The Pennsylvania Mechanics’ Lien Law has been tweaked for the second time since 2006.  Signed into law by Governor Rendell on August 11, 2009, and effective as of October 10, 2009, Act 34 amends the Lien Law of 1963, as well as the 2006 amendments. Specifically, the 2009 amendments expand the ability to obtain advance waivers of mechanics’ liens for residential projects only three years after the 2006 amendments instituted broad restrictions on the use of such waivers.

 

Under the prior amendments, up-front waivers were only permitted on a residential project where the total contract price was less than $1 million. However, under the new amendments, the monetary threshold has been eliminated, and a new definition of “residential property” has taken its place. Now, if the project involves “residential property,” as such term has been redefined, up-front waivers are permissible no matter what its total contract price.

 

More particularly, the new law defines “residential property” as that “which there is or will be constructed a residential building not more than three stories in height, not including any basement level . . . .” As such, under the new amendments, up-front waivers will be effective for (i) Contractors working on a “residential property” (a residential building of three stories or less) regardless of cost, (ii) Subcontractors working on a “residential property” (a residential building of three stories or less) regardless of cost, and (iii) Subcontractors working on non-residential projects where the Contractor has posted a payment bond. However, the up-front waivers will not be effective for Contractors working on non-residential jobs, as well as Contractors and Subcontractors working on residential buildings that do not meet the new definition of “residential property” (that is, buildings that are more than three stories in height).

 

These changes will undoubtedly result in the wide-spread use of up-front lien waivers for contractors and subcontractors working on “residential property” projects. However, as the new amendments were not effective until October 10, 2009, and these waivers are pre-construction/pre-payment in nature, they will not apply to any projects in which work started prior to such date.