THE PENNSYLVANIA STATE CONSTRUCTION NOTICE DIRECTORY
What it Means for Your Company
In October, 2014 Governor Corbett signed Act 142, which provides for an internet registry to help Owners and higher-tier Contractors identify potential lien claimants. Because of uncertainty about implementation, the Act provided that the registry would not go into operation until the end of 2016, and provided for a later start date if necessary. The thought was that any perceived problems in the Act would be addressed in the 2015-16 General Assembly in time for the targeted implementation date. By this past Summer, one of the most-asked questions by those who work with mechanic’s liens was whether the registry would actually happen this year. The answer is that it will.
The registry will be called the State Construction Notices Directory. It will be under the direction of the Department of General Services, but it is being designed and will be maintained by an outside provider, Pennsylvania Interactive. DGS has not yet identified an internet address, and there is no beta site, although DGS has targeted December 16th as a launch date for a beta site. DGS continues to emphasize that the site will go “live” on December 31st.
The purpose of Act 142 is to provide a mechanism to allow higher tiers to determine who is in the universe of potential lien claimants so they can track payments down the payment chain and avoid “surprise” liens from claimants they had no knowledge of.
The requirements of the Act apply only to “searchable projects”, which are defined as projects with a Contract Sum of $1.5 Million or more. The amount is determined as to the entire Project, and not based on subcontract value. The Act is silent as to multiple prime contracts.
The State Construction Notices Directory
The Act is implemented with the establishment of the SCND website. That website will allow Owners of “searchable projects” to register a project. If a searchable project is registered, then any subcontractor, supplier, sub-subcontractor or supplier to a subcontractor must identify itself on the SCND within 45 days of first performing work on the project location or furnishing materials; if it fails to do so, it will—except in unusual circumstances—not be able to proceed with an enforceable lien.
Interface for the SCND
The SCND interface is relatively user-friendly, and set up to guide users through the required steps on a step-by-step basis.
Participation with the Directory is optional for Owners. But if an Owner wishes to avail itself of the protection the Act offers—identification of potential lien claimants—the Owner must register the Project by filing a Notice of Commencement. “Filing” is actually a misnomer: a better description is that the Owner will have to complete the information required by the boxes in a series of pulldown windows on the Directory site, providing information identifying the project, record owner, Tax Parcel ID No. and other information that can help a claimant in filing a lien. The Notice of Commencement must be filed before commencement of work. It is anticipated that there will be a $72.00 fee for filing a Notice of Commencement. No other charges are required to use the site, or to file anything other than a Notice of Commencement.
Contractors are included in this paragraph because the Act provides that the Owner may have the Notice of Commencement filed by its agent, including its contractor. There are other responsibilities for Contractors, including notice to lower-tiers and posting; there are also “anti-interference” provisions prohibiting Contractors from causing lower tiers to not register on the Directory.
Subcontractors and Suppliers, and Third Tiers
If a project is registered—meaning if an Owner or its agent files a Notice of Commencement—a Subcontractor must file a Notice of Furnishing within 45 days of first furnishing work or materials or equipment to the jobsite. Failure to do so will generally result in the loss of the right to lien. So filing a Notice of Furnishing is one of two critical steps that should concern subcontractors.
Another critical step comes earlier: determining whether a Notice of Furnishing is required. Such notices are only required if the Owner has identified the project on the Directory. Subcontractors will have to get into the habit immediately at the start of 2017 of searching the SCND whenever it starts a job to determine whether the project is listed; if it is, the sub will have to give the required Notice of Furnishing within 45 days of starting work or first delivering material.
NOTE: For Subcontractors, filing the Notice of Furnishing is an additional step. Doing so does not eliminate the requirement that a Subcontractor furnish Formal Notice under 49 Pa. C. S. §1501.
CAVEAT: This summary is solely to alert readers to the upcoming implementation of Act 142 and the Pennsylvania State Construction Notices Directory. This summary is incomplete and preliminary, and should not be relied upon as legal advice for any specific situation. For actually using the Directory, or for any specific situation, consultation with counsel is strongly advised.
GBCA will provide further information concerning the directory in December or early January. The purpose of this Summary is to let members know that these changes to the Lien Law remain on track to take effect on 12/31/16.
Stan Edelstein chairs the Construction Law Services Group at Fineman Krekstein & Harris P.C. in Philadelphia. His email is firstname.lastname@example.org