Saturday, October 30, 2010

Possible Lien Law Amendments in the Pipeline

Here are a few proposed New York Lien Law amendments that are working their way through the legislative process:

A03513:   This proposed amendment to Lien Law Section 3 would allow land surveyors to place mechanic's liens on properties where they perform surveying services even if their survey is not performed in connection with an additional improvement to the land. 

A03869:  This is a very significant proposed amendment to the lien law that contractors should fight against.  This proposed amendment would insert some type of language into the lien law that would allow the County Clerk to refuse to file a mechanic's lien unless it is accompanied by a certification from the County stating that the contractor (or subcontractor, etc.) is licensed to perform the work in that county.  There are a number of potential problems with such an amendment.  First, who will be in charge of preparing this "certification"?  Will it be an expert on the county licensing laws that know when you do and when you don't need a license to perform certain services?  The answer is almost certainly no.  What if there is a difference of opinion between the contractor and the clerk that is issuing this certification as to whether a license is required?  If the clerk refuses to accept the mechanic's lien for filing, and it is ultimately determined that the lien should have been accepted, the right to file the lien may have expired in the interim.  There are a number of nuances in the licensing statutes for each county and those nuances have not yet been completely ironed out by the court systems despite extensive litigation.  How is a county employee supposed to make such a determination when the statutes themselves are not clear, especially because determining applicability requires a fact specific analysis?  While the problem of unlicensed contractors filings mechanic's liens is indeed a problem, it is one that the courts can address - they can vacate the mechanic's lien and if necessary award the home owner damages.  The legislature should not put the life or death of a mechanic's lien in the hands of a county employee that likely would not have the knowledge (either legally or factually) to determine if a license is required for that particular work.  The current system, while not perfect, works.  Leave it to the attorneys and the courts to sort out who should and should not file a mechanic's liens. 

If the legislature wants to act in this area a far better choice would be to adopt severe penalties for filing a mechanic's lien if you are not licensed to perform that particular work.  Such an amendment would not penalize legitimate valid claims and would, hopefully, cause unscrupulous contractors to pause before filing an improper mechanic's lien.  As the lien law stands, there is really no penalty for filing a mechanic's lien if you are not licensed other than losing your mechanic's lien. 

A09850:  This amendment relates to the time period permitted for filing a mechanic's lien if the lien relates to retainage.  The proposed amendment, which seems likely to pass, would allow the filing of a mechanic's lien for retainage within 90 days of the time that the retainage was due to be released.  As many of you know, subcontractors often encounter a problem with retainage because it is not due until after their lien rights expire.  Filing a lien simply to preserve their right to do so can cause payment problems because a lender or owner may refuse to release further payments until the lien is removed.  While the concept of this amendment is a good development for contractors, I question how the "date the reatinage is due to be released" is going to be determined?  It seems to me like it would be an area of law that is subject to voluminous litigation.  Retainage generally is released upon completion and acceptance of the project.  There are almost always disputes over when completion occurs and punch lists can last months.  Because the date would no longer be certain, mechanic's lien that are not timely may appear timely on their face and may therefore require extensive and expensive litigation to discharge. 

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

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