To Lien a Pipeline, or Not to Lien a Pipeline, That Is the Question

With the recent proliferation of pipeline construction projects in Pennsylvania namely, Mariner East, Mariner East II and Atlantic Sunrise to name a few, contractors have been faced with the dilemma of securing payment for work performed on these projects.

By Peggy Underwood and Rachel E. Jeanes | 

With the recent proliferation of pipeline construction projects in Pennsylvania namely, Mariner East, Mariner East II and Atlantic Sunrise to name a few, contractors have been faced with the dilemma of securing payment for work performed on these projects. Within the past year, at least one major pipeline contractor has filed for bankruptcy and the Mariner East II project was stalled by citizens’ lawsuits. As a result, contractors, subcontractors and suppliers (collectively, contractors) on these projects have been forced to find alternate means to secure payment. Can these contractors receive the benefit of Pennsylvania’s Mechanics’ Lien Law to preserve their right to payment when the property to be liened is not a traditional building, but rather a natural gas transmission pipeline that traverses multiple Pennsylvania properties and counties? We believe the answer to be “yes,” but it can be tricky and costly.

The first hurdle is to establish that the pipeline owner has an interest to which a lien can attach. For a lien to be effective, the pipeline must be an “improvement” on “property” as defined in the Pennsylvania Mechanics’ Lien Law of 1963, 49 P.S. Section 1201, et seq. (Lien Law). Traditionally, mechanic’s liens are filed against the owner’s fee or leasehold interest in a building or structure. The structure is normally found at one location and in only one county. A pipeline, however, by its very nature, traverses across many individual properties and counties. Often, the pipeline owner’s interests are a mix of easements, rights-of-way, leases and fee interests that span across thousands of unrelated real property parcels.

In view of the pipeline owner’s complicated ownership pattern, can contractors and subcontractors find protection in the Lien Law? The most common property interest held by pipeline owners is that of an easement. Contrary to common perception, we found no caselaw or statutory support that would limit the Lien Law to fee or leasehold interests in brick and mortar structures. The Lien Law simply provides lien rights for work performed on “every improvement and the estate or title of the owner in the property …” (49 P.S. Section 1301(a)). An improvement is defined as “any building, structure or other improvement of whatsoever kind or character erected or constructed on land, together with the fixtures and other personal property used in fitting up and equipping the same for the purpose for which it is intended.”

The term “property” includes the improvement (i.e., the pipeline) “belonging to the same legal or equitable owner … forming a part of a single business or residential plant.” The key phrase in the definition of property which allows the filing of a single lien is the phrase, “forming a part of a single business … plant.” As described below, if that language were not in the Lien Law, contractors would be forced to file separate liens against each and every parcel on which they performed work. Since a pipeline can meet the criteria of being an improvement on property that can be liened, the next hurdle is determining whether and how the other requirements of the Lien Law can be met.

Read the entire article at the Legal Intelligencer: To Lien a Pipeline, or Not to Lien a Pipeline, That Is the Question

Peggy Underwood and Rachel E. Jeanes are attorneys with Horn Williamson assisting clients at all stages of the construction and litigation process, representing general contractors, subcontractors, owners, developers and suppliers involved in both public and private construction projects throughout the Mid-Atlantic region. They may be reached at munderwood@hornwilliamson.com and rjeanes@hornwilliamson.com or at 215-987-3800.