Mechanic's liens are a statutory device designed to protect the interests of persons who furnish labor and materials for a construction project. New York Lien Law Article 2 and Article 3 set out procedures for filing and enforcing a mechanic's lien in New York. Pursuant to New York Lien Law § 3, an unpaid contractor, laborer, or materialman may file a mechanic's lien against privately owned real property for the value of the labor or material furnished. Mechanic’s liens cannot be filed against publicly owned real property. Instead, pursuant Lien Law § 5, a public improvement lien may be filed against the funds that the public entity appropriated for the improvements. Specifically, an unpaid subcontractor or supplier on a public works project can file a lien against the funds due to the general contractor. Contract provisions purporting to waive the right to file or enforce mechanic's liens are void as against public policy. New York Lien Law § 34.
I. Notice of Mechanic’s Lien
In New York, a lienor creates a mechanic's lien by filing a notice of mechanic's lien in the office of the county clerk where the improved property is located. Lien Law § 10. The notice of mechanic’s lien must substantially comply with the requirements of the Lien Law to create an enforceable lien. Lien Law § 23.
Pursuant to Lien Law § 9, a notice of mechanic’s lien must contain the following information:
1. The name and residence of the lienor; and if the lienor is a partnership or a corporation, the business address of such firm, or corporation, the names of partners and principal place of business, and if a foreign corporation, its principal place of business within the state.
1-a. The name and address of the lienor's attorney, if any.
2. The name of the owner of the real property, and the interest of the owner as far as known to the lienor.
3. The name of the person by whom the lienor was employed, or to whom he furnished or is to furnish materials; or, if the lienor is a contractor or subcontractor, the person with whom the contract was made.
4. A description of the labor performed or materials furnished and their agreed price or value.
5. The amount unpaid to the lienor for such labor or materials.
6. The date when the first and last items of work were performed and materials were furnished.
7. The property subject to the lien, with a description thereof sufficient for identification.
II. Deadlines for Filing and Serving a Mechanic’s Lien
Private improvement liens must be filed within eight months after the lienor's work is completed, or within four months for single-family dwellings. Lien Law § 10. Public improvement liens must be filed no later than 30 days after the entire public improvement is completed and accepted by the public owner. Lien Law § 12. Within 5 days before or 30 days after filing the notice of lien with the county clerk, the lienor must serve notice of the lien upon the owner and the contractor or subcontractor by whom he was employed. Lien Law § 11 and § 11-b. Proof of service on all required parties must be filed with the county clerk no later than 35 days after filing the notice of lien. Failure to meet this deadline terminates the lien.
III. Duration of a Mechanic’s Lien and Extension
A mechanic's lien will expire one year after the notice of lien is filed. Except for single-family dwellings, a lien may be extended for one additional year by filing a written notice of extension with the county clerk. To enforce a mechanic’s lien, it is necessary to commence a lawsuit and file a notice of pendency before it expires. Lien Law § 17. If the lienor fails to foreclose on the lien before it expires, the lien is automatically extinguished, though it may still be possible to commence a lawsuit for breach of contract.
Once a lien foreclosure action is commenced and a notice of pendency is filed, the lien and notice of pendency are valid for three years additional years. CPLR 6513. That is typically enough time to complete a lien foreclosure action, but if the lawsuit is unduly delayed, it is necessary to file a motion to extend the notice of pendency. An aggrieved party may also seek to cancel a notice of pendency by filing a motion. CPLR 6514. The notice of pendency puts potential purchasers of the property on notice of the pending lien foreclosure, so that if the property is sold while a lien foreclosure action is pending, the purchaser takes title subject to the claims of the lienor.
IV. Action to Enforce a Mechanic’s Lien
An enforcement action must be commenced before expiration of the lien. A mechanic's lien is effective only to the extent that funds remain payable by the owner to the prime contractor at the time when the lien is filed. Lien Law § 4. For lower tiered subcontractors, an amount must have been due to each party above them in the payment chain in order to recover. Otherwise, there is no “lien fund” against which the lienor can recover. However, if a party higher in the payment chain receives payment after the lien is filed and the relevant parties have been put on notice, this will not defeat the rights of the lienor. Thus, once a lien is filed, parties higher in the payment chain are likely to see their payments frozen until the lien is discharged through settlement negotiations or through the filing of a lien discharge bond pursuant to Lien Law 19(4), which provides substitute collateral.
Foreclosure is the primary remedy to enforce a mechanic's lien under the Lien Law. Lien Law § 43. Foreclosure results in the sale of the property and the distribution of the sale proceeds to satisfy the liens on the property. Other remedies available to a lienor, and often pled in the same foreclosure action, include causes of action for breach of contract, foreclosure on a bond or undertaking, enforcement of trust fund provisions under Article 3-A of the Lien Law.
Where a construction contract provides for arbitration of disputes, amounts due under a mechanic's lien may be pursued through arbitration. However, filing a demand for arbitration does not stop a lien from expiring. To preserve its lien rights while pursuing arbitration, a lienor may either continue the lien through extensions or file a lien foreclosure action. Either party may then file a motion to stay the lawsuit and compel arbitration. However, if the defendant does not seek to stay the action and compel arbitration, it is often more efficient for the lienor to prosecute the lawsuit than to proceed with arbitration.
About Author
Sophie Wang graduated from the University of California, Berkeley School of Law in 2013, where she served as an editor of the Berkeley Business Law Journal. Read more.
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