New York Mechanic's Lien

2025-06-02T11:11:00.000-04:00

How to Defend a Mechanics Lien Foreclosure in New York

By Kushnick Pallaci PLLC | www.nyconstructionlaw.com

Introduction

Mechanics liens are powerful tools for contractors, subcontractors, and suppliers seeking payment for labor or materials provided to a construction project. But when a lien foreclosure action is filed, property owners, developers, or general contractors must act quickly and strategically to defend against the claim. At Kushnick Pallaci PLLC, we represent defendants across New York facing lien foreclosure actions—protecting their rights, property, and financial interests.

What Is a Mechanics Lien Foreclosure?

A mechanics lien foreclosure is a lawsuit filed by a lienor (usually a contractor or subcontractor) to enforce a filed lien against real property. It operates similarly to a mortgage foreclosure and seeks a judgment directing the sale of the property to satisfy the claimed debt.

In New York, once a lien is filed, the lienor must commence an action to foreclose within one year of the lien filing (Lien Law § 17). Failure to do so may render the lien void.

Common Defenses to Lien Foreclosure Claims

If you're named as a defendant in a lien foreclosure action, several legal defenses may apply. These include:

1. Improper Service or Filing Defects

If the lien was not properly served, filed outside the statutory deadline, or contained material errors (e.g., wrong owner or amount), the lien may be dismissed outright.

2. No Contractual Relationship

In many cases, especially with subcontractors, there is no direct contract with the property owner. Without privity, a lien claim may be improper if certain statutory conditions are not met.

3. Overstated or Exaggerated Liens

If the lien amount is intentionally exaggerated, the claim can be dismissed, and the lienor may face damages or penalties (Lien Law § 39).

4. Work Not Performed or Defective

A lien can only be enforced for valid and properly performed work. If the plaintiff failed to complete the job or performed substandard work, the court may deny the foreclosure.

Lien Law § 17: The One-Year Deadline

One of the most effective defenses is the expiration of the lien under Lien Law § 17. If the plaintiff fails to foreclose within one year of filing the lien—and fails to file an extension—the lien is invalid.

A timely motion to dismiss based on expiration can end the case early and preserve your rights as the property owner or general contractor.

Defending the Property Owner vs. General Contractor

Property Owners are often brought into these suits even when they had no direct relationship with the subcontractor. In such cases, we argue lack of privity and defend against trust fund or unjust enrichment claims.
General Contractors may be exposed to lien foreclosure if they failed to pay a subcontractor—but they also have defenses based on payment disputes, lien waivers, or owner non-payment.

Each role has unique rights and defenses under New York Lien Law.

Litigation Tactics & Practical Strategy

At Kushnick Pallaci PLLC, we approach each lien foreclosure case with a tailored litigation plan:

Early motion practice to dismiss defective liens
Aggressive discovery demands to uncover inflated or unsupported charges
Assertive counterclaims when appropriate (e.g., for breach of contract or delay damages)
Negotiation and settlement when resolution is more efficient than litigation

We also advise clients on how to avoid liens in the future—by using clear written contracts, lien waivers, and prompt payment mechanisms.

Conclusion: Don’t Wait to Act

If you’ve been served in a lien foreclosure lawsuit, the clock is ticking. Failing to respond can lead to default judgment and potential loss of equity in your property.

Let Kushnick Pallaci PLLC defend your rights with experienced, construction-focused litigation. We’ve represented owners, contractors, and developers across New York City, Long Island, and the Hudson Valley in all aspects of lien law and construction disputes.

📞 Call Today: (631) 752-7100
📍 Visit Us Online: www.nyconstructionlaw.com
📧 Email: vtp@kushnicklaw.com

Willfull Exaggeration of Lien: A difficult burden of proof

2017-07-24T13:28:00.000-04:00

One of the most effective weapons against mechanic's lien abuse by contractors is the owner's ability to use Lien Law Section 39 and 39-a to defend against a "willfully exaggerated" lien. However, the burden of proving the "intent" necessary to establish that the exaggeration was "willful" can often be difficult, though not impossible, to achieve.

A recent 2017 decision from the Appellate Division, Third Department, offers a demonstration of that difficulty. Blair v. Ferris involved a contractor foreclosing upon a mechanic's lien for funds that it believed were not paid by homeowners. The case offers a nice discussion of the burden of proof needed to establish the amount due, including stating that oral testimony of the lienor alone, without documentary evidence, can be sufficient proof. However, the interesting discussion revolves around the homeowner's defense and claim of exaggeration of the lien.

Based on the written decision, it appears that at trial it was established that the contractor filed a mechanic's lien for $160,633. Given the discussion about evidence, it appears that the only evidence offered as to value was the contractor's oral testimony. The trial court eventually ruled in favor of the contractor-lienor but only awarded damages of $57,600. The lien, therefore, was more than $100,000 more than what plaintiff established at trial. Moreover, the appellate division appears to believe that the calculation of $57,600 was incorrect and, in fact, reversed the award and sent it back to the trial court for further proceeding. Though not explicit, the appellate court appears to believe that the $57,600 was too much based upon the math it could deduce from the facts. While the decision does not directly state an amount, it appears that the court believes the actual amount established by plaintiff may be in the range of $25,000 (against a $160,633 lien).

On its face, it would appear that the lien was exaggerated because it was significantly more than the amount plaintiff established. The real question then is whether it was "willfully" exaggerated. Here, the appellate division said no, it was not. The Court stated that "it is well established that inaccuracy in the amount of the lien, if no exaggeration is intended, does not void a mechanic's lien; willfulness also must be shown." The court noted further "the fact that a lien may contain improper charges or mistakes does not, in and of itself, establish that a plaintiff willfully exaggerated a lien." As to the burden of proof, the court unequivocally held that the owners had the burden to "show that the amounts set forth in the lien were intentionally and deliberately exaggerated" and that the Lien Law "must be strictly construed in favor" of the lienor. Applying this strict standard, even against a lien that was apparently "exaggerated" and without documentary backup, the Court found no basis to award exaggeration damages under Section 39 or 39-a because the proof of intent was lacking and, therefore, the exaggeration (the Court never actually never even specifically calls the discrepancy an exaggeration) was not willful.

Vincent T. Pallaci is the managing member of Kushnick Pallaci PLLC. The firm's construction lawyers regularly enforce and defend against mechanic's liens in New York including claims of willful exaggeration.

Don't wait too long to file your mechanic's lien

2016-11-13T16:29:00.002-05:00

As the end of the year quickly approaches many companies will begin reviewing their accounts receivable and decide what to write off and what to pursue. While mechanic's liens have deadlines to file that does not mean you should wait until the last minute. There can be practical reasons why filing a mechanic's lien early can lead to better recoveries. Some of the reasons include: 1) the recency is primacy principle. The long you wait to file the lien the more likely it is that the specifics of your work and your claim will become blurred. Deal with the claim quickly while details are fresh; 2) if the owner pays out to others the lien fund may be exhausted before your lien is recorded. Always remember that a mechanic's lien is only as good as the fund remaining. If you wait to long, others may be paid leaving you holding an empty bag; and 3) an early lien can put pressure on the project and force the key players to deal with you to avoid problems (such as lenders refusing to fund).

When in doubt, speak to your attorney about the pros and cons of filing your mechanic's lien but always remember that conversation is better had months before the deadline expires - not days.

Vincent T. Pallaci is the managing member of Kushnick Pallaci PLLC. Kushnick Pallaci PLLC regularly counsels clients on filing and enforcing mechanic's liens.

First Department Issues New Interpretation of Lien Law Section 5

2016-10-28T16:05:00.000-04:00

Skanska USA Building Inc. v. Atlantic Yards B2 Owner, LLC decided on October 20, 2016 by the Appellate Division, First Department, is an excellent discussion of various issues, including Lien Law Section 5, and is a good read for anyone practicing in this area.

Lien Law Section 5 provides, in part

"where no public fund has been established for the financing of a public improvement with estimated cost in excess of two hundred fifty thousand dollars, the chief financial officer of the public owner shall require the private entity for whom the public improvement is being made to post, or cause to be posted, a bond or other form of undertaking guaranteeing prompt payment of monies due to the contractor..."

In an excellent discussion of Section 5 and the legislative history the First Department noted that prior to 2004 the statute left a "gap" in that "contractors working on projects being built by private developers, with private funds, but on public land, could not file liens against the public land or the private entity's leadhold interest." But in 2004 the above cited language was added to Lien Law Section 5 to give those working on such projects (private projects on public land) some level of protection.

The plaintiff in Skanska apparently took the position that the guarantee provided did not comply with Lien Law Section 5 because it was not equivalent to a bond or "other form of undertaking" required by the law. The Court noted that New York Courts are to give meaning to each word in a statute and looked at various definitions of the word "undertaking." Ultimately, the court appears to define an undertaking for Lien Law Section 5 purposes as "simply a formal promise or guarantee." The Court goes on to note that the legislature intended the term "undertaking" as used in Lien Law Section 5 to mean "guarantee" and points to the fact that the Governor vetoed an earlier version of the law that would have required a bond be posted in every instance disallowing "other forms of security designed to guarantee payment." The sponsor of the amendment to Lien Law Section 5 clarified that the phrase "or some other form of undertaking" was added to satisfy the Governor's concerns.

Accordingly, the First Department determined that the Lien Law Section 5 obligations were met by Forest City Enterprise, Inc. (a party to the case) issuing a formal "guaranty" that the owner would "fully and punctually pay and discharge any and all costs, expenses and liabilities incurred for or in connection with the work including, but not limited to, the costs of constructing...the work." The decision notes that the language of the guarantee follows the letter of the statute and that the public owner was satisfied the by language of the guarantee. The court notably indicated that it was irrelevant that there were better guarantees available (such as a letter of credit).

While an excellent discussion of Lien Law Section 5, and some guidance as to what Lien Law Section 5 really requires, I'm not entirely sure that this decision is great for contractors and really satisfies the intent purportedly behind giving contractors on these projects some protection. That may just mean that the legislature needs to go back to work on Lien Law Section 5. It will be interesteing to see if this one makes it up to the Court of Appeals for the final say.

Vincent T. Pallaci is the managing member of Kusnick Pallaci PLLC and his practice focuses on construction law. For more information visit Kushnick Pallaci PLLC's website at www.nyconstructionlaw.com. For more information about Kushnick Pallaci PLLC's lien services visit their mechanic's lien services page here.

NY Appellate Court Says Incorrect Name on Lien May be Forgiven

2016-10-28T15:32:00.000-04:00

In Matter of CAFS Mgmt. Corp. v. Q Realty & Development the Court was faced with an appeal that denied a petition pursuant to Lien Law Section19(6). Apparently a mechanic's lien was filed that named Q Realty & Development, Inc. when, in fact, it should have listed the correct name of Q Realty & Development Group Corp. Noting that the Lien Law affords "liberal construction to protect the beneficial interests of lienors" (see Lien Law Section 23) the Appellate Division that denial of the petition to discharge the lien was proper and that "misidentification of the lienor on the notice of lien was a nonjurisdictional defect capable of amendment pursuant to Lien Law Section 12-a(2)".

In addition, the Court affirmed the lower court's determination that the petitioner failed to establish that the property was a single family dwelling (subject to a 4 month limitations period) as opposed to a multi-family dwelling (subject to an 8 moth limitations period).

There was nothing particularly new or novel in this decision but it reaffirmed the Second Department's long standing position that a "misidentification" of a name in a mechanic's lien is curable.

Vincent T. Pallaci is the managing member of Kusnick Pallaci PLLC and his practice focuses on construction law. For more information visit Kushnick Pallaci PLLC's website at www.nyconstructionlaw.com. For more information about Kushnick Pallaci PLLC's lien services visit their mechanic's lien services page here.

Case Law Update: Court allows "nunc pro tunc" amendment of lien that is in "substantial compliance" with Lien Law

2015-12-07T14:23:00.000-05:00

Matter of Rigano v Vibar Constr., Inc.

Decided 9/30/15 by the Appellate Division: Second Department

Upon remittitur from the Court of Appeals, the Court found that, upon re-argument, the Supreme Court should have granted Vibar Construction’s petition to amend the notice of lien nunc pro tunc and deny the petition to summarily discharge the lien.

The Court found that subject notice of lien was in substantial compliance with the requirements of the Lien Law and that no party would be prejudiced by the amendments. The Court affirmed the ruling that, “in the absence of a defect upon the face of the notice of lien, any dispute regarding the validity of the lien must await trial of the foreclosure action.”

Motion to Amend Pleadings Keeps Lien Alive

2014-12-25T12:57:00.002-05:00

Happy holidays lien lovers! We can be thankful to the Third Department this year for continually giving us interesting and thorough discussions of the Lien Law. Our latest gift comes courtesy of Edwards & Zuck, P.C. v. Cappelli Enterprises, Inc. There the lienor commenced an action to foreclose upon its mechanic's lien. As required by Lien Law Section 44, the lienor named other lien holders as necessary party defendants. One defendant lienor, Cives Corporation, originally filed an answer that did not include a counter/cross claim to enforce its own mechanic's lien. Pursuant to Lien Law Section 44(5), the failure to assert a counter/cross claim is a waiver of the lien. Cives was in trouble...

However, prior to the expiration of its own lien, Cives filed a motion to amend its answer and assert a counter/cross claim to enforce its mechanic's lien. The Supreme Court permitted the amendment and permitted the lien to survive. On appeal, the Third Department affirmed noting that the "law governing mechanic's liens...liberally construed to ensure that its purpose is accomplished..." The key here appears to have been that at the time the motion was filed the lien was still valid (it has not expired) and the other parties were on notice of the lien by virtue of it having been referenced in the complaint and its alleged validity and priority asserted in the original answer.

The lesson here? Play it safe: if you are going to appear as a defendant in the lien foreclosure action and you want to preserve and enforce your lien, assert a cross and counterclaim to foreclose.

Vincent T. Pallaci is the managing partner of the New York law firm of Kushnick | Pallaci PLLC where his practice concentrates mainly on the area of construction law including prosecuting and defending mechanic's lien claims. With offices in the New York City metropolitan area and in Buffalo, New York, KP serves the construction industry across the State of New York.

Free Sample New York Mechanic's Lien Form

2013-10-20T18:00:00.000-04:00

The New York Mechanic's Lien Blog is happy to offer this free sample New York mechanic's lien form. As with all legal issues, you should consult with an attorney before using any form or filing a mechanic's lien.

Vincent T. Pallaci is the managing partner of the New York law firm of Kushnick | Pallaci, PLLC where his practice concentrates on construction law.

Mechanic's Lien in NY may not be attached to property after transfer of deed

2013-10-20T13:17:00.001-04:00

In V.A.L. Floors v. Marson Contracting Co., the First Department of the Appellate Division reviewed a situation where a parcel of property (a condominium) had been sold and then a mechanic's lien was filed by a contractor hired by the prior owner. The Court found that:

"since the deed contains the statutorily required trust fund language (see Lien Law § 13[5]), and the conveyance occurred prior to the filing of plaintiff's lien, the "lien is not valid against the deed"

The Court further noted that the contractor's mechanic's lien was not filed because:

"Lien Law § 4 provides that a mechanic's lien "shall extend to the owner's right, title or interest in the real property and improvements, existing at the time of filing the notice of lien." Since ownership of the condominium unit passed to the Buyers at the time of delivery of the deed (seeReal Property Law § 244), and since the Buyers did not consent to the work performed outside of the unit which constituted the basis of the overwhelming majority of the Lien (see Real Property Law § 339-l[2]), the Lien was also "invalid under Lien Law § 4(1)"

Most deeds in New York do now contain the statutory trust fund language of Lien Law Section 13 so it would be uncommon to be able to attach a mechanic's lien to property after a valid transfer. However, the potential lienor is not without recourse. Lien Law Section 13 makes it clear that the funds received by the owner are trust funds and, if those funds are not used to satisfy claims of contractors and suppliers, the owner (and its principals) may have liability for trust fund diversions.

The lesson for contractors and suppliers here: don't wait to file your New York mechanic's lien! There are a number of defenses that can pop up in the window while you wait. Even though you have time to file (depending on the type of project this may vary in duration), the property could still be transferred hence defeating your mechanic's lien. Also, during this time the contractor could be paid in full by the owner hence defeating claims of lower tier subcontractors and suppliers. Granted, filing a mechanic's lien immediately may not always be the proper recourse, but there is a delicate and thin line between waiting too long and filing too soon. When in doubt, speak to your construction lawyer.

Vincent T. Pallaci is the managing partner of the New York law firm of Kushnick | Pallaci, PLLC where his practice concentrates mainly on the area of construction law including prosecuting and defending mechanic's lien claims. With offices in the New York City metropolitan area and in Buffalo, New York, KP serves the construction industry across the State of New York.

Make Sure You Have The Right License

2013-08-16T23:42:00.001-04:00

Bindela Construction LLC was a licensed general contractor in New York City. Its principal, Iancu Bindela, was a licensed NYC Home Improvement Salesperson. So when Bindela Construction LLC wasn't paid for home improvement work that it performed in New York City, it was probably confident it would have no problem pursuing the claim and enforcing a mechanic's lien. Bindela was very wrong.

In Bindela Construction LLC v. Campo, the home owner, Mr. Campo, moved to dismiss Bindela's claim and its lien. The argument was that Bindela failed to allege in its complaint that it was a licensed home improvement contractor and, therefore, that the complaint was fatally defective pursuant to CPLR Section 3015(e). Because an unlicensed home improvement contractor may not recover for work performed without a license, under any theory, the lien would also be invalidated if there was no valid home improvement contractor's license. Despite Bindela's best efforts, the Court here was not convinced that a general contractor's license or a home improvement sales person license satisfied the requirement to have a valid home improvement contractor's license in NYC and, therefore, dismissed the complaint and the lien.

Here the claimant learned a valuable, but very painful, lesson: make sure you have the correct license when performing construction work. In addition to being illegal, and often a crime, performing work that requires a license without that exact license usually means you forfeit the right to payment regardless of the quality of your work.

Vincent T. Pallaci is the managing partner of the law firm of Kushnick | Pallaci PLLC where his practice concentrates on construction law including prosecuting and defending mechanic's liens. With offices in Buffalo and Long Island, KP represents the construction industry across the State of New York.

NY Mechanic's Lien Discharge Bond May Have Impact on Other Causes of Action

2013-07-13T15:23:00.002-04:00

Lien Law Section 19 provides that a mechanic's lien may be discharged by the filing of a bond in the amount of 110% of the lien. The most obvious and straight forward impact of the lien discharge bond is that, once bonded, the mechanic's lien no longer attaches to the property. This, of course, means that in a foreclosure action the property is not being foreclosed upon but, rather, that the lienor is seeking to establish the validity of the lien so that it may recover upon the lien discharge bond. However, as we learned recently from the Second Department's decision in Holt Construction Corp. v. Grand Palais, the lien discharge bond may impact causes of action that have nothing to do with foreclosing upon the mechanic's lien itself.

In Holt Construction the lienor plaintiff sought to set aside a conveyance of the property that the lien was originally based upon. The lienor's argument was that a transfer of the property constituted a fraudulent conveyance of the property pursuant to Debtor and Creditor Law Section 273. While the trial Court agreed, the Appellate Division reversed on this point noting that once the owner

"obtained a bond to discharge the mechanic's lien, the debt no longer existed for the purposes of Debtor and Creditor Law Section 273."

The trial Court in Holt touched on another interesting, and often contested, issue: does the filing of a mechanic's lien discharge bond remove the debt from the clutches of Lien Law Article 3A? This issue has increasingly been clarified by the Courts and the 2nd Department follows form here (following the 3rd Department) in reversing the trial court and holding that

"the discharge of a mechanic's lien by the filing of a bond is not equivalent to the payment or discharge of a trust claim pursuant to Lien Law Article 3-A. Therefore, the filing of the bond did not necessitate the dismissal of the...causes of action which were to recover damages for diversion of trust assets pursuant to Article 3-a of the Lien Law."

The lesson from Holt? The mechanic's lien discharge bond may free up the property and make it freely transferable. But it does not extinguish the obligations of a trustee under Lien Law Article 3-a and corporate principals may continue to be held liable for trust fund diversions even after the posting of a bond.

Vincent T. Pallaci is the managing partner of the law firm of Kushnick | Pallaci, PLLC where his practice concentrates on construction law including prosecuting and defending lien law trust fund diversion class actions. With offices in Buffalo and Long Island, KP provides legal counsel to the construction industry across the State of New York.

You can't file a lien! We have an arbitration clause!

2013-07-11T18:23:00.000-04:00

Okay, so I admit that the title of this post is not entirely accurate; in fact, its 100% false here in New York. But, sadly, it is what many misinformed individuals tell me (or rather yell at me) after my client files a mechanic's lien. I'm not entirely sure where this misinformation came from. Perhaps a sly owner once convinced a contractor to give up his or her lien rights because of an arbitration clause and the legend was born. Or perhaps, more likely, it is the result of people in the construction industry, including attorneys, not actually reading and understanding the New York Lien Law. Regardless of the source, its a fallacy that needs to die out in the construction industry.

After the irate individual on the phone stops yelling at me for filing a "frivolous lien" despite our arbitration clause, I calmly respond that, with all due respect, you don't know what your talking about. Of course the natural response is more yelling ending with "what authority do you rely on?!" The answer is simple, take a look at Lien Law Section 35:

"The filing of a notice of lien shall not be a waiver of any right of arbitration of a contractor, subcontractor, material man or laborer..."

Not convinced by Lien Law Section 35? Then take a look at Lien Law Section 34:

"Notwithstanding the provisions of any other law, any contract, agreement or understanding whereby the right to file or enforce any lien created under article two is waived, shall be void as against public policy and wholly unenforceable."

Lien Law Section 35 works very nicely with Lien Law Section 34 to make one thing clear: New York favors a public policy of allowing contractors to protect and secure their right to payments through the filing of a mechanic's lien. You cannot waive that right (prior to payment) and even if someone tries to force you to do it, that is void under Lien Law Section 34. However, Lien Law Section 35 says you can still proceed to honor that contract and arbitrate the claim without impacting your lien rights.

So the next time you get an irate phone call claiming you cannot file that lien because there is an arbitration clause, politely tell them to go read the Lien Law or, better yet, just pay the claim!

Vincent T. Pallaci is a partner with the New York law firm of Kushnick | Pallaci, PLLC where his practice concentrates on construction law. With offices in Buffalo and Long Island, KP serves the construction industry across the State of New York.

Court of Appeals Issues Rare Commentary on Section 22 of the Lien Law and Priority

2013-06-14T12:46:00.002-04:00

The Court of Appeals offered us lien lovers a rare treat this week when they chimed in on the Lien Law (specifically Lien Law Section 22). Here is what we learned in Altshuler Shaham Provident Funds v. GML Tower...

As a result of the failed effort to renovate the Hotel Syracuse, a number of lienors and a mortgage holder found themselves disputing the priority of the payment of their liens out of the proceeds of a foreclosure sale. The trial court found that Lien Law Section 22 subordinates a building loan mortgage made pursuant to an unfiled building loan contract to subsequently filed mechanic's liens. The lender, of course, argued that the loan was not a building loan contract. The trial court found that the loan was a building loan contract as it had all of the tell-tale characteristics of a building loan contract. Specifically, the loan agreement was: 1) made between a lender and an owner of real property; 2) there was an express promise to construction improvements to the property; 3) periodic advances were to be made to fund the improvements; 4) the lender was to be informed of construction progress; and 5) the loan was to be secured by a mortgage on the real property. This is no shocking revelation as it is in line with the clear language of the statute and the interpreting case law. The loan agreement itself even identified itself as a "construction loan transaction." The trial court therefore awarded the mechanic's lien holders priority over the mortgage. The trial court also found that one subcontractor's liens was superior to the lien of a contractor that had hired the subcontractor (pursuant to Lien Law Section 56). Finally, the trial court rejected the argument of a lienor that claims its lien was superior to all other lienors pursuant to Section 13 of the lien law because it performed labor.

The Appellate Division affirmed the trial court without significant comment and the Court of Appeals granted leave to appeal.

Lien Law Section 22 requires that a building loan contract "with or without the sale of land and before or simultaneously with the recording of a building loan mortgage made pursuant to it, must be filed in the clerk's office of the county where land subject to the contract is located, along with a borrower's affidavit stating the consideration paid or to be paid for the loan, any expenses incurred or to be incurred in connection with the loan, and the net sum available for the construction project." Subsequent modifications of the loan contract must be filed within 10 days after their execution. Looking at Section 22, and applying the definition of a "building loan contract" found in Section 2 of Section 13 of the Lien Law, the Court of Appeals found that the building loan agreement here was, in fact, a building loan contract. Because the lender never recorded the initial loan agreement, the thereafter filed mortgage lost priority to subsequently filed mechanic's liens.

Of note, the Court of Appeals rejected the lender's argument that a subsequent mortgage was recorded pursuant to an amendment and not pursuant to the original building loan contract. The Court noted that Lien Law Section 22 does not state that modifications to a building loan contract "must be filed only so long as the contract, as modified, remains a building loan contract within the meaning of the Lien Law."

Finally, the Court of Appeals looked at the question of whether the proceeds of an additional loan, used to refinance the existing first mortgage, were entitled to priority. The Court noted in this respect that prior to this case, there was conflicting authority on whether a subordination penalty applied to funds loaned in a building loan contract for financing the purchase of the property on which the improvements are to be made. The Court found that "Section 22 does not state that the entire interest of each party to an unfiled building loan contract is subject to a later-filed notice of lien, and we do not infer such a limitation..." The Court therefore held that Lien Law Section 22 does not require that the subordination penalty apply to the entire mortgage but, rather, covers only the portion relating to the advancement of construction funds.

There is, notably, a detailed and very persuasive dissent from Judge Graffeo wherein it is argued that the entire proceeds of the loan, including funds used to acquire the property, should be subject to the subordination penalty pursuant to Lien Law Section 22. Worth a read for anyone that ever hopes to challenge the holding.

Vincent T. Pallaci is a partner with the New York law firm of Kushnick | Pallaci, PLLC where his practice concentrates on construction law.

New York Mechanic's Lien Collections

2013-05-21T17:55:00.000-04:00

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.

Conversion of Two Family Home to Single Family Home Subject to 8 Month Lien Period

2013-05-16T15:37:00.001-04:00

In J.B. Custom Masonry & Concrete v. Sutera, the owners moved to dismiss a mechanic's lien filed by the contractor. The owners argued that the property was a non-conforming two family that was being converted into a one family and, therefore, that the work performed by the contractors was on a single family home. Of course if the work was on a two family home then the lien would be subject to the 4 month period. Here, the 4 month filing period was important because the lien was not filed within the 4 month period but was filed within the 8 month period.

The court found that because the evidence established that the structure was being converted to a single family home, but was not at the time of the work an actual single family home, that it was a multiple dwelling and therefore subject to the 8 month filing period. The court therefore denied the motion to vacate the mechanic's lien and vacate the Notice of Pendency filed in connection with the mechanic's lien.

Vincent T. Pallaci is a partner with the New York law firm of Kushnick Pallaci, PLLC. With offices in Long Island and Buffalo, New York, KP regularly represents prosecutes and defends mechanic's lien enforcement litigation.

Enforcing a Mechanic's Lien in New York

2013-05-12T16:50:00.001-04:00

Unfortunately, a mechanic's lien does not get you paid simply by filing it. Instead, a mechanic's lien is enforced through a "lien foreclosure" action. Lien foreclosures are complicated and often expensive.

Kushnick | Pallaci, PLLC is a full service law firm whose lawyers concentrate their practice on construction law including enforcing and defending mechanic's lien claims.

What is Lien Law Section 38?

2013-05-09T13:48:00.000-04:00

Wondering just what New York's Lien Law Section 38 is?

Fourth Department Says that Final Lien Waiver is no so "final"

2013-05-02T15:24:00.000-04:00

One of the great things about the practice of law is that lawyers (and Judges) have an uncanny ability to take the abundantly clear and simple and make it complex and vague. Case in point is the 4th Department's recent decision in Leonard E. Reidl Const., Inc. v. Homeyer. Apparently the contractor, Leonard E. Riedl Construction, Inc., provided the owners, the Homeyers, with a "Final Waiver and Affidavit." The Waiver stated that the project was "fully completed" and that "all bills for labor and/or materials furnished in connection with the construction of said buildings and work of improvement have been fully paid." Finally, it very clearly said that the contractor "waives any and all lien rights which he may have or may have had on account of or arising out of the construction of said buildings and work of improvement." The case made its way to trial and the trial court found that the parties did not treat the document signed by contractor's representative as a final and complete waiver of any further claims by contractor. The court further found that payments made by the owners after the final waiver constituted evidence that there was a separate side verbal agreement outside of the signed Final Lien Waiver. In affirming the trial court, the Appellate Division noted that "where a waiver form purports to acknowledge that no further payments are owed, but the parties' conduct indicates otherwise, the instrument will not be construed as a release."

Well, having made this same argument myself (successfully), I have to agree that a lien waiver (especially a final lien waiver) is not always a a final waiver and sometimes it isn't even a waiver. This was a classic example of why attorneys are needed in all phases of the construction process and why just following basic advice is not always enough. Home owners are increasingly knowledgeable about lien waivers and especially where lenders are involved the lien waivers are becoming a common requirement on a construction project. However, if you tell the average owner that obtaining a signed document from the contractor wherein the contractor states the work is complete and paid for sometimes is not enough, you will likely be met with a blank look (and probably next with the owner searching Google on his or her phone for a new attorney that surely must know more than you).

The bottom line here is that all contracts, riders, liens, lien waivers, releases, certificates of insurance and insurance policies are not created equally. They must each be looked at within the context of the specific situation to determine how the written document will be applied and interpreted by a Court.

Vincent T. Pallaci is a partner with the New York law firm of Kushnick | Pallaci, PLLC. With offices in Buffalo, New York and Long Island, New York, KP serves the construction industry in each of New York's counties.

How Do I File a Mechanic's Lien in Staten Island?

2013-04-22T15:12:00.000-04:00

How do I file a mechanic's lien in Staten Island? The New York Mechanic's Lien Blog is posting short informational videos about the process for filing a mechanic's lien in each Borough. While the process is largely the same in every Borough, the place where you file is different so pay attention to the location of the Clerk's office. As always, you should seek legal advice for your specific situation and the best way to file a mechanic's lien is often to hire a professional to do it for you!

This is an embedded Microsoft Office presentation, powered by Office Web Apps.

Kushnick Pallaci, PLLC is a full service law firm serving the construction industry across the State of New York from its Buffalo and Long Island offices.

How do I File a Mechanic's Lien in Brooklyn?

2013-04-22T15:08:00.000-04:00

How do I file a mechanic's lien in Brooklyn? The New York Mechanic's Lien Blog is posting short informational videos about the process for filing a mechanic's lien in each Borough. While the process is largely the same in every Borough, the place where you file is different so pay attention to the location of the Clerk's office. As always, you should seek legal advice for your specific situation and the best way to file a mechanic's lien is often to hire a professional to do it for you!

This is an embedded Microsoft Office presentation, powered by Office Web Apps.

Kushnick Pallaci, PLLC is a full service law firm serving the construction industry across the State of New York from its Buffalo and Long Island offices.

2013-04-22T15:04:00.000-04:00

How do I file a mechanic's lien in the Bronx? The New York Mechanic's Lien Blog is posting short informational videos about the process for filing a mechanic's lien in each Borough. While the process is largely the same in every Borough, the place where you file is different so pay attention to the location of the Clerk's office. As always, you should seek legal advice for your specific situation and the best way to file a mechanic's lien is often to hire a professional to do it for you!

This is an embedded Microsoft Office presentation, powered by Office Web Apps.

Kushnick Pallaci, PLLC is a full service law firm serving the construction industry across the State of New York from its Buffalo and Long Island offices.

How Do I File a Mechanic's Lien in Queens?

2013-04-22T15:02:00.000-04:00

How do I file a mechanic's lien in Queens? The New York Mechanic's Lien Blog is posting short informational videos about the process for filing a mechanic's lien in each Borough. While the process is largely the same in every Borough, the place where you file is different so pay attention to the location of the Clerk's office. As always, you should seek legal advice for your specific situation and the best way to file a mechanic's lien is often to hire a professional to do it for you!

This is an embedded Microsoft Office presentation, powered by Office Web Apps.

Kushnick Pallaci, PLLC is a full service law firm serving the construction industry across the State of New York from its Buffalo and Long Island offices.

How do I File a Mechanic's Lien in New York City?

2013-04-22T14:51:00.000-04:00

How do I file a mechanic's lien in NYC (Manhattan)? Well, the easiest (and probably best) answer is that you a hire a professional to file the lien for you. But should you chose to file the mechanic's lien in New York City yourself, and brave the Lien Law waters, this short presentation will give you an idea of how the process works:

This is an embedded Microsoft Office presentation, powered by Office Web Apps.

Kushnick Pallaci, PLLC is a full service law firm serving the construction industry across the State of New York from its Buffalo and Long Island offices.

Can a material supplier file a mechanic's lien in New York?

2013-04-02T15:31:00.002-04:00

Can a material supplier file a mechanic's lien in New York? The question seems simple. The answer is equally simple, but, then again, we are talking about New York's Lien Law; so the answer really is not so simple. First, let's look at a private project. A material supplier to a general contractor, a subcontractor or a sub-subcontractor may file a mechanic's lien. A supplier to a materialman may never file a private improvement mechanic's lien. As a general rule of thumb, if the entity that you supplied materials to only provided materials to the project, but no labor, that entity is probably a materialman making you a supplier to a materialman with no lien rights. Anyone lower in the tier than the supplier to the sub-subcontractor has some other issues to look at that are beyond the scope of this blog. Arguably, the supplier to a sub-subcontractor and anyone below it is too far removed for a mechanic's lien upon a private improvement. But the law there is not clear so we'll leave that topic for another day.

Second, let's look at the public improvement lien. A material supplier to a general contractor or a subcontractor may file a mechanic's lien on account of a public improvement in New York. Like private improvement liens, a supplier to a materialman may never file a mechanic's lien on account of a public improvement. The tier limit issues that are in flux and unresolved on a private improvement lien are well settled on a public improvement lien. On a public improvement lien, a material supplier to a sub-subcontractor, and those lower in tier, has no lien rights in New York.

Vincent T. Pallaci is a partner with the New York law firm of Kushnick | Pallaci, PLLC where his practice concentrates on construction law.

New York Cause of Action for "wrongfully filed mechanic's lien"? Supreme Court says "yes"

2013-03-22T17:21:00.000-04:00

This is one of the more interesting decisions I have read in awhile and I urge anyone with the time to take a look at Neptune Estate v. Big Poll & Son Construction, LLC. In Neptune, a property owner sought to recover damages against a contractor/lienor under various theories, including "wrongfully filed mechanic's lien." In the hundreds of cases I have personally been involved with, and the thousands of cases I have read on mechanic's liens in New York, I have never seen a cause of action quite like the one for "wrongfully filed mechanic's lien" in the Neptune case. But, as you will see if you read the decision, the Supreme Court is of the opinion that the cause of action exists and is alive and well in New York.

Notably, this was not a statutory exaggeration claim under Lien Law Section 39 and 39-a. Nor was it a slander of title claim. In fact, one of the interesting aspects of this case was that the lienor claimed the owner was seeking to recover for slander of title and had failed to meet its burden. The Court rejected that theory stating that "plaintiff never asserted that it seeks to recover based upon slander of title and a mechanic's lien does not cast doubt on the validity of an owner's title, which is a necessary element for slander of title." Instead, in upholding the claim for "wrongfully filed mechanic's lien" the Court noted that it was really a claim routed in injury to property. The decision noted that "an action based upon an alleged injury to property is one sounding in tort. Accordingly, any manner of commercial torts have been found to be within the purview of injury to property." In citing to the First Department's decision in Lippes v. Atlantic Bank of New York, the Court said that "improperly filing a mechanic's lien upon a fictitious claim resulting in delaying building work was an injury to property."

After a bench trial, the Court found that "the proof establishes that construction on the project was stalled as a direct result of the filing of the January Lien and could not be resumed until the Lien was secured..." Accordingly, the owner was awarded damages on the cause of action for "wrongfully filed mechanic's lien" in the amount of $150,036.41 representing the cost for flood insurance and mortgage interest accrued during the period where the lienor's "fraudulent lien delayed construction." Even more interesting, is that the Court went on to award a judgment against the lienor's principal that signed the lien. Finding that the one who signed the lien is sufficient participation in the wrongful conduct of the lienor to justify personal liability.

This is certainly a wake up call to lienors to be careful when filing liens. While an exaggeration claim only exists in a foreclosure action, and is notoriously difficult to prove, this cause of action for "wrongfully filing a mechanic's lien" is offensive not defensive and can be affirmatively brought. It also does not appear to have the high burden of proof that is required on a lien exaggeration claim. Lienors beware.

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 lien actions.