Understanding Mechanic's Liens in New York

Mechanic’s liens are a crucial aspect of real estate law in New York, designed to protect contractors, subcontractors, and suppliers who provide labor or materials for construction or renovation projects. Understanding how mechanic's liens work and how they can impact real estate transactions and construction and renovation projects is essential for property owners, developers, and contractors. In this article, we will explore the basics of mechanic's liens in New York, including their purpose, requirements, and potential implications.

What is a Mechanic's Lien?

A mechanic’s lien is essentially a legal claim filed against real property by contractors, subcontractors, and suppliers seeking compensation for work performed and/or materials furnished. The person and/or entity that files the lien is called the lienor.

Who Can File a Mechanic's Lien?

In New York, various parties involved in a construction project can file a mechanic's lien, including general contractors, subcontractors, laborers, and suppliers. However, they must meet certain criteria and follow specific procedures to do so.

Article 2, Section 3 of New York Lien Law identifies who can file a mechanic’s lien on real property in New York.  It provides in part the following:

A contractor, subcontractor, laborer, materialman, landscape gardener, nurseryman or person or corporation selling fruit or ornamental trees, roses, shrubbery, vines and small fruits, who performs labor or furnishes materials for the improvement of real property with the consent or at the request of the owner thereof, or of his agent, contractor or subcontractor, and any trust fund to which benefits and wage supplements are due or payable for the benefit of such laborers, shall have a lien for the principal and interest, of the value, or the agreed price, of such labor, including benefits and wage supplements due or payable for the benefit of any laborer, or materials upon the real property improved or to be improved and upon such improvement, from the time of filing a notice of such lien as prescribed in this chapter.

Mechanic's Lien Requirements in New York

Contents of a Mechanic’s Lien: The content of a mechanic’s lien (i.e., what must be included in the lien) is governed by Article 2, Section 9 of the New York Lien Law which, in sum, requires require the lienor to identify:

1. The name and address of the lienor (and the name and address of his/her/its attorney, if applicable),
2. The name of the owner of the property and the address of the property,
3. The name of the person/entity that employed the lienor,
4. The labor performed and materials furnished and the agreed price,
5. The amount unpaid, and
6. The first and last days labor was performed and materials furnished. 

Timely Filing: New York has strict deadlines for filing mechanic's liens. Generally, mechanic liens must be filed within eight (8) months from the last date labor was performed and/or materials furnished except when the property is a single-family home in which case the deadline is four (4) months.

The Impact of Mechanic's Liens on Real Estate Transactions

Cloud on Title: A mechanic’s lien creates a cloud on the property’s title which could make it challenging to sell or refinance the property until the lien is vacated or discharged.

The filing of the lien clouds title because it is a claim against the property and the property serves as collateral for the lien.

One way to resolve the cloud on title is to file a bond discharging the mechanic’s lien. By filing the bond, the bond steps into the shoes of the property, essentially replacing the property as collateral for the lien.  At that point, the lien cannot be foreclosed against the property, but it can be foreclosed against the bond. 

Legal Remedies: Property owners may seek legal remedies to discharge or contest the lien if they believe it is unjust or inaccurate. Certain remedies are available to property owners if the lien is filed for exaggerated amounts.

Resolving Mechanic's Liens

Payment: The simplest way to remove a mechanic’s lien is to settle the dispute.

Bonding: Property owners can post a bond in court to discharge the lien. The filing of the bond does not affect the validity of the lien.  Once the bond is filed, it becomes collateral for the lien, replacing the property as collateral.  In other words, once the bond is filed, the relief is against the bond not the property.

Litigation: If a settlement cannot be reached between the parties the dispute may lead to litigation.

Conclusion

Mechanic’s liens play a vital role in New York’s real estate industry. Property owners and developers should be aware of the potential impact of mechanic’s liens on their projects and take appropriate measures to prevent or resolve them.

Looking to learn more? Email me at ctarnok@dlpartnerslaw.com or call me at 212-624-4185.

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