where excavation work is performed incidental to the planned erection or construction of a permanent structure, lien rights attach for the excavation work even if the structure is never erected. Therefore, where excavation and groundwork occurs that is connected to a planned structure, and not independent of a structure, lien rights will attach. This holding is welcome news for contractors involved in demolition, hauling, excavation, grading, and paving, as it makes clear that lien rights for such work is not dependent upon the successful progress of a project after the contractor has completed its work.
This blog is part of an ongoing series discussing the Pennsylvania Mechanics’ Lien Law. For more information on Mechanics’ Liens in Pennsylvania, click here.
For decades, Mechanics Lien Claims filed under the Pennsylvania Mechanics’ Lien Law of 1963 were reviewed scrupulously by the courts. Because Mechanics’ Lien Claims were considered “creatures of statute” in derogation of the common law, and constituting a special remedy for a unique and discrete class of creditors not granted to others, Lien Claims were construed strictly and absolute adherence to the requisites of the statute was required to withstand efforts to strike off the Lien Claim. If even relatively minor mistakes were made in preparing, giving the appropriate notices of, filing, and serving the Lien Claim, Courts were likely to strike off a Lien Claim in its entirety. This view was distilled in the Superior Court’s opinion in Sampson-Miller Associated Cos. V. Landmark Realty Co., 224 Pa.Super. 25 (1973). Rarely would preliminary objections or a motion be made to a Court seeking to strike off a lien claim that did not quote directly from the Sampson-Miller opinion, emphasizing that the Court was bound to “strictly construe” the statute and dismiss Lien Claims that did not comply with the Statute in any way. So ubiquitous was the language of Sampson-Miller that it constituted common knowledge even among attorneys who only casually practiced in the area of construction law and litigation.
In 2012, the Superior Court upended Sampson-Miller, and with it owners’ most common strategy to avoid filed Lien Claims. In Bricklayers of Western Pennsylvania Combined Funds v. Scott’s Development Co., 2012 Pa.Super. 4 (2012), the Superior Court expressly reversed its earlier holding in Sampson-Miller. In Bricklayers, the trustees of an employee benefit fund for a trade Union sought to file a Lien Claim as a “subcontractor” for unpaid contributions to employee benefit funds arising from work performed by the Union’s workers for a general contractor pursuant to collective bargaining agreements with the general contractor. The Union trustees argued that, contrary to the holding of Sampson-Miller, the Mechanics’ Lien Statute should be liberally construed, and that the Union by its trustees should not be denied standing to file a Lien Claim as a Subcontractor due to an overly technical and narrow construction of the law. The Union’s trustees argued that a liberal construction of the definition of “subcontractor” was warranted to ensure its prepayment of labor for the benefit of the property. The Superior Court agreed, stating that the Mechanics’ Lien Law, and the definition of “subcontractor” in particular must be “liberally construed to effect [its] objects and to promote justice.”
Although the Superior Court set forth a liberal construction standard, the Court cautioned that “a strict compliance standard may be used to determine certain issues of notice and/or service” when assessing the striking off of Lien Claims. Accordingly, some limited “strict compliance” grounds may remain to strike off a Lien Claim, but no specific reported cases have elaborated on this to date. It should be noted that the Superior Court’s Order and Opinion in Bricklayers has been appealed to the Pennsylvania Supreme Court, and the issue of whether liberal construction of the law is proper will be reviewed by Pennsylvania’s highest Court. Until the Pennsylvania Supreme Court renders its opinion, the law of Lien Claims will remain uncertain, but the liberal construction standard will be applied by trial courts in the meantime.
On March 13, President Obama directed the Labor Department and its secretary, Thomas E. Perez, to modify existing Federal Overtime Regulations under the Fair Labor Standards Act (“FLSA”).
I, along with my colleagues Rachel Lilienthal Stark and Henry E. Van Blunk, have authored a client alert regarding important changes to the law governing limited liabilities formed in New Jersey. While the law was actually passed in September of 2012, it did not affect existing limited liability companies until March 1, 2014. The law, known as the New Jersey Revised Uniform Limited Liability Company Act, or “RULLCA”, makes significant changes to many of the legal principles underlying the organization and operation of limited liability companies. Because RULLCA introduces several new “default” rules that will apply in the absence of a contrary provision in the operating agreement, your company’s governing documents should be carefully reviewed to determine the necessity or appropriateness of any amendments.
With the assistance of my fellow Stark & Stark Shareholders Daniel J. Sheridan and Henry E. Van Blunk, I have co-authored an important client alert about a law deadline that could impact all limited liability companies in the state of New Jersey. The article discusses the New Jersey Revised Uniform Limited Liability Company Act (RULLCA), which significantly changes many of the legal principles underlying the organization, governance and operation of limited liability companies. While, until now, existing LLC’s were not impacted by this new law, the grace period expires on March 1, 2014 and the new act will apply to all existing New Jersey limited liability companies.
The Pennsylvania Superior Court recently relaxed the Pennsylvania Courts’ trend of scrupulously constraining the use of warrants of attorney, also known as “confession of judgment” clauses in non-consumer credit transactions. In Graystones Bank v. Grove Estates, LP., 2012 Pa.Super. 274 (2012), affirmed at 2013 Pa. LEXIS 2855 (Pa. 2013) a debtor made a Promissory Note in favor of the creditor, which contained a warrant of attorney. After some time, the debtor began to have trouble making payments under the Note. The creditor then required the debtor to establish an interest reserve and pledge additional real property as collateral, and to enter a “Change in Terms Agreement.” The Change in Terms Agreement did not itself include a warrant of attorney.
Many commercial credit agreements contain Confession of Judgment or “Warrant of Attorney Clauses.” In general terms, a Warrant of Attorney permits a creditor to enter judgment against a debtor without first giving notice and an opportunity to defend the case against him. Usually, the debtor will first become aware that judgment has already been entered against him by receipt of a notice.
On April 15, 2013, the Farmland Assessment Act of 1964, N.J.S.A. 54:4-23.1 (the “Act”) was amended imposing new requirements for farmland assessment beginning in tax year 2015 The Act provides for property tax exemptions up to 98% for a landowner that uses the property for farming and meets the eligibility requirements of the Act.
