Thursday, September 27, 2012

Subcontractor to Unlicensed Home Improvement Contractor Has No Lien Rights

It is well settled law in New York that a contractor cannot recover on a mechanic's lien (or through any other means) where the work performed required a home improvement license and the contractor did not have such a license.  This week the First Department issued a decision with a bit of a twist on that rule - though not one that was surprising.  In Kamco Supply v. JMT Brothers Realty the lienor was a subcontractor to a general contractor that entered into a home improvement contract.  The property owner established that the general contractor did not have a home improvement license and, therefore, moved for summary judgment dismissing the subcontractor's lien (no mention is made of whether the subcontractor had its own independent home improvement license).  In affirming the dismissal of the lien, the First Department noted that "where a home improvement contract has been rendered unenforceable, there can be no funds due and owing from the owner to the unlicensed general contractor to support a subcontractor's mechanic's lien claim."  The Court further noted that "the rights of a subcontractor must be derivative of the rights of the general contractor and a subcontractor's lien must be satisfied out of the funds due and owing from the owner to the general contractor at the time the lien is filed."

The lesson for subcontractors, suppliers and materialmen is simple:  if you are providing labor or materials to a home improvement make sure that the general contractor that hired you has a home improvement license.  If he, she or it does not, you could be stuck holding the bag without any valid lien rights.

Vincent T. Pallaci is a partner at the New York law firm of Kushnick Pallaci, PLLC where his practice concentrates on construction law, including prosecuting and defending mechanic's lien foreclosure actions.

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