By Chadd Colin, Esq. and John Ziegler
Contractors and construction companies have for years known about and enjoyed the benefits of the Pennsylvania Contractor and Subcontractor Payment Act (73 P.S. § 501, et seq., “CASPA”), which provides enhanced legal remedies (such as interest and attorney’s fees) in the event of a default by a client. But did you know that engineering firms and other professional services providers also may be eligible for CASPA’s enhanced remedies?
A quick look at the definition of “contractor” under CASPA opens the door to other service providers besides just the “brick and mortar” type professions traditionally thought of as “contractors.” A contractor is defined as a person engaged to improve real property. 73 P.S. § 502. To improve real property, according to the Act, means, “to design, effect, alter, provide professional or skilled services” with respect to real property.
In such roles, contractors who fulfill the agreement and ultimately improve the quality of real property are entitled to enhanced remedies. Such remedies include a 1% per month penalty, interest, and attorney’s fees. 73 P.S. § 512.
In SE Technologies, Inc., v. K-Cor Inc. Case No. GD-01-21752 (Allegheny County 2001), aff’d without opinion at 881 A.2d 901 (Pa. Super. 2003), appeal denied at 895 A.2d 1263 (Pa. 2006) the court permitted an environmental engineering firm to recover interest and attorney’s fees under CASPA. While the Court found that there was no explicit language on engineering firms being “contractors” under CASPA, the engineers were hired to provide design services that were ultimately used to create improvements. Thus, the engineers were eligible.
In addition, the Pennsylvania Superior Court, in Reco Equip. v. John T. Subrick Contr. 780 A.2d 684 (Pa. Super. 2011), made it clear that all construction contracts for improvement of real property within the Commonwealth are eligible for CASPA relief. That case draws the line, however, at equipment lessees who lease equipment that is used on construction projects. Such entities do not provide “services” used in connection with the improvement of real property; they merely provide equipment that could be used for a wide variety of tasks.
Keep in mind, however, that courts may construe the word “improve” to mean that the actual physical work (i.e., the physical changes and alterations to the property) accompanying the professional services/design work must be completed in order for the engineers to qualify for CASPA remedies. In a recent trial court decision, the court held that where the engineers had begun to produce project plans and perform other work during the preliminary stages of a construction project, but the project ultimately did not proceed, the engineer only was entitled to a breach of contract claim. (Key Environmental, Inc. vs. North Strabane Properties LLC, Case No. 2021-15, Washington County). Because the job was scrapped before ground was broken, the court held that the engineers had no claim under CASPA. To our knowledge, however, this distinction has not been made by a Pennsylvania appellate court, and it is not clear that it is supported by the statute.
In summary, projects in which professional services are provided, including preliminary work for future construction, fall under the umbrella of CASPA claims, which include enhanced remedies in the event of client default.
Consult our firm if you are a contractor, including a professional services provider, that has contributed to the improvement of real property, and you have not been paid for your work.
YMFZ represents contractors, engineers, and other professionals in construction related litigation.