The amount of a mechanic's lien is a not a "facial defect" allowing summary discharge

This is hands down the biggest reason that people dispute mechanic's liens:  they do not agree that the amount set forth in the mechanic's lien is correct and think it should be discharged.  Every time I am presented with this scenario I have to explain that a mechanic's lien that is valid on its face cannot be summarily discharged and a dispute over the amount due is not an issue of facial validity.  In a decision out of the New York County Supreme Court this month this principle was yet again affirmed (as it has been over and over).  You can read the decision here. 

The case involved a general contractor commencing a special proceeding to discharge a subcontractor's mechanic's lien on two grounds: 1) the contractor argued that the mechanic's lien was exaggerated and therefore should be declared void under Lien Law Section  39; and 2) the contractor argued that the date of last performance was wrong and that the lien was therefore not timely.  In quickly denying the contractor's petition the Court noted Lien Law Section 19 and the oft quoted statement that "[a] court has no inherent power to vacate or otherwise discharge a mechanic's lien except as authorized under Lien Law [Section] 19(6)."  See Matter of Luckyland (N.Y.), LLC v. Core Continential Construction, 83 A.D.3d 1073 (2nd Dept. 2011).  The Court noted that neither of the contractor's challenges went to the sufficiency of the face of the mechanic's lien itself and therefore denied the petition noting that exaggeration can only be established at the trial of the foreclosure action. 

One other interesting little side note about this case is that the petition sought to compel foreclosure of the mechanic's lien pursuant to Lien Law Section 59.  The Court also denied this portion of the petition noting that the petitioner had totally failed to proceed as required under Lien Law Section 59 by serving a demand upon the lienor (personally) requiring foreclosure of the mechanic's lien within thirty (30) days. 

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

Can I amend my mechanic's lien?

It's a very common question and the subject of much confusion in the construction world.  A mechanic's lien amendment is very limited and may only be done for the following purposes and in limited situations.  First, an amendment can only be done within sixty (60) days of the filing of your mechanic's lien.  Second, the amendment must be done on twenty (20) days notice to existing lienors, mortgagees and the owner.  Third, the amendment must be to reduce the amount of the lien.  You cannot amend a mechanic's lien to increase the amount of the lien. 

In other certain limited instances, Lien Law Section 12-a (2) permits a court, on five days notice to existing lienors, mortgagees and the owner, to amend a mechanic's lien nunc pro tunc.  However, the amendment may not be granted if it would prejudice an existing lienor, mortgagee or purchaser in good faith.  Some examples of amendments that have been permitted are amendments to the name of the contracting party (the party that hired the lienor) and the dates of furnishing (if the amendment would not have changed the validity of the lien had the correct dates been originally inserted).  If the totality of the inaccuracies would render the lien such that there was not substantial compliance with the terms of the Lien Law then the lien cannot be saved by amendment and will be found defective and voidable.

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

No Attorneys' Fees in Mechanic's Lien

One of the most common questions that I am asked is whether a lienor may include attorneys' fees, such as the costs of collection or the costs of preparing the mechanic's lien itself, within the amount of the mechanic's lien?  Unfortunately for lienors the answer is no.  The mechanic's lien is limited to the actual cost of the labor and materials that the lienor provided to the construction project.  In some instances interest may be allowed but there are no situations in which attorneys' fees may be included within the 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

Mechanic's Lien can include interest charges

One of the most common questions that I am asked is whether a lienor may include interest or finance charges in the amount of its mechanic's lien.  The answer is a very simple "yes."  Lien Law Section 3 specifically authorizes a lienor to lien for the amount unpaid for the labor and materials and for the interest due thereon.  Be careful though, if the contract documents did not allow you to charge interest or finance charges on past due amounts then you cannot just make up an amount and include it in the lien.  On the other hand, if your contract documents allow you to charge interest or finance charges on past due amounts then the interest or finance charge is an entirely proper component of your mechanic's lien.  When inserting interest provisions in your contract documents just be careful not to run afoul of New York's Usury laws.

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

Lien Law Amendment Requiring "Certification" of Lienor Rises Again

This blog previously discussed a potential lien law amendment that would require the County Clerk to issue  "certification" that the lienor is authorized to conduct business in the county before accepting the lien for filing.  The bill has popped up again under A04562.  As previously discussed right here, this is a very significant proposed amendment to the lien law that contractors should fight against. This proposed amendment would insert some type of language into the lien law that would allow the County Clerk to refuse to file a mechanic's lien unless it is accompanied by a certification from the County stating that the contractor (or subcontractor, etc.) is licensed to perform the work in that county. There are a number of potential problems with such an amendment. First, who will be in charge of preparing this "certification"? Will it be an expert on the county licensing laws that know when you do and when you don't need a license to perform certain services? The answer is almost certainly no. What if there is a difference of opinion between the contractor and the clerk that is issuing this certification as to whether a license is required? If the clerk refuses to accept the mechanic's lien for filing, and it is ultimately determined that the lien should have been accepted, the right to file the lien may have expired in the interim. There are a number of nuances in the licensing statutes for each county and those nuances have not yet been completely ironed out by the court systems despite extensive litigation. How is a county employee supposed to make such a determination when the statutes themselves are not clear, especially because determining applicability requires a fact specific analysis? While the problem of unlicensed contractors filings mechanic's liens is indeed a problem, it is one that the courts can address - they can vacate the mechanic's lien and if necessary award the home owner damages. The legislature should not put the life or death of a mechanic's lien in the hands of a county employee that likely would not have the knowledge (either legally or factually) to determine if a license is required for that particular work. The current system, while not perfect, works. Leave it to the attorneys and the courts to sort out who should and should not file a mechanic's liens.

If the legislature wants to act in this area a far better choice would be to adopt severe penalties for filing a mechanic's lien if you are not licensed to perform that particular work. Such an amendment would not penalize legitimate valid claims and would, hopefully, cause unscrupulous contractors to pause before filing an improper mechanic's lien. As the lien law stands, there is really no penalty for filing a mechanic's lien if you are not licensed other than losing your 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

Foreign Corporations Filing Mechanic's Liens in New York Beware

A foreign corporation that performs work in New York or supplies materials to a construction project within New York may file a mechanic's lien.  However, if the foreign corporation does not have a New York address there is some authority to suggest that the mechanic's lien could be invalidated if the lien does not list the address of the lienor's New York attorney. 

While Lien Law Section 9 does state that a lien can contain the name and address of the lienor's attorney, it is not mandatory.  Case law, however, has interpreted Lien Law Section 9 to require that the lienor list the name and address of its New York attorney if the lienor does not have a New York address. 

Prudent foreign contractors, suppliers and materialmen, to be safe, should retain a New York attorney to prepare and file the mechanic's lien for them and the lawyer will take note to his or her name and address in any mechanic's lien that they file within the State of New York on the foreign corporation's behalf.  While doing so may not be statutorily mandated, given the decisions of certain courts on the issue, it is better to be safe than left with an invalidated mechanic's lien and the cost of hiring an attorney to file the lien for you is likely not significantly different than having a filing service prepare the lien for you. 

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

Pitfalls to Beware of When Working On Condominiums in New York

It's a phone call that I get at least once every week: "I did some work on a condominium and I haven't been paid.   I want to file a mechanic's lien."  Well, here is where the bad news comes in.  If you did that work and the condominium has already been converted (it is a living breathing condominium) then you most likely cannot file a lien.  In order to file a mechanic's lien against a condominium's common area, the Real Property Law requires that you have the "unanimous consent" of all of the unit owners.  Without it, you cannot file your mechanic's lien.  Well the next question is always the same: "what about the work I did in the individual units"?  Here, again, comes more bad news.  If those units have already been sold then you cannot file that mechanic's lien.  The reason is simple - you did not have the consent of that unit owner to do the work so you cannot encumber their property with a mechanic's lien. 

So for you contractors out there that are working on a condominium make sure you don't wait too long to file that mechanic's lien.  If you know a conversion is on the way, and payment is past due, you should consider whether the time is right to file your mechanic's lien.  Waiting too long could result is a total loss of your lien rights.  That doesn't mean that you have no options left to collect your money, it just means you can no longer file the mechanic's lien.  You can always still file a claim for breach of contract and, thankfully for contractors, the Lien Law and case law has developed an "alternate" security for your payment.  The Lien Law deems all common charges collected by the condominium to be trust funds intended for the benefit of contractors doing work on things like common areas.  So if you perform work in a common area without the unanimous consent of the unit owners you can still assert a lien law trust fund claim even though you cannot file or enforce a 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

Wrong Owner Listed on Mechanic's Lien Causes Contractor Trouble

In In the Matter of the Application of Carnegie Hill North, LLC v. Diontech Consulting, Inc., the court (New York Supreme Court) examined the issue of whether a contractor could amend a mechanic's lien that identifies the wrong owner of the property. The true legal owner of the property, who was not identified in the mechanic's lien, filed a motion to discharge the lien arguing that under Lien Law Section 9(2) the lien was jurisdictionally defective because it misidentified the owner of the premises and, therefore, cannot be cured by an amendment. The contractor cross-moved to amend the lien pursuant to Lien Law Section 12-a(2) arguing that the lien simply "misdiscribes" the owner rather than misidentifies. The contractor relied on Lien Law Section 9(7) which states that a misdiscription of the true owner shall not affect the validity of the lien. Of importance in this case were the facts that the contractor did not do a title search to find out who the true legal owner was (a title search here would have revealed the proper owner) and also whether certain statements made in the contract and orally to the contractor would have led the contractor to believe that the person named in the lien (who was actually the principal of the entity that held title) was the proper owner. The court here found issues of fact that required it to refer this matter to a special referee to determine so, for now, we don't know whether the contractor will be permitted to amend the lien. However, there is a valuable lesson to be learned here for anyone who is looking to file a lien in New York: do your due diligence and order a last owner search before you file a mechanic's lien. The cost to do so is usually minimal and is worth it for the added protection of knowing that you properly identified the property in the 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