Introduction

In the dynamic and often contentious world of construction in New York State, securing payment for labor and materials can be a challenge. As disputes over quality, delays, and compensation arise, contractors and suppliers must rely on legal tools to protect their interests. Chief among these is the mechanic’s lien – a powerful statutory remedy that can level the playing field for even the smallest subcontractor.

During a recent Goldberg Segalla webinar, partner Steven J. Lee outlined the practical and procedural aspects of New York State’s lien law, offering guidance on how to use this tool effectively while avoiding common pitfalls.

Understanding Mechanic’s Liens in New York State

A mechanic’s lien allows contractors, subcontractors, laborers, materialmen, landscape gardeners, nurserymen, and certain service providers to assert a legal claim against property for unpaid work or materials. In private projects, the lien attaches directly to related real estate titles, pressuring owners and general contractors to resolve debts. In public projects, the lien targets funding earmarked for the improvement, often prompting agencies to withhold payments to the general contractor.

Lien rights in New York State are broadly accessible. Even subcontractors without direct contracts with the property owner may file a lien, provided the owner consented to the work. However, strict procedural requirements govern the validity and enforceability of liens, and missteps can result in cancellation and/or penalties.

Securing Payment and Preserving Leverage

Mechanic’s liens are more than just paperwork – they are strategic tools that can:

• Pressure owners and general contractors to resolve debts by clouding title or having public funds frozen.
• Preserve leverage in negotiations, even when litigation is not pursued.
• Provide a path to recovery through foreclosure actions if payment is not forthcoming.

However, misuse or procedural errors can backfire. Willful exaggeration of lien amounts, failure to meet deadlines, or improper execution of the lien can void it and/or expose the filer to damages and attorney’s fees.

Red Flags and Strategic Considerations

While the lien law is powerful, it must be used judiciously. Contractors and suppliers should keep the following in mind:

• Industry Relationships: Filing a lien may strain ongoing business relationships, especially in New York State’s tight-knit construction community.
• Payment Delays vs. Refusal: Not all delays signal bad faith. Understanding the reason behind nonpayment, whether due to owner milestones or disputes over workmanship, is key.
• Documentation Gaps: Without clear records of pricing, progress, and communications, lien claims may falter under scrutiny.
• Lien Waivers: Conditional waivers protect lien rights until payment clears; unconditional waivers may forfeit rights prematurely.

Procedural Requirements: Deadlines and Details Matter

New York State’s lien law imposes strict timelines and content requirements.

Private Projects Require:

• Filing within eight months of completing work (or four months for single-family dwellings).
• Serving notice on the owner and hiring contractor within five days before or 30 days after filing.
• Filing proof of service with the county clerk within 35 days of filing the lien.

Public Projects require:

• Filing within 30 days of project completion and acceptance.
• Accurate filing with the appropriate public entity.

Best Practices for Filing and Enforcement

1. Document Everything: Maintain clear records of contracts, change orders, invoices, work progress, and communications. This supports lien validity and counters exaggeration of claims.
2. File Accurately and Timely: Ensure all required information is complete and correct. Inaccuracies may lead to a lien cancellation and/or summary discharge.
3. Avoid Willful Exaggeration: Overstating lien amounts can result in the voiding of the lien and liability for damages, which may include bond premiums and attorney’s fees. The lien claim amount should be limited to the amount of unpaid labor, material, and equipment supplied to the project at the time of lien filing.
4. Preserve Enforcement Rights: Mechanics Liens automatically expire one year after filing unless extended by the proper filing of a written notice of extension (except as to single-family dwellings). Foreclosure actions must be timely filed, and notices of pendency maintained.
5. Bonding: Owners may discharge liens by posting a bond equal to 110% of the lien amount. This shifts the lien from the property to the bond, preserving litigation rights but curtailing leverage.

Special Considerations

• Trust Fund Obligations: Funds paid to a general contractor are held in trust for subcontractors and suppliers. Misuse may trigger personal liability for company officers.
• Arbitration Clauses: Filing for arbitration does not toll lien deadlines. Preserve rights by adhering to statutory timelines.
• Lien Waivers: Review waiver language carefully. Avoid signing unconditional waivers before payment is received. Ensure waivers are project- and date-specific.

Consequences of Missteps

Failure to comply with lien law requirements can result in:

• Lien cancellation
• Loss of leverage
• Exposure to counterclaims
• Forfeiture of payment rights
• Reputational harm

Conclusion

New York State’s mechanic’s lien law offers a robust framework for contractors and suppliers to secure payment and assert their rights. When used strategically and in compliance with procedural rules, it can be a powerful ally in the construction industry. By documenting thoroughly, filing accurately and acting promptly, professionals can protect their interests and maintain leverage in even the most complex disputes.