Five Things To Know About Mechanic’s Liens Against Privately Owned Property In New York
- Filing a proper mechanic’s lien is an effective way to ensure that a contractor gets paid. A mechanic’s lien against a privately-owned property must be filed with the county clerk in the county or counties where the improved property is located within four months if the property is a single-family dwelling or eight months if the property is not a single-family dwelling (g., commercial) from the last date on which the contractor provided labor and/or materials to the project.
- When filing a mechanic’s lien, a lienor should never overstate the amount that is actually owed. The “unpaid amount” set forth in the lien should only include the value or “agreed price” (g., based on an agreed schedule of values or contract price set forth in a written contract) of the labor and materials actually furnished in connection with the “permanent” (not all items of labor and materials are lienable) improvement of the project. The lien amount should not include items such as delay damages and attorney’s fees. If an inflated lien is challenged and a court determines that the lien amount is “willfully exaggerated,” the lien will be deemed void and the lienor will be liable for damages including the amount of the overstatement, bond premiums, and attorney’s fees. See Lien Law §§ 39 and 39-a.
- There is no “quick and easy” way to discharge a lien unless: (1) the lienor (i.e., the unpaid person/entity) is paid and provides a “satisfaction of lien”; (2) a “lien discharge bond” is filed or a deposit of funds is made with the court in an amount equal to 110% of the lien amount (at which point the bond replaces the property as collateral); (3) it can be demonstrated to the court that the lien is defective on its face (e.g.: the date listed on the face of the lien for last work/materials is beyond the eight- or four-month deadline, etc.); or (4) it can be demonstrated to the court that the lien is procedurally defective. Unless a notice of lien is defective on its face, the owner must wait until the contractor commences the lien foreclosure action before the validity of the lien can be challenged by way of a counterclaim against the lienor. See Lien Law § 19(6) (grounds for summary discharge of a lien).
- An owner can obtain ammunition to challenge a bogus mechanic’s lien. Options include: (1) making a demand for an itemized statement of lien pursuant to Lien Law § 38, which requires the lienor to itemize the labor and materials furnished and the terms of the contract under which they were furnished; and (2) serving a demand pursuant to Lien Law § 59, which requires the lienor to commence its foreclosure action within 30 days from its receipt of the demand. After the contractor commences its foreclosure action, the owner can file a counterclaim, and seek an order cancelling the lien if there are grounds to do so.
- A lien must be extended within one year from the date of filing of the lien by (1) filing an extension of lien with the applicable county clerk; or (2) commencing a lawsuit to foreclose the lien and filing a notice of pendency within one year from the date of filing of the lien. A notice of pendency is not filed if the lien has been discharged by bond (see number 3 above).
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Paul V. Lucas, Jr. is an associate at Georgoulis PLLC. He has extensive experience in complex litigation, including construction litigation involving the representation of owners, contractors, and design professionals. He can be reached at +1-212-425-7854 or via email at [email protected]
The material in this publication should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, an attorney/client relationship.