Owner's Payment in Full to General Contractor Voids Subcontractors Mechanic's Lien

In Klin Construction Group v. Blue Diamond Group and North Tower Realty, the Court addressed the common situation where a subcontractor, here Klin Construction Group, files a mechanic's lien against a property, and subsequently it is discovered that the general contractor, here Klin Construction Group, had already been paid in full. The Court in Klin Construction Group held that because the general contractor had been paid in full 45 days prior to the time that the subcontractor filed its mechanic's lien, the lien could attach to nothing since nothing was due from the owner to the general contractor at the time the lien was filed. Of course while the court here does not address it, Klin Construction should still have a breach of contract claim against Blue Diamond. Additionally, if, in fact, Blue Diamond was paid in full but did not pay Klin, Klin may have a Lien Law trust fund violation claim against Blue Diamond pursuant to Article 3A of the Lien Law. There are two lessons to take away from the Klin Construction case: 1) if you are a subcontractor and the general contractor has been paid in full, you do not have any lien rights; and 2) even if you have no lien rights there are other potential remedies available to you (such as Article 3A claims) so make sure you consult with your attorney to address every potential claim that you may have.

Vincent T. Pallaci is a partner at the New York law firm of Kushnick Pallaci, PLLC where his practice focuses primarily on the area of construction law.  He can be reached at (631) 752-7100 or vtp@kushnicklaw.com