Pennsylvania’s Medical Marijuana Act was enacted in May 2016 (the “Act”). Under the Act, patients with serious medical conditions, such as cancer, HIV/AIDS, Parkinson’s Disease, Multiple Sclerosis, and severe chronic or intractable pain, are authorized to use medical marijuana to treat their condition after obtaining a certification from a physician and an identification card issued by the Pennsylvania Department of Health. Medical marijuana may only be issued to an individual or an individual’s caregiver who has received the certification and identification card. Medical marijuana may not be smoked and may only be dispensed in certain enumerated forms.

Continue Reading What Does PA’s Medical Marijuana Act Mean for My Company?

In Pennsylvania, residential and commercial lease agreements are governed not only by the terms of the lease itself, but also by the Landlord and Tenant Act of 1951, 68 P.S. §§ 250.101, et. seq.

When a lease term ends, the landlord is required to provide a tenant with a list of damages caused to the premises within thirty days of the termination of the lease or repossession of the property.

In addition, the landlord must return any escrow monies held under the lease within that time period. If the landlord deducts any funds to pay for alleged damages to the premises, then the landlord must return the difference in the balance of the escrow funds to the tenant.

Continue Reading Landlords Risk Exposure to Double Damages in Suits by Tenants

Cyber security has become a growing concern for individuals and businesses across the nation. Undoubtedly, you’ve heard about breaches at Target, Wal-Mart, J.P. Morgan Chase, Home Depot, Apple, and Neiman Marcus. Hundreds of thousands of people had their names, social security numbers, financial information, and other sensitive data stolen and used unlawfully.

Theft of consumer information via the internet happens every day from any number of data or network systems to all types of people. It’s not just individuals or big box stores that are targeted. Cyber-attacks are directed at various organizations that keep clients’ and customers’ personal information on record. Hackers will look to small businesses, and even to a person’s home management company or homeowners’ association, to access their sensitive personal and financial information.

Continue Reading Your Business Could Be Liable for Cyber Security Breaches

The Truth in Lending Act was passed by Congress in order to help consumers “avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing.” The Act permits borrowers to rescind a loan three business days following the “consummation of the transaction or the delivery of the information and rescission forms” and disclosures required under the Act, whichever is later, by notifying the creditor of its intention to do so. The borrower’s right of rescission lasts for three years after the date of consummation of the transaction or upon the sale of the property. In a recent case, Jesinoski et. ux. v. Countrywide Home Loans, Inc., et. al., the Supreme Court of the United States was asked to determine whether a borrower properly exercises its right of rescission by providing notice to the lender (as required by the Act), or whether the borrower is also required to file suit before the three-year period ends. The Court found that the Act only requires the borrower to give the lender notice, and does not require that suit be filed, within the three-year rescission period.

The Pennsylvania Legislature recently enacted legislation which amends portions of the Mechanics’ Lien Law, 49 P.S. § 1101, et. seq. (“MLL”), and provides a statutory fix to the Kessler decision.

The Superior Court of Pennsylvania’s decision in Commerce Bank/Harrisburg, N.A. v. Kessler, issued in May 2012, caused a fundamental change in the industry’s understanding that open-end mortgages for construction loans had priority over mechanics’ liens. Under the MLL at that time, a mechanics’ lien for construction improvements had priority from the date of visible commencement of work, but was subordinate to an open-end mortgage where the proceeds were “used to pay all or part of the cost of completing erection, construction, alteration or repair of the mortgaged premises. . .” The Kessler Court determined that, in order for this exception to apply, all of the loan proceeds had to be used to pay the hard construction costs, and nothing else. As such, if any of the loan advances were used to pay any other costs associated with the construction, and unpaid contractors and/or subcontractors filed mechanics’ liens to recover money owed, those liens would take priority over the loan.

On September 7, 2014, Act 117 of 2014 took effect and changed the landscape. Act 117’s amendments to the MLL provide that a construction loan secured by an open-end mortgage will take priority over a mechanics’ lien claim (even where visible commencement of work occurred prior to the recordation of the mortgage) if 60% of the loan proceeds are “intended to pay or used to pay” all or part of the “costs of construction.” The amendments include a broad definition of “costs of construction” which includes items such as insurance, taxes, utility fees, and closing fees. The amendment applies to mechanics’ liens perfected on or after September 7, 2014, even where visible work commenced prior to that date.

A recent case decided by the District of Columbia Court of Appeals has sent shockwaves through the Mortgage Lending Industry and given hope to Condominium Associations and Homeowners Associations at the same time. The issue in Chase Plaza Condominium Association, Inc. v. JP Morgan Chase Bank, N.A., concerned the statutory “super-priority” lien established in the District of Columbia’s Condominium Act which guarantees to an Association a lien superior to a Mortgage or Deed of Trust for assessments incurred six (6) months prior to the initiation of a suit to foreclose the lien. Most states – including Pennsylvania and New Jersey – have similar statutory frameworks because their Condominium and Homeowners Acts are based on a common Uniform Act adopted in whole or in part by the various state legislatures. The question hanging in the air for some time has been what the effect of a foreclosure of the super-priority lien would have on a Mortgage or Deed of Trust – that is, whether foreclosure of the super-priority lien would extinguish a purchase money Mortgage recorded before the assessments fell due.

In the Chase Plaza case, a condominium unit owner became delinquent on his condominium assessment payments. JP Morgan Chase Bank was the holder of a Deed of Trust encumbering the unit under which it was the lender to the unit owner, who had used the funds to purchase the unit. Unable to collect the assessments from the unit owner due to insolvency and later bankruptcy, Chase Plaza foreclosed its lien only to the extent that it represented the period during which assessments fell due under its statutory super-priority lien. Chase Plaza obtained a judgment and followed the prescribed process for listing the unit for a foreclosure sale under District of Columbia law. The unit was then sold at the foreclosure sale to a third party in an amount which would compensate the condominium association for its super-priority lien of assessments. JP Morgan Chase then filed a Complaint seeking to have the foreclosure sale declared void.

The D.C. Court of Appeals reversed the trial Court, which had previously found in favor of JP Morgan Chase and voided the foreclosure sale. The Appeals Court employed a rigorous examination of the D.C. Condominium statute and found that the plain language of the law conferred upon the association a lien superior in priority even to prior recorded mortgages for the assessments falling due six months before initiation of a lien foreclosure action. The Appellate Court’s opinion found that the D.C. Council intended in the Act to ensure the timely payment of assessments, and that a mortgage lender had available remedies such as escrow accounts to preserve the position of its lien of mortgage. This was a welcome event for condominium and homeowners associations, particularly in the current environment where mortgage lenders will often delay in prosecuting a mortgage foreclosure action for their own benefit while associations (and by extension other unit owners) continue to provide services to a unit which is also delinquent for assessment obligations.

Chase Plaza has upended the position taken by the mortgage lending industry that foreclosure of super-priority liens for assessments does not extinguish prior recorded mortgages. Expect to see test cases on similar facts brought by associations in Pennsylvania, New Jersey and other jurisdictions citing Chase Plaza as persuasive authority and urging that those Courts adopt the reasoning of the D.C. Court of Appeals.

This blog is part of an ongoing series discussing the Pennsylvania Mechanics’ Lien Law. For more information on Mechanics’ Liens in Pennsylvania, click here.

Of paramount importance to determining the deadline to file a Mechanics’ Lien Claim is the date of last work performed by the prospective claimant. A lien claim must be filed no later than six months after the claimant’s date of last work – lien claims filed after six months are time barred and will be stricken by any Court. As a result, the question of what constitutes “work” within the Law’s definition of “last work” has been the subject of much litigation, but without much guidance in the form of binding precedents from Pennsylvania’s Appellate Courts. Often, contractors would seek to extend or renew their Lien Claim rights by performing punch-list or remedial work – sometimes even without having been requested to do so by owners and prime contractors. Trial Courts have wrestled with the issue of whether punch list or remedial work constitutes “last work” from which the six months within which to file a Lien Claim runs. Generally, the trial Courts found that punch list work was not “work” within the meaning of “last work” for purposes of dating the deadline to file a Lien Claim. Recently, the Pennsylvania Superior Court came to the same conclusion, providing binding authority for trial Courts, and clarity to the Construction Litigation bar. In Neelu Enterprises, Inc. v. Agarwal, 2012 Pa.Super. 276 (2012), a panel of the Superior Court found that remedial work performed to address an owner’s complaints did not constitute “last work” for the purposes of determining the timeliness of a Lien Claim.

The Superior Court relied upon an earlier Pennsylvania Supreme Court case which distinguished between remedial work and substituted work in determining that remedial work does not extend the time to file a Lien Claim, while work that is substituted for work within the scope of the contract does. Therefore, the right to Lien may turn on whether the work performed compensates for defective performance – which is, in effect, a breach of the contract – or whether the work performed is done pursuant to a modification of the contract by agreement of the parties. For these reasons, owners and contractors should be mindful of the distinctions and clarify whether the work to be performed is remedial or substituted before allowing a subcontractor or sub-subcontractor to enter the jobsite. A mistake in making these distinctions clear could renew lien rights inuring to subcontractors and sub-subcontractors which have already expired.

This blog is part of an ongoing series discussing the Pennsylvania Mechanics’ Lien Law. For more information on Mechanics’ Liens in Pennsylvania, click here.

For decades in Pennsylvania, there was a lack of clarity as to when Mechanics’ Lien Claim rights attached to a project where the work and materials provided were for the demolition, removal of improvements, excavation, grading and the like. The text of the Pennsylvania Mechanics’ Lien Law of 1963 is clear that lien rights attach for such work and materials furnished “incidental to the erection, construction, alteration or repair” of a permanent structure. What was unclear was whether or not lien rights would attach to a project where such work was performed and materials furnished as part of the contemplated erection or construction of a permanent structure that is never actually erected or constructed.  For a multitude of reasons, a construction project may be initiated but fail to progress through the initiation of construction of the structure, including the failure of construction financing and poor financial planning on the part of the owner or prime contractor. In such cases, a contractor or subcontractor may have already performed demolition, excavation, or site work that in and of itself does not constitute a permanent structure. In B.N. Excavating, Inc. v. PBC Hollow-A, L.P., 2013 Pa.Super. 120 (2013), the Pennsylvania Superior Court held that where excavation work is performed incidental to the planned erection or construction of a permanent structure, lien rights attach for the excavation work even if the structure is never erected. Therefore, where excavation and groundwork occurs that is connected to a planned structure, and not independent of a structure, lien rights will attach. This holding is welcome news for contractors involved in demolition, hauling, excavation, grading, and paving, as it makes clear that lien rights for such work is not dependent upon the successful progress of a project after the contractor has completed its work.

This blog is part of an ongoing series discussing the Pennsylvania Mechanics’ Lien Law. For more information on Mechanics’ Liens in Pennsylvania, click here.

For decades, Mechanics Lien Claims filed under the Pennsylvania Mechanics’ Lien Law of 1963 were reviewed scrupulously by the courts. Because Mechanics’ Lien Claims were considered “creatures of statute” in derogation of the common law, and constituting a special remedy for a unique and discrete class of creditors not granted to others, Lien Claims were construed strictly and absolute adherence to the requisites of the statute was required to withstand efforts to strike off the Lien Claim. If even relatively minor mistakes were made in preparing, giving the appropriate notices of, filing, and serving the Lien Claim, Courts were likely to strike off a Lien Claim in its entirety. This view was distilled in the Superior Court’s opinion in Sampson-Miller Associated Cos. V. Landmark Realty Co., 224 Pa.Super. 25 (1973). Rarely would preliminary objections or a motion be made to a Court seeking to strike off a lien claim that did not quote directly from the Sampson-Miller opinion, emphasizing that the Court was bound to “strictly construe” the statute and dismiss Lien Claims that did not comply with the Statute in any way. So ubiquitous was the language of Sampson-Miller that it constituted common knowledge even among attorneys who only casually practiced in the area of construction law and litigation.

In 2012, the Superior Court upended Sampson-Miller, and with it owners’ most common strategy to avoid filed Lien Claims. In Bricklayers of Western Pennsylvania Combined Funds v. Scott’s Development  Co., 2012 Pa.Super. 4 (2012), the Superior Court expressly reversed its earlier holding in Sampson-Miller. In Bricklayers, the trustees of an employee benefit fund for a trade Union sought to file a Lien Claim as a “subcontractor”  for unpaid contributions to employee benefit funds arising from work performed by the Union’s workers for a general contractor pursuant to collective bargaining agreements with the general contractor. The Union trustees argued that, contrary to the holding of Sampson-Miller, the Mechanics’ Lien Statute should be liberally construed, and that the Union by its trustees should not be denied standing to file a Lien Claim as a Subcontractor due to an overly technical and narrow construction of the law. The Union’s trustees argued that a liberal construction of the definition of “subcontractor” was warranted to ensure its prepayment of labor for the benefit of the property. The Superior Court agreed, stating that the Mechanics’ Lien Law, and the definition of “subcontractor” in particular must be “liberally construed to effect [its] objects and to promote justice.”

Although the Superior Court set forth a liberal construction standard, the Court cautioned that “a strict compliance standard may be used to determine certain issues of notice and/or service” when assessing the striking off of Lien Claims. Accordingly, some limited “strict compliance” grounds may remain to strike off a Lien Claim, but no specific reported cases have elaborated on this to date. It should be noted that the Superior Court’s Order and Opinion in Bricklayers has been appealed to the Pennsylvania Supreme Court, and the issue of whether liberal construction of the law is proper will be reviewed by Pennsylvania’s highest Court. Until the Pennsylvania Supreme Court renders its opinion, the law of Lien Claims will remain uncertain, but the liberal construction standard will be applied by trial courts in the meantime.

On March 13, President Obama directed the Labor Department and its secretary, Thomas E. Perez, to modify existing Federal Overtime Regulations under the Fair Labor Standards Act (“FLSA”).

Currently, workers are entitled to overtime pay of no less than time and a half (1.5 times the regular hourly rate of pay) for hours worked in excess of forty in a week, unless the worker falls within one or more of several exempt categories. Under existing law, an employee would be exempt from the overtime requirements of the FLSA if the employee is paid on a salary basis and in an amount of at least $455 per week, or $23,660 on an annual basis, and the employee’s duties are of an executive, administrative, or professional in nature or which involve outside sales – jobs termed “white-collar” by some. For example, lawyers and doctors compensated on a salary basis in excess of $23,660 per year are exempt from overtime pay requirements, and their employers can lawfully refuse to pay them overtime wages for hours worked in excess of forty hours in a week.

Although it is unclear as to what the regulatory changes will be, analysts believe that the Labor Department will seek to raise the wage threshold for exempt employees above the current $23,660 mark and tighten the requirement that exempt employees’ duties be executive, administrative, professional or sales-related in nature. They believe that this move is targeted at minimizing the practice by employers of classifying employees as “managers” due to limited supervisory, administrative or executive duties and for whom the majority of their job duties are indistinguishable from other non-exempt co-workers.

For example, an employer that hires an employee to be a manager of a retail operation, pays him or her in excess of $23,660 per year, and grants limited supervisory authority over hourly workers, but still requires the employee to perform stocking, cashiering, and other non-executive duties may require that the employee work in excess of forty hours per week, and refuse to pay the employee overtime wages for hours worked in excess of forty in a week. After the Rules changes, it is predicted that this practice will be curtailed, or that employers may have to hire additional employees to perform duties which are not executive or administrative in nature rather than requiring this work from salaried “white-collar” employees in addition to their executive and administrative duties.