The Empire State is known for its constant development and redevelopment. Whether it’s a new skyscraper in Manhattan or a new luxury real estate development in Poughkeepsie, New York has long been home to one of the most active construction communities in the country.
As a contractor, however, you will sometimes face the unfortunate situation of being stiffed on payment from a property owner. Fortunately, New York law provides a powerful tool that contractors and subcontractors can use to obtain payment for their work: mechanic’s liens.
A mechanic’s lien is a statutory device that essentially functions as a cloud on the owner’s title to the land. How can mechanic’s liens in New York help to obtain your money?
Mechanic’s liens have many benefits. They are far quicker and less expensive to file than a lawsuit. But filing a lien should not be your first step to resolving a payment dispute. Most disputes between contractors and owners can instead be resolved through negotiation. You will usually save time and money by dealing directly with the property owner, rather than initiating a legal action.
So how should you go about getting paid? Imagine that your company performed flooring work in a home and the owner failed to pay the last $2,000 of his bill. First, you should mail copies of the final invoice and/or statements to the homeowner’s home and business addresses. If that receives no response, telephone the owner. Send an email too, in order to create a paper trail. And then try writing a formal demand letter on your company’s letterhead.
If your communications are still being ignored, you might consider investing in a few hours of a lawyer’s time to write a demand letter, on law firm letterhead. Sometimes, property owners may take you more seriously if they believe that you are willing to get an attorney involved. While attorney’s rates differ (and will ordinarily be especially high in New York City), having a lawyer write a simple demand letter will probably cost no more than a few hundred dollars.
More often than not, some combination of these steps will be enough to push the property owner (or general contractor) to pay the balance owed, or at least come to the negotiating table to pay some substantial portion of that amount. These steps can also help you avoid the time and expense of liens and lawsuits.
As a business owner, you know all too well that mere negotiation and demand letters will not always suffice. You will not be surprised to learn that New York law allows you to sue a homeowner who has not paid you, on grounds of simple breach of contract, or based on other related causes of action (such as quantum meruit). The same theories apply if you are a subcontractor or supplier suing a general contractor.
But mechanic’s liens are another important tool in your arsenal. Liens offer a way to pressure an owner to pay by clouding the title to the property. Liens are the result of a specific statute: the New York Lien Law.
Under the statute, many different types of entities can file liens. “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” are all entitled to file liens as long as their work was for the improvement of real property.
As in most states, there are strict deadlines for when you can file your lien. In the state of New York, it depends on the type of project.
The statute requires that for single-family residential projects (such as a single suburban home), the lien must be filed within four months of the last date on which you provided labor or materials. On all other projects (for instance, a commercial development, apartment buildings, and so on), the lien must be filed within eight months of the last date on which you provided labor or materials.
In all cases, you must file a lawsuit to enforce the lien within one year of its filing, or else the lien “expires.” In other words, if you merely file a lien and then let it sit on the property docket, it will become null and void after one year. However, New York law also allows you to file a short form (a single page) extending the year for an additional year. (If you need to extend it beyond those first two years, you must file a formal motion with the court).
Once a lien is filed with the county clerk (of the county where the property is located), your job is not done. You must serve a copy of the lien on the owner within 30 days. New York does not require you to use a formal process server, like a lawsuit; you can simply mail it by Return Receipt Mail through the U.S. Post Office. If you are a subcontractor, you must serve both the owner of the property and the general contractor. It is generally smart to service every company you are aware is working on a particular project, so that your rights are widely known. (Often, if you are a subcontractor, the owner will lean on the general contractor to pay you).
Liens are intended to be fairly simply forms. Online, you will find many different model template forms. Unlike some states, you can use substantially the same form in all of New York’s 62 counties.
The form must include, among other pieces of information, your company’s name, the property owner’s name, the location of the property, and the amount of money still due. You must also describe the labor or material you provided to or on the property. New York requires that you identify the property not just by the address, but also by the “block and lot” numbers, which correspond to the tax map. If the property is in New York City, you can usually find these numbers through a website known as ACRIS. If the property is outside of New York City, contact the local county clerk to determine the best means of obtaining the block and lot numbers.
You will see that your signature needs to be notarized, meaning that this form is a sworn statement—the legal equivalent of swearing to the veracity of the contents in court.
In New York, liens are filed in the office of the clerk of the county where the property is located. Usually, the clerk’s office is either connected to, or nearby, the county’s Supreme Court (New York’s trial level court). Note that there are fees associated with the filing (usually under $50, though the fees may vary year by year).
For contractors and subcontractors in New York, liens are an important tool. But they are not necessarily the first or best means of achieving payment for construction projects.
First, even though New York seems like a very big state (with a very big city within it!), contractors, owners, subcontractors, and material suppliers tend to work with one another again and again. Unfortunately, filing a lien will send an aggressive message. If you take this step, it might put the owner (or the contractor who hired you) on the defensive, and encourage all entities to get lawyers involved, or to retaliate by publicly claiming that you did shoddy work.
Perhaps this is the direction that you need to take, unfortunately, if the homeowner is refusing to pay. But be aware that you may quickly escalate the dispute by filing a lien.
Second, remember that merely filing a lien will not force the property owner to pay you (nor will it force the general contractor to pay you if you are a subcontractor). The owner will receive notice of the lien, but unless you file a further lawsuit to “foreclose” on the lien, then it will merely sit on the property docket. In other words, you will likely need to spend some amount of money on legal fees in order to “force” payment.
Finally, remember that the lien laws in New York are highly complex. If you read the statute, you will quickly appreciate how dense and technical the law is. If you are owed a substantial sum of money, it might be worth your investment to have a consultation with an experienced New York construction attorney who can advise you of your rights.