Contractors Working Under ‘Cost-Plus’ Agreements Beware: Strict Compliance with Pennsylvania Mechanics’ Lien Law Should Not be Assumed
Contractors filing a mechanics’ lien claim pursuant to Pennsylvania’s Mechanics’ Lien Law (the Lien Law) must pay particular attention to the requirements of Section 1503, “Contents of Claim,” to determine the level of specificity needed.
12.16.25
Generally, contractors working under a “contract or contracts for an agreed sum” must only identify the contract and provide “a general statement of the kind and character of the labor or materials furnished.” For most project delivery systems, which include an “agreed sum” —whether as a fixed price or guaranteed maximum price—contractors benefit from this provision. Absent a specific, agreed sum, however, Section 1503(6) requires “a detailed statement of the kind and character of the labor or materials furnished, or both, and the prices charged for each thereof.”
In PW Campbell Contracting Co. v. Yetter[1], the Superior Court of Pennsylvania affirmed the striking of a contractor’s mechanics’ lien claim for failure to meet the requirements of Section 1503(6) where the contract was a reimbursement contract without a fixed sum. In PW Campbell Contracting, a homeowner entered into a design-build contract with a contractor to make certain home improvements. The contract was entitled, “Standard Form of Agreement Between Owner and Design-Builder – Lump Sum.” However, the lump sum amount was only established for design work, not the “hard construction costs,” which were to be paid at “the cost of the work, plus 25%.” During construction, disagreements arose regarding the quality of the work. The contractor subsequently filed a mechanics’ lien claim and attached the design-build contract. The contractor did not attach any invoices or other documentation to support its calculations of amounts due and payable. Arguing that the contractor failed to strictly comply with the specificity requirements of Section 1503(6), the homeowner moved to strike the mechanics’ lien claim.
Both the trial court and the Superior Court determined that the parties’ “cost-plus” payment arrangement was not an “agreed-upon sum” under the Lien Law, as the contract did not list an amount for “hard construction costs.” Rather, the price was to be calculated based upon “the cost of the work, plus 25%.” In affirming the trial court, the Superior Court stressed that the contract provided the homeowner with no indication of the amount of money that would constitute “cost of work” such that they agreed to a particular amount. Thus, the contractor was required to provide a detailed statement of the work with the prices charged in its mechanics’ lien claim. Accordingly, the mechanics’ lien was invalid due to the contractor’s failure to strictly comply with the Lien Law.
Indeed, this case serves as a reminder to those in the construction industry that the law is strictly construed, and it highlights the importance of seeking legal guidance concerning compliance with the law and avoiding potential lawsuits.
Co-authors Gaetano Piccirilli, partner, and Stephanie Wolbransky Fenster, associate, are members of the construction practice group at Klehr Harrison.
[1] This is an unpublished, non-precedential decision.