New York Mechanic's Lien Collections

When a mechanic's lien is properly utilized in New York it is a fantastic tool for contractors, subcontractors and material suppliers to secure their ability to recover payment on unpaid contracts.  Unfortunately, despite popular belief, a mechanic's lien is not a magical tool.  One of the most common questions that I hear is "I filed a lien now how do I get my money?"  Sadly, while the Tooth Fairy may immediately sneak a dollar under your pillow when you lose a tooth, the Lien Fairy does not come along and place a check snug under your pillow after your lien is recorded.  Instead, to collect on a mechanic's lien in New York you must foreclose on the mechanic's lien which should always be done through an experienced lien attorney.

Don't Wait

Once you have made the choice to lien the job, don't wait too long.  A mechanic's lien is good for one year unless it is extended.  While miracles do happen, in general if you are not paid on day 2 of the lien you probably are not going to be paid on day 364.  So my suggestion is make a determination early on.  Are you filing this mechanic's lien because you want to secure your payment but are willing to wait years for payment if necessary?  If the answer is yes, then by all means sit back relax and wait for the Lien Fairy.  But if you are filing the lien and intending on pursuing the payment, there is probably not much to gain by waiting.  While you probably do not need to enforce the lien on day 3, there may not be much to gain by waiting more than 30-60 days.  After that initial 30-60 day window you probably have a good idea of everybody's position and know whether they intend on paying you or not paying you.  If they intend on paying you, you weigh the risk of continuing to wait.  But if they make it clear that you will not be paid, why are you going to wait for years?  Granted that for smaller liens enforcement is not cost effective and you may choose to just wait it out.  But if you lien is for $75,000 or $750,000 and you know they do not intend to pay, its time to move forward with enforcement.

Some Things to Keep in Mind

The first thing to mention, and it should go without saying, is that foreclosing on a mechanic's lien means commencing a lawsuit.  Just filing a lien does not mean you are entitled to payment.  You still have to prove that you performed the work and are due money.  In addition, simply put, there are a bunch of other requirements related to the lien itself and your ability to establish the lien that must be proven in the litigation.  

Another thing to know is that lien foreclosures typically involve multiple parties.  In addition to suing the person that owes you money, you will also be suing the property owner, the owner's mortgage holder, and other lienors that have liens recorded against the property and sometimes even government tax authorities that have liens against the property.  This is because the ultimate goal of the foreclosure is to take the property and have it sold to satisfy your debt.  Since the property will be sold, everyone with an interest in it must be named so they can assert their rights.  

When attempting to collect on a mechanic's lien in New York you should also keep in mind that lien foreclosures take time.  Unless there is a total default, which is pretty rare in lien foreclosures (though they do happen), there is going to be an answer, exchanges of discovery, depositions, probably some motion practice and, ultimately, a trial.  Depending on the complexity of the claim, and the location of the property, the lien foreclosure could take anywhere from 18 months to 3+ years.  This is part of the reason for not waiting too long.  Why wait until the eve of the expiration of the lien if you are going to have to wait another three years for the litigation to play out?  

Don't ignore letters or other communications and documents related to your lien.  If you receive a demand pursuant to Lien Law Section 38, its time to hire an attorney.  There are drastic consequences for not handling Section 38 correctly.  Likewise, if you receive a Demand to Foreclose under Lien Law Section 59, its definitely time to hire an attorney and do it quickly because your clock to commence a foreclosure action is running.  

Shop Around

While there may not be a Lien Fairy, a competent experienced lien attorney is probably just about the closest thing you will find.  Don't rely on the attorney you know, the attorney that lives across the street, your cousin Sally that just graduated from law school, a cold call from the yellow pages or a blind search on Google.  Look for an attorney that knows construction and knows mechanic's liens.  While you may not know a thing about the process for foreclosing on a mechanic's lien, you probably know construction if you are involved in lien litigation.  Google, the Yellow Pages, Cousin Sally and the guy across the street are all good sources of information for locating potential attorneys to collect on your mechanic's lien, but you need to actually speak to those attorneys and find out what they know, how they would handle your case and what they recommend.  If they cannot explain the enforcement process to you, what makes you think they can explain it to a judge and get you paid?  You worked hard for your money, make sure you hire someone that will work just as hard to help you collect it.

Vincent T. Pallaci is a partner with the New York law firm of Kushnick | Pallaci, PLLC where his practice concentrates on construction law including mechanic's lien foreclosure and mechanic's lien defense.  KP has offices in the NYC Metro area and in Buffalo and files, enforces and defends against mechanic's liens in every County in New York.  

Conversion of Two Family Home to Single Family Home Subject to 8 Month Lien Period

In J.B. Custom Masonry & Concrete v. Sutera, the owners moved to dismiss a mechanic's lien filed by the contractor.  The owners argued that the property was a non-conforming two family that was being converted into a one family and, therefore, that the work performed by the contractors was on a single family home.  Of course if the work was on a two family home then the lien would be subject to the 4 month period.  Here, the 4 month filing period was important because the lien was not filed within the 4 month period but was filed within the 8 month period.

The court found that because the evidence established that the structure was being converted to a single family home, but was not at the time of the work an actual single family home, that it was a multiple dwelling and therefore subject to the 8 month filing period.  The court therefore denied the motion to vacate the mechanic's lien and vacate the Notice of Pendency filed in connection with the mechanic's lien.

Vincent T. Pallaci is a partner with the New York law firm of Kushnick Pallaci, PLLC.  With offices in Long Island and Buffalo, New York, KP regularly represents prosecutes and defends mechanic's lien enforcement litigation.

Enforcing a Mechanic's Lien in New York

Unfortunately, a mechanic's lien does not get you paid simply by filing it.  Instead, a mechanic's lien is enforced through a "lien foreclosure" action.  Lien foreclosures are complicated and often expensive.

Kushnick | Pallaci, PLLC is a full service law firm whose lawyers concentrate their practice on construction law.

What is Lien Law Section 38?

Wondering just what New York's Lien Law Section 38 is?


 

Fourth Department Says that Final Lien Waiver is no so "final"

One of the great things about the practice of law is that lawyers (and Judges) have an uncanny ability to take the abundantly clear and simple and make it complex and vague.  Case in point is the 4th Department's recent decision in Leonard E. Reidl Const., Inc. v. Homeyer.  Apparently the contractor, Leonard E. Riedl Construction, Inc., provided the owners, the Homeyers, with a "Final Waiver and Affidavit."  The Waiver stated that the project was "fully completed" and that "all bills for labor and/or materials furnished in connection with the construction of said buildings and work of improvement have been fully paid."  Finally, it very clearly said that the contractor "waives any and all lien rights which he may have or may have had on account of or arising out of the construction of said buildings and work of improvement."  The case made its way to trial and the trial court found that the parties did not treat the document signed by contractor's representative as a final and complete waiver of any further claims by contractor.  The court further found that payments made by the owners after the final waiver constituted evidence that there was a separate side verbal agreement outside of the signed Final Lien Waiver.  In affirming the trial court, the Appellate Division noted that "where a waiver form purports to acknowledge that no further payments are owed, but the parties' conduct indicates otherwise, the instrument will not be construed as a release."

Well, having made this same argument myself (successfully), I have to agree that a lien waiver (especially a final lien waiver) is not always a a final waiver and sometimes it isn't even a waiver.  This was a classic example of why attorneys are needed in all phases of the construction process and why just following basic advice is not always enough.   Home owners are increasingly knowledgeable about lien waivers and especially where lenders are involved the lien waivers are becoming a common requirement on a construction project.  However, if you tell the average owner that obtaining a signed document from the contractor wherein the contractor states the work is complete and paid for sometimes is not enough, you will likely be met with a blank look (and probably next with the owner searching Google on his or her phone for a new attorney that surely must know more than you).

The bottom line here is that all contracts, riders, liens, lien waivers, releases, certificates of insurance and insurance policies are not created equally.  They must each be looked at within the context of the specific situation to determine how the written document will be applied and interpreted by a Court.

Vincent T. Pallaci is a partner with the New York law firm of Kushnick | Pallaci, PLLC.  With offices in Buffalo, New York and Long Island, New York, KP serves the construction industry in each of New York's counties.