In SMI Bldg. Sys. v. West 4th St. Dev. Group the appellate division affirmed the trial court's ruling denying the property owner's motion for summary judgment dismissing a lien foreclosure cause of action asserted by a subcontractor. The owner sought summary judgment based on the argument that at the time of the subcontractor's mechanic's lien being filed there was no money due and owing to the general contractor or to become due and owing to the general contractor. While the court recognizes that "a mechanic's lien will only attach to those funds due and owing to the general contractor at the time of its filing, or which may thereafter become due and owing", the court nevertheless found that the owner here failed to meet its burden of proving that no funds were due to the general contractor. From the decision, it appears that the property owner simply submitted affidavits stating that the general contractor had been paid in full and that no additional monies were due. However, the owner apparently did not submit any documentary proof to support these statements (such as checks or similar financial documents). The lesson to be learned for you owners and developers out there is to keep very good track of your records of payments to the general contractor. Not only should you of course keep copies of cancelled checks, but a running ledger showing the amount due, copies of payment applications and, most importantly, lien waivers for each payment made are crucial to protect your property.
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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