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Subcontractor Prohibited From Filing Mechanics’ Lien

The Superior Court of Pennsylvania dismissed a subcontractor's mechanics' lien for failure to issue the requisite notice under Pennsylvania law. Wentzel-Applewood Joint Ventures v. 801 Market Street Associates, 878 A. 2d 889 (Pa. Super. 2005). As a result of this failure, a subcontractor may have lost the ability to collect over $250,000 from a now-bankrupt general contractor.

This case involved the conversion of several floors of a Center City, Philadelphia building from a retail space into an "item processing center" and offices. The general contractor retained the services of a subcontractor, who provided and installed drywall, studs, doors, windows, ceilings, and millwork. However, following completion of the job, the contractor filed for bankruptcy protection and in turn, the subcontractor provided formal written notice of its intent to file a mechanics' lien in state court.

However, in response to preliminary objections of the named parties, the trial court dismissed the subcontractor's lien for failure to issue, prior to completion of its work, the required preliminary written notice of its intent to file a lien. The subcontractor appealed this decision to the Superior Court.

According to Pennsylvania's Mechanic's Lien Law, if the work done is deemed to be "alterations and repairs," a subcontractor must give "the owner, on or before the date of completion of his work, a written preliminary notice of his intention to file a claim if the amount due or to become due is not paid." However, if the work is categorized as "erection and construction," no such requirement exists. Therefore, the Superior Court's decision hinged upon the classification of the work done as "alterations and repairs" or "erection and construction."

The Superior Court cited prior decisions where Pennsylvania courts have deemed improvement of real estate as "erection and construction" "where the adaptation (1) is substantial enough in its own right to constitute a new structure, or (2) creates a significant change in the use of the existing structure." In this case, the Superior Court held that the renovations were not substantial enough in their own right to constitute a new structure. This decision was based, in part, upon the deposition testimony of the subcontractor's principal, who "established that prior to the alterations, the renovated floors were 'retail, old space'" as used in commercial operations, and after construction, "the floors were used in ... commercial operations ... as 'office space' and 'processing area.'" Because of this characterization of the construction, the subcontractors failed to fulfill the requirements imposed upon them, which cost them the ability to collect compensation for their work, an outcome that would have been avoided had the subcontractors simply filed a timely notice.


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