Alaska and Pennsylvania Legislative Update

Alaska and Pennsylvania Legislative Update

The Alaska legislature recently amended its laws governing the ability of insurers to cancel an insurance policy, effective September 21, 2014.  The Pennsylvania legislature recently amended its Mechanics Lien Law (the “Law”), effective September 7, 2014.

 

ALASKA SENATE BILL 58

 

In addition to nonpayment of premiums, instances of criminal acts or fraud, negligence or physical changes in the property, an insured may now cancel an insurance policy in the case of entire abandonment of the property if the abandonment increases the likelihood of a hazard that is being insured against occurring.

 

In such a case, the insurer shall give notice of cancellation of the policy to the lender on file with the insurer at the time of the cancellation.

 

Entire abandonment is defined as property that is no longer occupied by the insured as defined by the policy and does not have contents of substantial utility.  However, property is not entirely abandoned if the insured or an agent for the insured demonstrates that the property is being reasonably maintained and monitored for a condition that might cause damage to the property.

 

PENNSYLVANIA SENATE BILL 145

 

“Costs of construction” means 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 improvement, made or intended to be made, to the property. Reimbursement 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.

Except as provided in the next paragraph, every improvement and the estate or title of the owner in the property will be subject to a lien, to be perfected as herein provided, for the payment of all debts due by the owner to the contractor or by the contractor to any of his subcontractors for labor or materials furnished in the erection or construction, or the alteration or repair of the improvement, provided that the amount of the claim, other than amounts determined by apportionment of claims to several different improvements which do not form all or part of a single business or residential plant, must exceed five hundred dollars ($500).

 

A subcontractor does not have the right to a lien with respect to an improvement to a residential property if:

  • The owner or tenant paid the full contract price to the contractor; and
  • The property is or is intended to be used as the residence of the owner or subsequent to occupation by the owner, a tenant of the owner; and
  • The residential property is a single townhouse or a building that consists of one or two dwelling units used, intended or designed to be built, used, rented or leased for living purposes.  The term “townhouse” will mean a single-family dwelling unit constructed in a group of three or more attached units in which each unit extends from foundation to roof with a yard or public way on at least two sides.

 

Any lien obtained under the Law by a contractor or subcontractor will be subordinate to the following:

  • A purchase money mortgage;
  • An open-end mortgage, the proceeds of which are used to pay all or part of the cost of completing erection, construction, alteration or repair of the mortgaged premises secured by the open-end mortgage, where at least sixty percent (60%) of the proceeds are intended to pay or are used to pay all  or part of the costs of construction.

 

A claim filed under the Law with respect to an improvement to a residential property must, upon a court order issued in response to a petition or motion to the court by the owner or a party in interest, be discharged as a lien against the property when the owner or tenant has paid the full contract price to the contractor.

 

Where the owner or tenant has paid a sum to the contractor which is less than the sum of the full contract price, a claim filed under the Law with respect to an improvement to a residential property must, upon a court order issued in response to a petition or motion to the court by the owner or a party in interest, cause the lien to be reduced to the amount of the unpaid contract price owed by the owner or tenant to the contractor.

 

The amendments to the Law will apply to liens perfected on or after the September 7, 2014, effective date, including liens relating to the construction of an improvement for which the visible commencement of work occurred prior to the effective date, but were not perfected until on or after the effective date.