Liens, Bonds and Arbitration Clauses: Preserve Each Remedy

Reviewed September 7, 2026.

A construction arbitration clause does not prevent a contractor from filing a mechanic’s lien. But moving a dispute into arbitration requires careful attention to the lien, any discharge bond, the foreclosure action and the parties bound by the agreement.

What went wrong in PGA Mechanical

In PGA Mechanical Contractors, Inc. v. GPNZ Realty Co., LLC, 37 Misc. 3d 1210(A) (2012), the lien had been bonded and the parties discontinued the foreclosure action in connection with arbitration. The court discharged the bond. A reference to the bond in the stipulation’s background recitals did not supply an operative agreement preserving it after discontinuance.

The decision is a warning about the actual stipulation and procedural history. It does not mean that agreeing to arbitration automatically releases every lien or bond.

Coordinate arbitration with lien security

Lien Law § 35 permits lien filing without waiving contractual arbitration rights. A court action can, where appropriate, be stayed while arbitration determines the contractual dispute. Before discontinuing an action, identify how lien or bond rights will remain enforceable, whether the surety is bound, which parties must participate, and what operative language and court orders are needed.

Calendar the preservation requirements under § 17. Neither an arbitration demand nor the existence of a bond should be assumed to extend the lien automatically. A bond transfers security; it does not establish liability or guarantee immediate payment.

The firm also handles construction surety disputes and mechanic’s lien foreclosure.

Kushnick Pallaci PLLC assists clients throughout New York with construction arbitration. Contact 631-752-7100 or vtp@kushnicklaw.com.

Attorney Advertising. General information, not legal advice.