Tuesday, August 24, 2010

Court Issues Reminder to Owners Not to Pay Over a Mechanic's Lien

In M&V Concrete Contr. Corp. v. Modica the Appellate Division reviewed a situation where an owner had paid his construction manager in full and the owner therefore argued that there were no funds to which any lower tier contractors could attach a mechanic's lien.  While it was true that the construction manager had been paid in full the court noted that the time when the payments were made is an additional factor to take into consideration.  Here, the owner made final payment to the construction manager well after the subcontractor's mechanic's lien was filed.  The court therefore found that there were funds that the lien could attach to at the time the mechanic's lien was filed  and, therefore, rejected the owner's argument that there was no lien fund.  The lesson to owner's is that if you make payments after a mechanic's lien is filed (to anyone other than the lienor) you run the risk of being forced to pay twice. 

Owners faced with mechanic's liens would be wise to consult with legal counsel before making any additional payments.  There are a variety of mechanisms available to prevent the owner from paying twice such as escrow agreements and mechanic's lien discharge bonds.  Competent construction attorneys should be able to help you devise a plan to keep the project moving without the risk of double payment. 

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

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