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Philadelphia Construction Law Blog


Posted by:  Andy Cohn  (acohn@kaplaw.com)

On July 9, the Pennsylvania Legislature amended the Mechanic's Lien Law to change lien priority rules flowing from the 2012 Kessler decision by the Pennsylvania Superior Court. The Kessler Court had established that mechanic's liens had priority over open-end mortgages where visible commencement of work at the site pre-dated the recording of the mortgage and advances on the mortgage were made for costs other than "hard construction costs".

Act 117 amends the Mechanic's Lien Law to provide that a construction loan will have lien priority ahead of any filed mechanics lien claims if it is secured by an open-end construction loan mortgage under which at least 60% of the proceeds are "intended to pay or used to pay" all or part of the "costs of construction". This is the case even if visible commencement of work precedes the recording of the construction loan's open-end mortgage. The Act was signed into law by Governor Corbett on July 9, 2014 and becomes effective on September 7, 2014.

mortgage.pngAct 117's definition of "cost of construction" is very broad. It includes all costs, expenses and reimbursements pertaining to erection, construction, alteration, repair, mandated off-site improvements, government impact fees and other construction-related costs, including, but not limited to, costs, expenses and reimbursements in the nature of taxes, insurance, bonding, inspections, surveys, testing, permits, legal fees, architect fees, engineering fees, consulting fees, accounting fees, management fees, utility fees, tenant improvements, leasing commissions, payment of prior filed or recorded liens or mortgages, including mechanics' liens, municipal claims, mortgage origination fees and commissions, finance costs, closing fees, recording fees, title insurance or escrow fees, or any similar or comparable costs, expenses or reimbursements related to an improvements, made or intended to be made, to the property. For purposes of this definition, "reimbursements" includes any such disbursements made to the borrower, any person acting for the benefit or on behalf of the borrower, or to an affiliate of the borrower.


Posted by:  Josh Quinter  (jquinter@kaplaw.com)

It should be the goal of every owner and construction company to return employees home for dinner safely every day. In addition to being the right thing to do, workers who are injured, or worse, don't show up for work the next day. Safety is and should be one of those symbiotic relationships that all parts of the construction community can work on together.

OSHA Inspector.jpgThe U.S. Department of Labor's Occupational Safety and Health Administration recently launched a "Construction Incident Prevention Initiative" campaign in an effort to curb fatalities on construction projects. Increased inspection and compliance efforts, particularly out of the Wilmington, Delaware office, will be part of the program. OSHA hopes that the increased compliance efforts will decrease fatalities in particular.

The primary focus of the initiative is to identify and eliminate safety and health hazards from the four leading causes of accidents: falls, crushing events, electrocutions, and caught-in-between events. In terms of health hazards, the compliance efforts will target silica, lead, and hexavalent chromium. Given the high heat conditions this summer, special efforts will be undertaken to address heat illness for those working outside too.

New OSHA Area Director for Region III

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

Effective June 29, 2014, Nicholas DeJesse is the Area Director of the Philadelphia Are Office for OSHA. The new position is a promotion from Assistant Area Director in Area III, a position DeJesse has held since April 2012.

DeJesse started with OSHA in 1995 as an Industrial Hygienist intern. He later took a full time position with OSHA as a CSHO in the Philadelphia Area Office later that year. He went on to work as a Safety and Occupational Health Specialist in the Regional Office and a Safety and Health Manager with the Regional OASAM. He has also spent time working for the Department of Health and Human Services as a Public Health Analyst/Regional Emergency Coordinator and with the Federal Emergency Management Agency as the Chief of the Regional Preparedness Branch.

Be Careful With Lien Releases, They Can Do More Than Release Just Liens

Posted by:  Josh Quinter (jquinter@kaplaw.com)

Executing releases of mechanic's liens is an all too common part the application for payment process on construction projects. Often times, payment is not released by the party upstream until that release of liens is submitted. Contractors and subcontractors alike should be particularly careful, however, when signing these lien releases. They are powerful documents that can result in a complete dismissal of much more than just the right to file a mechanic's lien.

The recent holding in Conestoga Ceramic Tile Distributors, Inc. v. Travelers Casualty and Surety Company of America reinforces the aforementioned concept. The background of the case is not an unusual occurrence and can easily happen to the lackadaisical or unsuspecting contractor. After payment was slow in coming, a deal was reached in which the subcontractor was to, among other things, submit a lien release to have the disputed payment released. The payment never came; but the surety issuing the payment bond was also found to have been free of liability because of the language in the release of liens.

The case arose out of a project done by IMC Construction for the Pennsylvania College of Technology. IMC provided the college with a payment bond issued by Travelers, pursuant to which Travelers agreed to accept liability if IMC defaulted on any of its obligations to Pennsylvania College or its requirement to pay the subcontractors and suppliers. IMC then contracted with Profast Commercial Flooring for a portion of the work; and Profast entered into a sub-subcontract with Conestoga to provide the tile for the project.

Frustrated Contractor.jpgA payment dispute arose and was allegedly settled between the parties. As part of the agreement to resolve the issue, Conestoga agreed to and in fact signed a "Lower Tier Vendor Final Waiver and Release". The release contained language which stated that Conestoga "forever releases and discharges IMC, Profast, and Penn College from all claims, demands, and causes of action, arising from or relating to Conestoga's labor, materials, and/or services provided to the project." Two joint check agreements were also signed by which Conestoga was to be paid. Despite signing the release and the join check agreements, Conestoga was still not paid approximately $170,000.00 by Profast.

Metabo Corporation Announces Recall

Posted by: Josh Quinter  (jquinter@kaplaw.com)

The Metabo Corporation has announced a recall of the W14-150 Ergo Angle Grinder. The company indicated that it was brought to their attention that under certain circumstances the grinder can get stuck in the on position. Two incidents were verified, although there have been no injuries to date. Metabo cites its desire to promote safety and to ensure that no user is injured by its product as the basis for the recall.

Metabo Grinder.jpg

Distributors were asked to immediately stop selling the product and determine what tools fall into the recall group. Those who already have the Ergo grinders are instructed to contact the Metabo Corporation at 800-638-2264, ext. 253, to make arrangements for replacement or repair.

New Allentown Project Is Biggest Ever for Neighborhood Improvement Zones

Posted by: Josh Quinter  (jquinter@kaplaw.com)

The next project for the City Centered Investment Corporation of Allentown is likely to end up being its biggest ever. Five City Center, a proposed 7-story office building would be 250,000 square feet plus parking for more than 1,000 spaces to accommodate the building. The project would be headed by the Allentown Neighborhood Improvement Zone Development Authority.

The Five City Center project will be built at a cost of approximately $100 million on a property located in the parking lot of the current Wells Fargo building between Walnut and 7th and 8th Streets. The location is prime real estate in close proximity to the PPL Center, which is where the new hockey team will be playing. With the Development Authority's approval in place, the City can begin looking for tenants as zoning approval and construction are completed.

Delaware County Pennsylvania Jury Renders a $24.3 Million Verdict to Construction Company

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

A recent trial in Delaware County, Pennsylvania resulted in a $24.3 million verdict in favor of the construction company Utility Line Services. The award, handed down by an 8 person jury panel, was arrived at by finding a breach of contract, violation of the Pennsylvania Contractor and Subcontractor Payment Act ("CASPA"), and wrongful termination of the contract.

According to news accounts, Utility Line Services entered into a contract with PVR Marcellus Gas Gathering to build a natural gas pipeline in Lycoming County, Pennsylvania. Utility Line Services is a builder of natural gas pipelines and PVR is a company that brings gas from well sites to refineries and, eventually, market.

Pipeline Consruction in the Marcellus Shale Region.jpgUtility Line Services, as the Plaintiff, alleged that PVR failed to pay it approximately $16.7 million for work between late 2011 and early 2012. It also alleged that PVR wrongfully terminated the contract when work appeared to be carrying over until after the projected termination date for the contract on December 31, 2011. At the time of termination, PVR already owed Utility Line Services approximately $12 million and was raising "questions" about outstanding invoices. An accounting firm was brought in to try to justify PVR's actions, but no supportable conclusion was offered.

OSHA Wrapping Up National Safety Stand Down Week

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

The Occupational Safety and Health Administration is winding down its national Safety Stand Down Week. The effort, which s designed to create an increased awareness on safety issues, is suggested by OSHA in order to set aside a little extra time to teach and train on specific safety issues.

The effort this year focused on fall protection. According to OSHA statistics, 269 of the 775 construction fatalities in 2012 (the most recent years with numbers reported) were caused by falls from elevation. Fall prevention safety standards were also in the top 10 most frequently cited violations of OSHA standards. Falls can happen in a variety of ways, including as a result of failing to tie off, improper use of ladders and scaffolds, unmarked floor openings, and simply things like tripping over extension cords.

Paycheck Protection Picking up Steam in Pennsylvania Legislature

Posted by:  Josh Quinter (jquinter@kaplaw.com)

New legislation aimed at eliminating the role of government in collecting union dues and PAC contributions from public sector employee's unions is under consideration in the Pennsylvania legislature. Although the parameters of any pending legislation are not yet entirely clear, it is undeniable that discussions are under way in both the House and the Senate to consider making changes to this area of the law.

As it presently stands, the treasurer for the State of Pennsylvania and his contemporaries at the local levels collect union dues and PAC contributions from public sector union members as part of the normal payroll process. Those funds are then funneled through the governmental institution, using governmental resources, and then passed along to the respective unions by way of a check cut by the governmental entity to the public sector union. There is nothing illegal about this methodology under current law.

Public Sector Union Protestors.pngThe proposed change in the law would eliminate this mechanism. Legislation loosely called the Paycheck Protection Act would shift responsibility for collecting these union dues and PAC contributions to the unions themselves. In this regard, it would make public sector unions function much the same way as the private sector trade unions in Pennsylvania. These unions already utilize their own resources and efforts to collect their dues and PAC contributions.

The legislation would not alter the collective bargaining process, deprive public sector employees from joining a union, or otherwise impact the rights to join or participate in a union. The union's status would not be changed in any way either. The only change would be to who collects dues and PAC contributions.

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