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.  

Appeals Court Reinstates Discharged (Expired) Mechanic's Liens

An interesting decision out of the Second Department in Brooklyn this week.  In In the Matter of Navillus Tile, Inc., the Court was faced with an appeal where the lienor sought to extend two mechanic's liens through  Court order pursuant to Lien Law Section 17.  The Court below denied the petitions to extend the liens.

The history of the petitions is interesting and needs to be reviewed.  Apparently the original liens were recorded on May 29, 2008.  They were each extended by the filing of an extension of lien.  The extensions were stamped received by the County Clerk on May 22, 2009.  On May 19, 2010, three days before the extensions would have expired, the lienors filed ex parte petitions to extend the liens.  Remember, in New York the application to extend the lien must normally be granted before the lien expires.  As I was reading this decision it appeared to me to be business as usual to this point.  The Clerk was apparently told by Counsel for the lienors that the liens would soon expire.  However, the Clerk did not deliver the petitions to a justice of the Court until May 25, 2010 - after the liens had expired.  Since the liens had expired, the Court asked the lienors to brief the issue of whether it still had the power to grant the extensions.  The Court concluded that it did not have the power to extend the expired liens nunc pro tunc and denied the petitions.  This is the conclusion I would have expected up through this point - it is what just about every other Court in New York has consistently said.  Once the lien expires, no Court has the power to revive it: or so was the law until the Second Department chimed in here.

The Court held that "nothing in the text of Lien Law Section 17 prohibits the granting of an application for an extension of the term of a lien where the application is timely filed but not presented to a judge or justice until after the expiration date."   The Court went on to state that "since the granting of the petitions nunc pro tunc is not otherwise expressly prescribed by law, the court may extend the time fixed [by Lien Law Section 17] upon such terms as may be just and upon good cause shown, whether the application for extension is made before or after the expiration of the time fixed."

Shocking (at least to this author) decision out of the Second Department and one that leaves open a whole litany of questions.  While this is no doubt a huge victory for lienors, I'm not sure the law is so settled.  The Court relied on Makovic v. Aigborgun, 41 A.D.3d 342 in reaching its decision.  But Makovic involved extending nunc pro tunc a lis pendens that expired while a motion to renew the lis pendens was pending.  We know that a lien is a unique animal in New York and is not necessarily the same as a lis pendens when it comes to whether it has expired or not.  The argument for not extending an expired lien nunc pro tunc, or allowing a late filing, has always been that third party good faith purchasers for value would have no knowledge of the lien if they ran a search the day after it expired.  A nunc pro tunc reinstatement of the lien would allow the lien to sneak in past the good faith purchaser.  It appears this is no longer a concern to the Second Department.

Compare this case with the Second Department's 1983 decision in Contelmo's Sand & Gravel, Inc. v. J&J Milano, 96 A.D.2d 1090, 467 N.Y.S.2d 55 where the Court vacated a lien that was extended on March 24, 1980 because it had actually expired on March 17, 1980 (no mention of when the motion was filed).

For now, it appears that in the Second Department, a lien can be extended as long as a petition to extend it has been filed before the expiration date.

Another interesting question is the status of the lien now.  The Court extended the lien nunc pro tunc as of May 2010.  That means that the lien expired in May 2011.  The decision wasn't even issued until September 2012 - more than a year after the lien expired even once the extension was granted!  So now do they get to foreclose on the lien nunc pro tunc because they have good cause (the lien wasn't extended until a year after it expired)?  Fascinating stuff out of the Second Department and kudos on a job well done to the attorneys for the lienor.

Vincent T. Pallaci is a partner with the New York law firm of Kushnick Pallaci, PLLC.  With offices in Buffalo and Long Island Kushnick Pallaci provides legal services to the construction industry across the State of New York.