Few things can sour the completion of an otherwise successful construction project more than a lingering mechanics’ lien claim—especially where the developer or project owner did not see it coming. Pennsylvania’s General Assembly took steps to assist developers and project owners in preventing against this scenario when it passed Act 142 of 2014, which led to the establishment of Pennsylvania’s State Construction Notices Directory (the “Directory”) in December 2016. This post, Part I of a two-part series, discusses the benefits of registering a project on the Directory. Part II will highlight how underutilized the Directory is in many parts of Pennsylvania.
The Directory is an online database that was developed and is now managed by the Pennsylvania Department of General Services. It is used for the filing and dissemination of certain project-related information on qualifying construction projects in Pennsylvania. When the cost of a private construction project meets or exceeds $1.5M, the project is eligible to be “registered” on the Directory. Project registration is wholly voluntary, and whether to register is a decision for the owner or developer. A project that is registered is known as a “searchable project” per the statutory terminology. Registering a project offers important benefits to developers and owners.
First, registering the project can extinguish a potential lien claimant’s right to assert a mechanics’ lien claim during or after construction. By filing a Notice of Commencement on the Directory, the owner or developer immediately creates a precondition for a mechanics’ lien for all persons or entities that will be furnishing labor, equipment, or materials to the project. In order to preserve their mechanics’ lien rights, subcontractors and suppliers must file a document known as a Notice of Furnishing within a prescribed time frame; failure to do so results in forfeiture of lien rights. Because of the relative infancy of the Directory, it is not uncommon for subcontractors and suppliers to forgo searching the Directory to determine whether a particular project has been registered. These would-be claimants may not otherwise know of their obligation to file the Notice of Furnishing in order to preserve their lien rights. Others may be aware of the obligation, but simply fail to timely file a Notice of Furnishing. When the potential mechanics’ lien claimant later attempts to make a lien claim, their claim will be invalidated for failure to file the Notice of Furnishing. Each failure on the part of subcontractors and suppliers to file a Notice of Furnishing decreases the pool of possible lien claimants.
Another benefit for developers and owners is enhanced clarity with regard to the identities of potential lien claimants, including an enumerated listing of all persons or entities that could file a mechanics’ lien. A common scenario before the introduction of the Directory, and in locales that currently underutilize it, was that owner and developer were resigned to guessing at who might later appear from the proverbial woodwork to assert a mechanics’ lien claim against the project. Now, a savvy developer or owner who registers their project on the Directory can use the Notice of Furnishing filings to their advantage. For example, by reviewing the list of subcontractors and suppliers that may later come knocking to assert a mechanics’ lien claim, the owner or developer can ensure that it obtains lien waivers during construction from everyone that has lien rights (i.e., those suppliers and subcontractors listed on the Directory).
In enacting legislation that called for the creation of the Directory, the General Assembly clearly was responding to a deficiency, and the Directory has indeed added appreciable benefits for developers and owners. In the forthcoming Part II of this post, we will discuss the disparate use of the Directory across Pennsylvania. Please contact any member of the McNees Wallace & Nurick Construction Law Group or Land Use Group with questions regarding this post or for assistance with any land use issues.