Posts Tagged ‘Jeffrey Bright’

New Mechanics’ Lien Law Amendments

Last month, the General Assembly amended the Pennsylvania Mechanics’ Lien Law. The amendments will go into effect on September 7, 2014, which is 60 days after the passage date.

New Homeowner Protections. It has long been the law in Pennsylvania that subcontractors could lien property, even if the owner already made payment to the general contractor for the work. See Fahringer Corp. v. Newman, 1 Pa. D.&C.3d 115, 118 (C.P. Somerset Co. 1976). Under this old law, because an owner’s payment to a general contractor is not a defense to a lien, an owner could ultimately pay twice for the same work.

The revised Mechanics’ Lien Law changes this. Now, a subcontractor cannot lien residential property if the owner paid the full contract price to the general contractor. 49 P.S. § 1301 (effective September 7, 2014).

This new law is only applicable to residential properties. Regardless of this new protection, it is still advisable for owners to require lien waivers and diligent payment-tracking processes. For subcontractors, it is now very important to immediately address any delinquent payment issues.

New Lender Protections. The lending and title insurance industries was quite anxious after the 2012 Pennsylvania Superior Court decision, Commerce Bank v. Kessler, 46 A.3d 724. In Commerce Bank, the owner contracted to build a luxury home. The house was fully constructed; however, the owner failed to make payments to the homebuilder, and also failed to make payments on the mortgage. Both the bank and the homebuilder obtained default judgments. The bank believed its mortgage had priority lien rights against the property, based upon a provision in the Mechanics’ Lien Law.

The appellate court disagreed. It ruled that the mechanic’s lien took priority lien status over the mortgage. The court reasoned that the Mechanics’ Lien Law only affords priority lien status to open-end mortgages if the loan is used solely for “erection, construction, alteration, or repair.” As is typical, the loan in Commerce Bank included disbursements for tax claims, closing costs, pay-off of a prior mortgage, and other liens. Because of these other disbursements, the mortgage did not receive priority status.

Banks need not worry anymore. The amended Mechanics’ Lien Law provides that open-end mortgages take priority so long as 60% of the loan proceeds, at a minimum, go towards construction costs. The amendment also broadens the definition of construction costs to include common items paid by the loan, such as taxes, surveys, attorney’s fees, engineering fees, architectural fees, satisfaction of old mortgages, etc.

Entering contracts, getting paid, making payments, and litigating lien rights can be complicated. Owners, contractors, subcontractors, and lenders should double-check their contracts and seek proper legal advice.

What’s Happening Now . . .

7.5%

Construction Industry Unemployment Rate (unadjusted).

  • The construction industry added 22,000 jobs last month. This is the lowest unemployment rate in the construction industry since November 2007.

Source: Bureau of Labor Statistics, Series ID LNU04032231.  

* This Blog is not legal advice. Unlike this Blog, legal advice is specifically tailored to the facts, law, and objectives unique to each circumstance. To join or remove yourself from the subscription list, email jbright@h-dlaw.com or call 717-291-2236.

 

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According to local newspapers, a Tulsa, Oklahoma company, Williams Partners, continues to move forward with a proposed natural gas pipeline in Lancaster County. The pipeline is expected to impact the following Lancaster County municipalities: Drumore, Martic, Conestoga, Manor, West Hempfield, East Donegal, and Mount Joy.[1]  Many landowners ask: Who gives them the right to do this? And what can I do?

Generally, when long-ranging natural gas pipelines are installed, it is done under the federal government’s power of eminent domain. Eminent domain allows the government to take land for the purpose of public use. The federal government can delegate this power to government agencies and also to private corporations. The Natural Gas Act, 15 U.S.C. 717f, allows private companies to exercise eminent domain for the construction of natural gas pipelines. Sometimes, gas pipelines will be installed under state eminent domain laws.

Thus, the first method of defense—arguing that there is no right for the gas company to put the line in—is generally unsuccessful. This does not mean that there is nothing to be done.  A detailed description of the process can be found on the Federal Energy Regulatory Commission’s website, http://www.ferc.gov/for-citizens/citizen-guides/citz-guide-gas.pdf. As noted in the brochure, FERC can be contacted with environmental concerns or other comments.

Affected Lancaster landowners may have already received notice from Williams or other parties regarding the potential construction of the pipeline on their property. Williams will also host open house meetings, as required by federal regulations, which can be attended by the public to receive information and make comments. A flow-chart showing the process can be found here: http://www.ferc.gov/help/processes/flow/gas-2.asp. An open house meeting was recently announced: Tuesday, April 29, 2014 at 10am at the Lancaster County Government Center, 150 N. Queen St., Room 102-104. County Commissioners are expected to be in attendance and there is expected to be a period reserved for open comments from the public.[2]

Certainly, landowners have the right to question the ability of Williams to install the gas line. But landowners should also consider the negotiation of just compensation for any pipeline easements that transgress their land. By actively developing a dialogue with the gas company, landowners may be able to timely negotiate certain aspects of the pipeline and just compensation. Thus, in the early stages of the pipeline process, it might be in the landowner’s interest to allow the gas company on the property to survey and mark the path of the pipeline. While doing so, the landowner may be able to ensure and negotiate some details of the placement of the line (e.g. don’t place the line through my septic tank!)

Also, by communicating with the gas company, paying attention to the letters received in the mail, and attending the open house meetings, the landowner may be able to “get on the gas company’s radar.” Generally, the gas company has two methods to gain access to the land for installation of the line: (1) an easement agreement; or (2) filing a lawsuit for condemnation (eminent domain). Most landowners (and gas companies) seek to avoid litigation; thus, engaging with the gas company are merely the first steps of negotiating the placement of the pipeline and receiving compensation.

If no resolution is reached, or if the gas company has found the landowner to be non-responsive, the gas company is likely to file a lawsuit seeking the right to access the land and install the pipeline. At that point, the landowner still receives just compensation; merely, it must reach the resolution through litigation, resulting in either a settlement or trial. Whether negotiating with the gas company, or litigating the amount of just compensation, it is advisable to seek legal advice to protect your rights and obtain the best possible outcome.

Harmon & Davies, P.C. is a Lancaster based law firm with experience in construction and real estate law. For more information regarding legal assistance with the Williams pipeline, please call Harmon & Davies, P.C. at 717-291-2236. This article is authored by attorney Jeffrey C. Bright and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.


[1] Ad Crable, “Officials confirm Solanco part of proposed gas line would follow power lines,” Lancaster Online (Intelligencer Journal/Lancaster New Era) April 8, 2014.

[2] Ad Crable, “Builder of pipeline planned for Lancaster County to face public for first time,” Lancaster Online (Intelligencer Journal/Lancaster New Era) April 11, 2014.

 

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