Mechanics’ liens are powerful remedies for contractors involved in payment disputes with owners of construction projects in Pennsylvania, but the six month deadline under the Mechanics’ Lien Law is strictly construed and contractors who delay filing them may lose their rights.
In Neelu Enterprises, Inc. v. Agarwal, the Pennsylvania Superior Court considered the deadline for a contractor to file lien claims “within six months after the completion of his work” set forth in Section 502 of the Pennsylvania’s Mechanics’ Lien Law. Specifically, the two issues in the case were whether the deadline begins to run after a contractor is terminated and whether the deadline can be extended by the subsequent performance of corrective or remedial work. After disputes developed on the project, the plaintiff contractor and defendant owners signed a one-page termination agreement. The parties acknowledged that the contractor was being terminated and that the owners would be using their own subcontractors to complete the work. The contractor filed a mechanics’ lien claim more than six months later, claiming that the deadline was extended by a post-termination return to the property by the contractor and various subcontractors to inspect the work and address the owner’s complaints. Because there were disputed issues of fact, the trial court conducted a hearing on the timeliness of the mechanics’ lien claim. The contractor testified that he brought his subcontractors back to the property to perform remedial work and to resolve outstanding disputes.
The trial court ruled in favor of the owners. On appeal, the Superior Court affirmed, finding that that the date of termination was the date the contractor completed its work. Further, relying on a Pennsylvania Supreme Court case from 1890, the Court held that corrective or remedial work failed to extend the date of completion for purposes of determining the timeliness of a mechanics’ lien claim. Although acknowledging that work substituted for that called in the contract or performed under a modification to the original contract could extend the deadline in Section 502, the Court found that the work performed by the contractor here was in the nature of work to correct deficiencies in performance of the contract and, as such, the contractor’s work was completed on (and the six month period to filed a lien claim began to run from) the date of termination.
As the Neelu decision demonstrates, contractors must be aware that mechanics’ liens are created by statute, and strict adherence with the deadlines set forth in the statute is required. The six (6) month deadline for filing a claim set forth in Section 502 of the Mechanic’s Lien Law begins to run upon completion of the contract work, and termination of a contract will constitute completion of the work. Post-termination or completion visits to the project site, even to perform remedial work that was the subject of the contract, will not toll or re-start the six (6) month time frame. Thus, if disputes over payment exist upon termination or completion of the contract work, the contractor should file its lien claim within six (6) months in order to ensure that its valuable lien rights are protected.