New York's Lien Law § 38 provides valuable recourse for property owners and contractors faced with a questionable or exaggerated mechanic's lien. This article delves into the requirements of Lien Law § 38, its practical application, and the legal precedents that shape its interpretation and enforcement.
I. Serving and Responding to a Lien Law § 38 Demand:
Under New York Lien Law § 38, when a mechanic's lien is filed, the property owner or contractor is entitled to issue a written demand to the lienor, requiring the lienor to produce a verified, itemized statement of the lien within a five-day period. The demand should be served by certified mail, with a return receipt requested. It should identify the party seeking the statement and the specific mechanic’s lien in question.
In response, the lienor must provide a verified statement, itemizing the labor and/or materials supplied, including their individual values and the contractual terms under which they were delivered. This can assist the parties impacted by the lien in evaluating the validity of the claim, resolving accounting issues, and potentially proving that the lien is willfully exaggerated.
II. Legal Implications and Enforcement
If the lienor fails to provide an itemized statement within the five-day period, or if the lienor's statement is insufficient, the property owner or contractor may petition the Court to enforce compliance. Failure to comply with the Court's order to properly respond to a Lien Law § 38 demand can result in the cancellation of the lien by the Court.
For those aiming to contest a mechanic's lien as exaggerated under the Lien Law Sections 39 or 39A, issuing a demand under Lien Law Section 38 is a strategic starting point. A verified statement from a lienor, which fails to align with the claimed lien amount, can serve as compelling evidence against the lienor for willful exaggeration of mechanic’s lien. This can facilitate efforts to vacate the lien under Lien Law 39 or to recover damages under Lien Law 39-A. It may also put the lienor on notice of the risk of such a claim, requiring the lienor to choose between reducing the lien claim, avoiding foreclosure upon it, or risking exposure to a large counterclaim under Lien Law 39-A. If a lienor cannot plausibly account for the calculation of its lien, its credibility will also be weakened in any subsequent litigation. Therefore, it is crucial for lienors to respond accurately and promptly to a Lien Law § 38 demand to mitigate the risk of lien cancellation or claims of willful exaggeration.
Conclusion
Lien Law § 38 serves as a valuable tool for property owners and contractors seeking to challenge a lien. It is equally crucial for lienors to respond to Lien Law § 38 demands in a timely and accurate manner, a step essential to maintaining the validity of their liens. Furthermore, this approach promotes clear understanding and insight into the lien claim for all involved parties, which in turn facilitates the potential for amicable settlements in resolving underlying payment disputes. If you have been served with a Lien Law § 38 demand or a lien which you believe is exaggerated, contact Sophie Wang or any of the attorneys at Muchmore & Associates PLLC for an initial consultation.
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. Sophie graduated summa cum laude with a Bachelor of Laws from East China School of Political Science and Law. Read more.
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