Subcontractor seeking to enforce mechanic's lien must establish money due from the owner to the General Contractor

In IMP Pluming and Heating Corp. v. 317 East 34th Street LLC the Second Department of the Appellate Division reviewed a determination of the trial Court that granted a lienor's motion for summary judgment in a lien foreclosure action.  The Court determined that the lienor failed to establish that money was due from the Owner to the General Contractor noting that the subcontractor lienor's rights "are wholly derivative of the general contractor's right to payment" and that the subcontractor's lien can "only be satisfied out of funds due and owing from the owner to the general contractor."  In IMP Pluming the Court found that while the subcontractor established the amount due under the contract had the general contractor fully performed its obligations, it failed to address the owner's allegation that the general contractor did not fully perform and, in fact, had breached the prime contract.  Because the subcontractor failed to refute the owner's claims, the Appellate Division reversed the trial Court's decision and remanded the matter for trial to determine the owner's breach claims on the merits.

This situation is often one of the most common scenarios that will confuse a subcontractor.  Many times subcontractors are surprised to learn that their mechanic's lien is not valid if there are no funds due and owing to the general contractor at the time that the mechanic's lien is filed.  An important note is that if the owner later "pays over" the mechanic's lien, and thereby extinguishes the funds due to the general contractor, it is no longer a defense assuming that the lien was properly served upon the owner.

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