Tuesday, May 21, 2013

New York Mechanic's Lien Collections

When a mechanic's lien is properly utilized in New York it is a fantastic tool for contractors, subcontractors and material suppliers to secure their ability to recover payment on unpaid contracts.  Unfortunately, despite popular belief, a mechanic's lien is not a magical tool.  One of the most common questions that I hear is "I filed a lien now how do I get my money?"  Sadly, while the Tooth Fairy may immediately sneak a dollar under your pillow when you lose a tooth, the Lien Fairy does not come along and place a check snug under your pillow after your lien is recorded.  Instead, to collect on a mechanic's lien in New York you must foreclose on the mechanic's lien which should always be done through an experienced lien attorney.

Don't Wait

Once you have made the choice to lien the job, don't wait too long.  A mechanic's lien is good for one year unless it is extended.  While miracles do happen, in general if you are not paid on day 2 of the lien you probably are not going to be paid on day 364.  So my suggestion is make a determination early on.  Are you filing this mechanic's lien because you want to secure your payment but are willing to wait years for payment if necessary?  If the answer is yes, then by all means sit back relax and wait for the Lien Fairy.  But if you are filing the lien and intending on pursuing the payment, there is probably not much to gain by waiting.  While you probably do not need to enforce the lien on day 3, there may not be much to gain by waiting more than 30-60 days.  After that initial 30-60 day window you probably have a good idea of everybody's position and know whether they intend on paying you or not paying you.  If they intend on paying you, you weigh the risk of continuing to wait.  But if they make it clear that you will not be paid, why are you going to wait for years?  Granted that for smaller liens enforcement is not cost effective and you may choose to just wait it out.  But if you lien is for $75,000 or $750,000 and you know they do not intend to pay, its time to move forward with enforcement.

Some Things to Keep in Mind

The first thing to mention, and it should go without saying, is that foreclosing on a mechanic's lien means commencing a lawsuit.  Just filing a lien does not mean you are entitled to payment.  You still have to prove that you performed the work and are due money.  In addition, simply put, there are a bunch of other requirements related to the lien itself and your ability to establish the lien that must be proven in the litigation.  

Another thing to know is that lien foreclosures typically involve multiple parties.  In addition to suing the person that owes you money, you will also be suing the property owner, the owner's mortgage holder, and other lienors that have liens recorded against the property and sometimes even government tax authorities that have liens against the property.  This is because the ultimate goal of the foreclosure is to take the property and have it sold to satisfy your debt.  Since the property will be sold, everyone with an interest in it must be named so they can assert their rights.  

When attempting to collect on a mechanic's lien in New York you should also keep in mind that lien foreclosures take time.  Unless there is a total default, which is pretty rare in lien foreclosures (though they do happen), there is going to be an answer, exchanges of discovery, depositions, probably some motion practice and, ultimately, a trial.  Depending on the complexity of the claim, and the location of the property, the lien foreclosure could take anywhere from 18 months to 3+ years.  This is part of the reason for not waiting too long.  Why wait until the eve of the expiration of the lien if you are going to have to wait another three years for the litigation to play out?  

Don't ignore letters or other communications and documents related to your lien.  If you receive a demand pursuant to Lien Law Section 38, its time to hire an attorney.  There are drastic consequences for not handling Section 38 correctly.  Likewise, if you receive a Demand to Foreclose under Lien Law Section 59, its definitely time to hire an attorney and do it quickly because your clock to commence a foreclosure action is running.  

Shop Around

While there may not be a Lien Fairy, a competent experienced lien attorney is probably just about the closest thing you will find.  Don't rely on the attorney you know, the attorney that lives across the street, your cousin Sally that just graduated from law school, a cold call from the yellow pages or a blind search on Google.  Look for an attorney that knows construction and knows mechanic's liens.  While you may not know a thing about the process for foreclosing on a mechanic's lien, you probably know construction if you are involved in lien litigation.  Google, the Yellow Pages, Cousin Sally and the guy across the street are all good sources of information for locating potential attorneys to collect on your mechanic's lien, but you need to actually speak to those attorneys and find out what they know, how they would handle your case and what they recommend.  If they cannot explain the enforcement process to you, what makes you think they can explain it to a judge and get you paid?  You worked hard for your money, make sure you hire someone that will work just as hard to help you collect it.

Vincent T. Pallaci is a partner with the New York law firm of Kushnick | Pallaci, PLLC where his practice concentrates on construction law including mechanic's lien foreclosure and mechanic's lien defense.  KP has offices in the NYC Metro area and in Buffalo and files, enforces and defends against mechanic's liens in every County in New York.  

1 comment:

  1. I am in received of a Notice Under Mechanics Lien Law, to what I have answered requesting an itemized statement. Both documents I have received regular mail. After reviewing the itemized statement, I realized the contract amount is higher than the original copy I have, (not included in their statement, also they included two change orders I have never seen before. How coud I answer. They can't make up amounts owed, can they?