In Adams v. Carriage House Farm, Inc. the Appellate Division, Second Department, affirmed a lower court judgment that held that a mechanic's lien was subordinated to the mortgage on the premises. The Court noted that there was no proof on the record that the lender had failed to comply with Lien Law Section 22 and, as such, the mortgage had priority over the mechanic's lien.
The relevant portion of Lien Law Section 22 says that if the building loan contract (identified in Lien Law Section 22) is not properly recorded as described in Lien Law Section 22, then the interest of the parties to the building loan contract becomes subordinate to a mechanic's lien later filed. In more simple terms, if the lender does not file the contract then it cannot claim priority over a subsequently filed mechanic's lien.
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
Thanks for sharing. These state-by-state rules are important for lenders and contractors to know. In Missouri and Kansas (where I primarily practice), the priority issues between lenders and mechanic's lien claimants could not be more different!
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