Photo of Jason A. Copley

Jason A. Copley is Chair of the Firm's Construction Group as well as a Shareholder and member of the Board of Directors. He focuses his practice on representing contractors, subcontractors and owners in the areas of construction and commercial litigation and maintains offices in both Philadelphia and Harrisburg. From 2010 through 2016, Jason served as the Firm's Managing Partner.

By now, you have probably heard enough from us about the new changes to the Pennsylvania Mechanics’ Lien Law. If a newsletter article and several blog posts were not enough, here is one more reminder that the long-anticipated Pennsylvania State Construction Notices Directory is up and running. Already, owners have been active in registering searchable projects. Continue Reading It’s Official: PA Construction Notices Directory Is Up and Running

The new — and much anticipated — Pennsylvania State Construction Notices Directory (“Directory”) is expected to go live this December 31. With this rollout, the PA legislature will have established a statewide directory system for owners to list projects and create a new lien notice requirement for projects in excess of $1.5 million. The Directory for the Pennsylvania Mechanics’ Lien Law, which was signed into law in October 2014, provides the following important changes:  Continue Reading PA Construction Notices Directory Goes Live December 31, 2016

Are you a construction company owner, CFO, controller, or lead estimator involved in the bidding process?

On October 13th, join construction industry leaders, Bill Burke, Jason Copley, David Kane, and Anthony Stagliano, for a hands-on seminar, providing insights into effective strategies to maximize your profitability through innovative insurance, surety, legal, and accounting perspectives.

To register, contact Olivia Kornilowicz at 215.564.1700 or opk@cohenseglias.com.

Continue Reading Construction Executive Boot Camp 2016 – Interactive Panel Discussion and Cocktail Networking Event

IOil and gas industry - refinery, factory, petrochemical plantt’s not every day that a decision by the United States Supreme Court has the potential to impact the construction industry. But the Court handed down a decision last month that could hinder the pace of power plant construction around the country. In Hughes v. Talen Energy Marketing, LLC, the Court unanimously struck down a Maryland regulatory program that provided subsidies to incentivize new power plant construction in the state. According to the Court, the program intruded on the federal government’s authority to regulate the interstate wholesale market for electricity. Because several other states have similar programs, more cases challenging state power plant construction incentives could be on the horizon.

Continue Reading Lights Out for Maryland’s Power Plant Construction Subsidy Program

When it comes to the Pennsylvania Mechanics’ Lien Law (Lien Statute), the Pennsylvania legislature was quite active in 2014.  In July, Governor Corbett signed into law certain changes to the Lien Statute affecting residential lien rights and lien priority.  We previously covered these changes.

Change Ahead Sign

On October 14, 2014, Governor Corbett signed into law additional changes to the Lien Statute in the form of House Bill 473 (HB473).  HB473 had been written, voted against, rewritten, and voted against some more going all the way back to June 2013 when we first covered the proposed changes.

The new amendments to the Lien Statute provide for the creation of a State Construction Notices Directory (the Directory) that will serve as a statewide system for registering and tracking construction projects within the Commonwealth costing in excess of 1.5 million dollars.  The legislation is designed to provide a centralized system for owners, contractors, subcontractors, and suppliers to notify each other that projects registered on the Directory have commenced and that furnishings of labor, materials, and equipment are being made by subcontractors.

Now, if an owner elects to register a project on the Directory (by filing a Notice of Commencement), subcontractors will be required to file a Notice of Furnishing with the Directory within 45 days after commencing work or first providing materials to the jobsite.  Under the changes, subcontractors that fail to substantially comply with these requirements forfeit their lien rights.  This front-end notice requirement is in addition to the existing back-end notice requirement in the Lien Statute requiring subcontractors to serve the owner with a notice of intent to lien at least 30 days before filing.

As we previously reported, one touted benefit of the law is that owners and contractors will be able to reconcile their payments with the list of subcontractors and suppliers registered on the Directory.  This centralized system will help owners and contractors ensure that lower-tiered contractors and suppliers have been paid.

As a product of the new amendments, subcontractors must carefully review their contracts for notice that the project in question will be registered with the Directory.  If the subcontract does not contain such a notice, subcontractors should nonetheless check the Directory out of an abundance of caution.  Suppliers will also need to monitor the Directory vigilantly for Notices of Commencement so that they file timely Notices of Furnishing and protect their lien rights.

With the Directory to be operational by December 31, 2016, members of the Pennsylvania construction industry have some time to study the new changes to the Lien Statute and modify their business practices accordingly. We welcome your comments and questions on these new changes to the Lien Statute.

Jason A. Copley is the Managing Partner at Cohen Seglias and a Partner in the Construction Group. His practice is focused on representing contractors, subcontractors and owners in the areas of construction and commercial litigation.

Daniel E. Fierstein is an Associate in the Construction Group of Cohen Seglias and focuses his practice on construction law. Dan counsels clients at all tiers of the construction industry, including general contractors, subcontractors, owners, developers, and design professionals.

Rolled Blueprints and gavel of justice

On July 9, 2014, Pennsylvania Governor Tom Corbett signed a bill (S.B. 145) into law that amends the Pennsylvania Mechanics’ Lien Law of 1963 (the “Lien Law”). The new law took effect on September 8, 2014 and affects subcontractor lien rights on residential construction projects as well as the order of lien priority between mechanics’ liens and open-end mortgages.

Liens on Residential Property

Under the new law, an unpaid subcontractor no longer has lien rights if all three of the following conditions are satisfied:

  1. The property owner or tenant has paid the full contract price to its general contractor;
  2. The property is or is intended to be used as the owner’s or tenant’s residence; and
  3. The property in question is a one or two unit residential property or townhouse.

In other words, this amendment protects homeowners from having to pay twice for the same work (e.g., where the owner pays the general contractor but the general contractor fails to pay its subcontractor). The new law includes a procedure through which an owner can discharge or reduce the amount of the mechanics’ lien by petitioning the court and proving that he or she has paid the full contract price to the general contractor.

Changes to Lien Priority

Through S.B. 145, the Pennsylvania Legislature has also changed how the Lien Law addresses the question of lender priority. As we have blogged previously, “priority” refers to who gets paid first if a property encumbered with multiple mortgages, mechanics’ liens, or the like is sold. Before the new law was passed, a mechanics’ lien could enjoy priority over a mortgage if the work in question began before the bank recorded the mortgage and the loan proceeds secured by the mortgage were used, in part, for non-construction costs.

With the new changes to the Lien Law, these open-end mortgages will enjoy priority over a mechanics’ lien claim as long as at least 60% of the loan proceeds are used to pay the “costs of construction” (which is defined in S.B. 145 very broadly to encompass just about every conceivable construction cost including taxes, bonding, and permits). These changes appear to be the legislature’s response to situations like the one in which the Pennsylvania Superior Court encountered in the case of Commerce Bank/Harrisburg, N.A. v. Kessler. In Kessler, a contractor’s mechanics’ lien was given priority over a bank’s open-end mortgage on the property in connection with a construction loan because not all of the proceeds from the loan were used to cover the costs of construction.

What Do These Amendments Mean to Players in the Construction Industry?

For subcontractors, the risk of nonpayment on residential projects increases because the homeowner may be able to demonstrate that it paid the general contractor in full. In those instances, the subcontractor’s recourse will most likely be limited to a breach of contract lawsuit against the general contractor. It is important for all members of the construction industry to note that this new protection to owners is limited to residential properties where the owner intends to use it as his or her residence.

Lenders and title companies will likely celebrate the changes to the Lien Law because it effectively overrules the Kessler decision and defines “costs of construction” more broadly such that open-end mortgages in connection with construction loans are likely to enjoy priority over a mechanics’ lien claim under most circumstances.

As is evident from these amendments, the Lien Law is a powerful and complicated statutory remedy that affects the rights of most participants in a construction project including lenders, owners, contractors, subcontractors, and suppliers. These latest changes remind us how challenging it can be to balance and navigate the competing rights and interests of each player. Anyone with questions regarding these new changes or the Lien Law generally should feel free to contact Cohen Seglias.

Jason A. Copley is the Managing Partner at Cohen Seglias and a Partner in the Construction Group. His practice is focused on representing contractors, subcontractors and owners in the areas of construction and commercial litigation.

Daniel E. Fierstein is an Associate in the Construction Group of Cohen Seglias and focuses his practice on construction law. Dan counsels clients at all tiers of the construction industry, including general contractors, subcontractors, owners, developers, and design professionals.

As we first reported back in January of 2012, the Pennsylvania Superior Court issued a decision in Bricklayers of Western Pennsylvania Combined Funds v. Scott’s Development Co. that significantly changed the meaning of the Pennsylvania Mechanics’ Lien Law. In its decision, the Superior Court expanded the Lien Law’s definition of “subcontractor” to include union members, giving the union trustee the ability to assert lien claims on behalf of its members for unpaid contributions to the union trust funds. This decision exposed contractors and owners to liability for a subcontractor’s failure to make benefit contributions, and we provided insight on strategies to avoid or limit such exposure.

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From a legal perspective, the Superior Court’s liberal construction of the Lien Law overturned decades of precedential case law that required contractors and subcontractors to comply strictly with the Lien Law requirements.

However, on April 17, 2014, the Pennsylvania Supreme Court unanimously reversed the Superior Court’s decision and held that union workers are not “subcontractors” under the definition in the Lien Law and that the union Trustees are not entitled to file a lien claim for unpaid benefit contributions.

It is worth noting that the Supreme Court did not weigh in on whether the Lien Law should be strictly interpreted and applied as it was prior to the subject case. Instead, the Court stated that the clear and unambiguous portions of the Lien Law should reflect the intent of the Legislature, while ambiguous provisions should be reviewed further.

What does this mean going forward? It is clear that union members do not have mechanics’ lien rights under the Lien Law and have thus lost a collection tool. With regard to the strict versus liberal interpretation of the Lien Law, we will have to wait for the Court to take another case raising that issue. However, given the reversal of the Superior Court’s ruling here, it can certainly be argued that the Supreme Court rejects liberal interpretations of the Lien Law. On the other hand, this ruling likely eliminates concerns that owners and general contractors had as a result of the Superior Court ruling. As always, we will continue to monitor any new developments.

Jason A. Copley is the Managing Partner at Cohen Seglias and a Partner in the Construction Group. His practice is focused on representing contractors, subcontractors and owners in the areas of construction and commercial litigation.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

Counterintuitive as it may seem, courts can exert significant influence by deciding not to consider a case. The Supreme Court of Pennsylvania did just that on April 1, 2014 when it decided not to consider an appeal in the Berks Products Corp. v. Arch Insurance Co. case (Berks). The underlying case involved a material supplier’s payment bond claim against a surety who issued bonding for the general contractor (GC) on a public school project for the Wilson Area School District.

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The Berks Decision and the “Safe Harbor” Provision

In Berks, the surety, Arch Insurance Company (Arch), was ordered to pay the bond claim of a supplier, Berks Products Corp. (Berks), even though the GC had paid its subcontractor for all of the materials that Berks supplied on the project. The subcontractor did not pay Berks in full for its materials and eventually went bankrupt, which led Berks to file its claim against the payment bond that Arch issued on behalf of the GC.

The Commonwealth Procurement Code (Code), which governs the award and administration of most public construction projects in Pennsylvania, contains a provision commonly referred to as the Safe Harbor Provision. The Safe Harbor Provision protects GCs and sureties from future claims if the GC has paid its subcontractor in full, even if the subcontractor has failed to pay a supplier.

The Berks decision is monumental (perceived by some members of the construction industry positively and, by others, negatively) because the Commonwealth Court concluded that the specific language in the GC’s payment bond required Arch to pay Berks’ claim even though the GC paid its subcontractor for all of Berks’ materials. In other words, according to the Court, the language in the payment bond waived the protection of the Code’s Safe Harbor Provision.

Likely Implications

With the Supreme Court’s recent denial of Arch’s Petition for Allowance of Appeal, the practical implications of Berks will now become a permanent reality in the absence of new legislation. The implications for public projects are likely to include the following, some of which could increase the costs and risks of doing business for companies at all tiers in the construction industry:

  • In light of the perception of sureties that the Safe Harbor Provision could be under attack, they will likely reexamine the language of their payment bonds to make sure the language is in lockstep with the Safe Harbor Provision and does not contain the Berks language . Sureties may also reevaluate the risks and costs of providing bonding in Pennsylvania.
  • Sureties and GCs may even take steps to pursue legislative changes because of what they perceive as unintended consequences of Berks on the Bond Law and the Safe Harbor Provision.
  • Second-tier contractors/suppliers like Berks are obviously pleased with the result and will continue to assert bond claims even where GCs have paid subcontractors in full, using Berks as their authority.
  • GCs may take additional steps to avoid the fate that Arch (as indemnified by the GC) has suffered in Berks that include: (i) confirming that their payments are making their way to lower-tiered subcontractors by way of releases and actual verification of payment, (ii) increasing their use of joint check agreements, and (iii) requiring their subcontractors to obtain bonding for the project.

We will be expanding our coverage of this case and the effects it may have on the construction industry in the next volume of our newsletter, Construction in Brief, which will be available electronically within the next couple of months. If any of our readers have questions about Berks and its implications for the industry, please feel free to contact us.

Jason A. Copley is the Managing Partner at Cohen Seglias and a Partner in the Construction Group. His practice is focused on representing contractors, subcontractors and owners in the areas of construction and commercial litigation.

Daniel E. Fierstein is an Associate in the Construction Group of Cohen Seglias and focuses his practice on construction law. Dan counsels clients at all tiers of the construction industry, including general contractors, subcontractors, owners, developers, and design professionals.

As most contractors recall, the Pennsylvania Lien Law was modified in 2007 to reinstate lien rights.  We have previously reported on proposed changes to the lien law and lien rights preservation.  Additional proposed changes to the lien law, if passed, would have widespread impact across the industry.  Pending Pennsylvania House Bill 473 seeks to amend the current lien law to create a State Construction Notices Directory.  The Directory would be an online database providing extensive details of each registered project.

Owners and General Contractors would have access to a centralized, detailed list of subcontractors and sub-subcontractors.

HB 473 would only affect projects which are registered in the Directory.  Owners would have the option to register a project by filing a notice of commencement.  This notice would be available online and displayed at the project site.  For all such registered projects, subcontractors and suppliers would be required to file notices of furnishing within 20 days of first providing work, services or materials in order to preserve lien rights.

Many owners are likely to take advantage of the new law to create an additional step for claim preservation and limit the pool of potential lien claimants.  General contractors would not have additional requirements under HB 473.  The law would give owners and general contractors access to a database listing all potential lien claimants on a job.

Subcontractors will be required to monitor notices of commencement and file notices of furnishing to preserve lien rights.

HB 473 requires subcontractors to locate notices of commencement and to file notices of furnishing within 20 days of first providing work or materials.  Late notices of furnishing would result in forfeiture of lien claim rights for work performed more than 20 days before the filing of the notice.

One stated benefit of the law is that owners and contractors would be able to reconcile their payments with the list of subcontractors and suppliers registered on the Directory.  This would help ensure that all such subcontractors, second tier subcontractors and suppliers have been paid.  If adopted, the law would place an additional burden on subcontractors, who would need to vigilantly monitor notices of commencement and file timely notices of furnishing before starting work to avoid forfeiting lien claim rights.

HB 473 has potential to significantly impact mechanic’s lien claim rights in Pennsylvania because of the new notice requirements.  However, it is still in the legislative process and further developments are expected.

Jason A. Copley is the Managing Partner at Cohen Seglias and a Partner in the Construction Group. His practice is focused on representing contractors, subcontractors and owners in the areas of construction and commercial litigation.

Catherine Nguyen, an Associate in the Construction Group, contributed to this post.

By: Jason A. Copley and Lori Wisniewski Azzara 

On January 6, 2012, the Pennsylvania Superior Court, in a 7-2 decision, significantly expanded the Pennsylvania Mechanics’ Lien Law’s definition of a “subcontractor” in Bricklayers of Western Pennsylvania Combined Funds, Inc. v. Scott’s Development Co., 2012 Pa. Super 4. In this case, the trustees of employee benefit funds filed mechanics’ lien claims as a result of unpaid contributions owed to union members under collective bargaining agreements with the general contractor. The lower court dismissed the claims for lack of standing, concluding that the union members were not “subcontractors” under the Mechanics’ Lien Law because the collective bargaining agreements were not traditional subcontractor agreements and the union members were employees and/or laborers of the general contractor.

The Superior Court disagreed, concluding that a traditional subcontractor agreement was not a mandatory prerequisite to confer “subcontractor” status under the Lien Law. The Court found the collective bargaining agreements to be “implied in fact” contracts to furnish labor for the construction of an improvement. In liberally construing the Lien Law’s definition of “subcontractor,” the Court found the unions to be “subcontractors” under the Lien Law. Moreover, the Court held that the trustees had standing to assert the lien claims on behalf of the union members. Therefore, the mechanics’ lien claims were permitted to proceed.

This decision and its liberal construction of the Lien Law is a first in Pennsylvania. We will continue to monitor its impacts on the construction industry.

A more in depth discussion and analysis of this case can be found in the upcoming edition of our quarterly newsletter: Construction In Brief.

Jason A. Copley is the Managing Partner at Cohen Seglias and a Partner in the Construction Group. His practice is focused on representing contractors, subcontractors and owners in the areas of construction and commercial litigation.

Lori Wisniewski Azzara is an associate at Cohen Seglias Pallas Greenhall & Furman PC. Mrs. Azzara practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.