Sunday, November 13, 2016

Don't wait too long to file your mechanic's lien

As the end of the year quickly approaches many companies will begin reviewing their accounts receivable and decide what to write off and what to pursue.  While mechanic's liens have deadlines to file that does not mean you should wait until the last minute.   There can be practical reasons why filing a mechanic's lien early can lead to better recoveries.   Some of the reasons include: 1) the recency is primacy principle.  The long you wait to file the lien the more likely it is that the specifics of your work and your claim will become blurred.  Deal with the claim quickly while details are fresh; 2) if the owner pays out to others the lien fund may be exhausted before your lien is recorded.   Always remember that a mechanic's lien is only as good as the fund remaining.  If you wait to long, others may be paid leaving you holding an empty bag; and 3) an early lien can put pressure on the project and force the key players to deal with you to avoid problems (such as lenders refusing to fund).  

When in doubt, speak to your attorney about the pros and cons of filing your mechanic's lien but always remember that conversation is better had months before the deadline expires - not days.  

Vincent T. Pallaci is the managing member of Kushnick Pallaci PLLC.   Kushnick Pallaci PLLC regularly counsels clients on filing and enforcing mechanic's liens.

Friday, October 28, 2016

First Department Issues New Interpretation of Lien Law Section 5

Skanska USA Building Inc. v. Atlantic Yards B2 Owner, LLC decided on October 20, 2016 by the Appellate Division, First Department, is an excellent discussion of various issues, including Lien Law Section 5, and is a good read for anyone practicing in this area.

Lien Law Section 5 provides, in part
"where no public fund has been established for the financing of a public improvement with estimated cost in excess of two hundred fifty thousand dollars, the chief financial officer of the public owner shall require the private entity for whom the public improvement is being made to post, or cause to be posted, a bond or other form of undertaking guaranteeing prompt payment of monies due to the contractor..."  
In an excellent discussion of Section 5 and the legislative history the First Department noted that prior to 2004 the statute left a "gap" in that "contractors working on projects being built by private developers, with private funds, but on public land, could not file liens against the public land or the private entity's leadhold interest."  But in 2004 the above cited language was added to Lien Law Section 5 to give those working on such projects (private projects on public land) some level of protection.

The plaintiff in Skanska apparently took the position that the guarantee provided did not comply with Lien Law Section 5 because it was not equivalent to a bond or "other form of undertaking" required by the law.  The Court noted that New York Courts are to give meaning to each word in a statute and looked at various definitions of the word "undertaking."  Ultimately, the court appears to define an undertaking for Lien Law Section 5 purposes as "simply a formal promise or guarantee."  The Court goes on to note that the legislature intended the term "undertaking" as used in Lien Law Section 5 to mean "guarantee" and points to the fact that the Governor vetoed an earlier version of the law that would have required a bond be posted in every instance disallowing "other forms of security designed to guarantee payment."  The sponsor of the amendment to Lien Law Section 5 clarified that the phrase "or some other form of undertaking" was added to satisfy the Governor's concerns.

Accordingly, the First Department determined that the Lien Law Section 5 obligations were met by  Forest City Enterprise, Inc. (a party to the case) issuing a formal "guaranty" that the owner would "fully and punctually pay and discharge any and all costs, expenses and liabilities incurred for or in connection with the work including, but not limited to, the costs of constructing...the work."  The decision notes that the language of the guarantee follows the letter of the statute and that the public owner was satisfied the by language of the guarantee.  The court notably indicated that it was irrelevant that there were better guarantees available (such as a letter of credit).

While an excellent discussion of Lien Law Section 5, and some guidance as to what Lien Law Section 5 really requires, I'm not entirely sure that this decision is great for contractors and really satisfies the intent purportedly behind giving contractors on these projects some protection.  That may just mean that the legislature needs to go back to work on Lien Law Section 5.  It will be interesteing to see if this one makes it up to the Court of Appeals for the final say.

Vincent T. Pallaci is the managing member of Kusnick Pallaci PLLC and his practice focuses on construction law.   For more information visit Kushnick Pallaci PLLC's website at www.nyconstructionlaw.com.  For more information about Kushnick Pallaci PLLC's lien services visit their mechanic's lien services page here.   

NY Appellate Court Says Incorrect Name on Lien May be Forgiven

In Matter of CAFS Mgmt. Corp. v. Q Realty & Development the Court was faced with an appeal that denied a petition pursuant to Lien Law Section19(6).  Apparently a mechanic's lien was filed that named Q Realty & Development, Inc. when, in fact, it should have listed the correct name of Q Realty & Development Group Corp.  Noting that the Lien Law affords "liberal construction to protect the beneficial interests of lienors" (see Lien Law Section 23) the Appellate Division that denial of the petition to discharge the lien was proper and that "misidentification of the lienor on the notice of lien was a nonjurisdictional defect capable of amendment pursuant to Lien Law Section 12-a(2)".

In addition, the Court affirmed the lower court's determination that the petitioner failed to establish that the property was a single family dwelling (subject to a 4 month limitations period) as opposed to a multi-family dwelling (subject to an 8 moth limitations period).

There was nothing particularly new or novel in this decision but it reaffirmed the Second Department's long standing position that a "misidentification" of a name in a mechanic's lien is curable.

Vincent T. Pallaci is the managing member of Kusnick Pallaci PLLC and his practice focuses on construction law.   For more information visit Kushnick Pallaci PLLC's website at www.nyconstructionlaw.com.  For more information about Kushnick Pallaci PLLC's lien services visit their mechanic's lien services page here.   

Monday, December 7, 2015

Case Law Update: Court allows "nunc pro tunc" amendment of lien that is in "substantial compliance" with Lien Law

Matter of Rigano v Vibar Constr., Inc.
Decided 9/30/15 by the Appellate Division: Second Department
Upon  remittitur from the Court of Appeals, the Court found that, upon re-argument, the Supreme Court should have granted Vibar Construction’s petition to amend the notice of lien nunc pro tunc and deny the petition to summarily discharge the lien. 
 The Court found that subject notice of lien was in substantial compliance with the requirements of the Lien Law and that no party would be prejudiced by the amendments.  The Court affirmed the ruling that, “in the absence of a defect upon the face of the notice of lien, any dispute regarding the validity of the lien must await trial of the foreclosure action.”

Thursday, December 25, 2014

Motion to Amend Pleadings Keeps Lien Alive

Happy holidays lien lovers!  We can be thankful to the Third Department this year for continually giving us interesting and thorough discussions of the Lien Law.  Our latest gift comes courtesy of Edwards & Zuck, P.C. v. Cappelli Enterprises, Inc.  There the lienor commenced an action to foreclose upon its mechanic's lien.  As required by Lien Law Section 44, the lienor named other lien holders as necessary party defendants.  One defendant lienor, Cives Corporation, originally filed an answer that did not include a counter/cross claim to enforce its own mechanic's lien.  Pursuant to Lien Law Section 44(5), the failure to assert a counter/cross claim is a waiver of the lien.   Cives was in trouble...

However, prior to the expiration of its own lien, Cives filed a motion to amend its answer and assert a counter/cross claim to enforce its mechanic's lien.  The Supreme Court permitted the amendment and permitted the lien to survive.  On appeal, the Third Department affirmed noting that the "law governing mechanic's liens...liberally construed to ensure that its purpose is accomplished..."  The key here appears to have been that at the time the motion was filed the lien was still valid (it has not expired) and the other parties were on notice of the lien by virtue of it having been referenced in the complaint and its alleged validity and priority asserted in the original answer.  

The lesson here?  Play it safe: if you are going to appear as a defendant in the lien foreclosure action and you want to preserve and enforce your lien, assert a cross and counterclaim to foreclose.

Vincent T. Pallaci is the managing partner of the New York law firm of Kushnick | Pallaci PLLC where his practice concentrates mainly on the area of construction law including prosecuting and defending mechanic's lien claims.  With offices in the New York City metropolitan area and in Buffalo, New York, KP serves the construction industry across the State of New York.