Sunday, December 03, 2006

Act 52 of 2006 Mechanics' Lien Law Changes in PA

Mechanics’ Lien law changes taking effect with any contracts entered into on or after January 1, 2007. Mortgage lenders and builders should seek legal advice now on how these changes will impact their business practices.

Here are a few of the changes:

1. The filing period has been extended from 4 to 6 months.
2. Another tier of potential claimants has been added – those contracted by sub-contractors.
3. The protection of properly filed No Lien Agreements has been significantly diminished.
4. Good news for lenders in that mechanics’ liens will be subordinate to certain types of mortgages. Lenders should pay close attention to the definitions in the act.

As title insurance underwriters struggle to create new guidelines, they expect a wave of claims. For now and until the industry has some experience under its belt with the new law, owner policies will likely NOT COVER mechanic’s liens.

We’ll keep you posted as new information is available. For now, good old-fashioned methods should be relied on. Do not start construction – no delivery of materials or breaking of ground – until the mortgage instrument is on record.

No comments: