Ruling Stresses Importance of Strict Adherence to Mechanics’ Lien Requirements
Written by: Alan Nochumson
In Pennsylvania, if a contractor is not paid for repairs or improvements made to real estate, the contractor can either take the traditional path of litigation and sue the property owner by filing a complaint under contractual or equitable theories or file for a mechanics’ lien that clouds title to the real estate.
If the contractor files for a mechanics’ lien, practically speaking, the property cannot be sold and there cannot be any change in financing of the property by way of a mortgage loan without the mechanics’ lien being paid or discharged.
In other words, obtaining a mechanics’ lien is a very powerful tool for any contractor if there is a payment dispute with the property owner.
In Baker v. Amin, 2022 Pa. Super. Unpub. LEXIS 336 (Feb. 4, 2022), the Pennsylvania Superior Court analyzed a contractor’s compliance with the Mechanics’ Lien Law of 1963 (MLL), 49 P.S. Sections 1101-1902, which was established to protect contractors, subcontractors, and even suppliers against property owners who may refuse to pay for labor and materials as it relates to repairs and improvements made to real estate.
In Baker, the property owners purchased a vandalized and seriously damaged skating rink in Dunbar Township, the opinion said.
They subsequently entered into oral agreement with a contractor to renovate the skating rink, the opinion said.
The contractor was expected to provide labor and materials for the renovation project, using a diagram provided by the property owner, the opinion said.
According to the opinion, the contractor worked on the renovation project for almost a year but ceased work when the property owner allegedly failed to make payments due to the contractor.
The contractor then filed a mechanics’ lien claim against the property owners in the Fayette County Common Pleas Court.
In doing so, the contractor alleged that, while the property owner paid $100,000 to the contractor, the contractor believed that it was owed an additional amount of $68,304 for labor and materials it expended during the renovation project.
In response, the property owners claimed that the contractor “failed to provide a detailed statement of the kind and character of the labor and materials furnished and prices charged for each” as required by Section 1503(6) of the MLL that governs the contents of a claim made by a contractor under the MLL.
The trial court ultimately ordered the contractor to file an amended complaint in compliance with Section 1503(6) of the MLL.
The contractor’s amended complaint included exhibits with invoices, receipts and cost breakdowns.
However, the property owners maintained their argument that the contractor failed to provide detailed statements regarding the cost breakdown for labor and materials, as mandated by the MLL.
The property owners argued that the contractor “only gave a broad description of the alleged money owed and a broad description of what the money was used for.”
The property owners filed a motion for summary judgment, asserting an identical argument under Section 1503(6).
The trial court granted summary judgment in part, noting that the invoices that did not comply with the MLL would be excluded from consideration.
At trial, it was ordered for the parties to submit briefs about the application of the MLL under the circumstances of the case.
The trial court found that, even with the amendments to the complaint, the contractor did not comply with the MLL.
After the trial court denied the contractor’s post-trial motion, the contractor filed an appeal to the Superior Court.
On appeal, the contractor argued that the case law interpreting the MLL utilize a “rule of ‘substantial compliance’ when determining if a claim filing has complied with law,” such that “wherever enough appears in the statement to point the way to successful inquiry.”
The contractor contended that the exhibits attached to the amended complaint substantially complied with the requirements of Section 1503(6) by providing: the employees who worked on the renovation project and their hourly wage; the dates and hours worked for these employees; the land involved and the character of the renovation project; a description of a previously unbilled kitchen equipment; and the date when the last work occurred.
The contractor further claimed that it could not detail exactly what labor or materials were completed, but not paid for, because the property owners always paid the contractor in round numbers.
The Superior Court in Baker highlighted that the issuance of a mechanics’ lien is an extraordinary remedy and anyone seeking to obtain it must “judiciously adhere to the requirements” of the law to secure a valid and enforceable lien.
Keeping that in mind, the Superior Court in Baker noted that anyone filing a claim for a mechanics’ lien must provide a “detailed statement of the kind and character of the labor or materials furnished or both, and the prices charged for each thereof.”
While acknowledging that courts in Pennsylvania have held that substantial compliance with the MLL is sufficient to claim a mechanics’ lien, the Superior Court in Baker concluded that the contractor did not comply with the statutory requirements.
The Superior Court in Baker emphasized that the contractor’s exhibits describing the work performed were prepared after the filing of the claim for a mechanics’ lien, some even by the contractor’s own attorney, and were not previously presented to the property owners.
Moreover, the Superior Court in Baker stated that, although the contractor’s invoices were thorough, listing the employees utilized on different workdays and receipts from purchases, the contractor still failed to accurately describe the work performed by the employees and the receipts did not describe what the materials were used for.
By relying on the exhibits, not an actual detailed statement as required under the MLL, the Superior Court in Baker determined that the contractor did not substantially comply with the law.
The Superior Court’s ruling in Baker emphasizes the importance of strict adherence to the requirements set forth in the MLL. Contractors must keep detailed contemporaneous records of the kind and character of the labor or materials furnished, the prices charged, and all communication with owners regarding payment and the scope of work. By failing to do so, they lose the right to obtain a mechanics’ lien and the leverage to immediately collect the amount in controversy, forcing themselves to instead undertake litigation against the property owner under traditional means which, in many cases, may take years to complete.
Alan Nochumson is the sole shareholder of Nochumson P.C., a legal services firm with a focus on real estate, land use & zoning, litigation, and business counseling for the people of Pennsylvania and New Jersey. Nochumson is a frequent author and lecturer on issues commonly confronting businesses, individuals and professionals. You can reach him at 215-399-1346 or email@example.com.
Clementa Amazan is an associate attorney at the firm, a legal services law firm with a focus on real estate, land use and zoning, litigation, and business counseling for the people of Pennsylvania and New Jersey. Her experience as a judicial law clerk has enhanced her ability to identify, analyze and solve a diverse array of legal issues confronting her clients.
—Kelsey Keane, a third-year law student at the Benjamin N. Cardozo School of Law, who is interning at the firm, assisted in the writing of this article.
Reprinted with permission from The Legal Intelligencer © 2022 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, firstname.lastname@example.org or visit www.almreprints.com.