The Empire State is home to some of the most expensive real estate in the country. If you are a homeowner in New York, your property is more than simply the place you live with your family; it is a valuable investment. Consequently, you care deeply about protecting its value.
Imagine that your family bought an apartment in the Upper East Side neighborhood of Manhattan last year. After moving in, you decided to renovate the master bathroom. You hired a contractor to replace the flooring, sink, toilet, and cabinets, for a lump sum of $7,000. Two months later, the work was complete. However, the contractor says the job cost more than he anticipated—a whole $3,000 more. He demands that you pay that extra sum at the end of the job. You refuse, even though he sends you multiple bills and increasingly angry emails. In your opinion, you had a deal for a specific amount of money, and shouldn't have to pay one penny more.
Shortly thereafter, you open your mail to find notice of a mechanic’s lien for $3,000. What is this document? And what can you do about it under New York law?
You may be surprised when you receive a mechanic’s lien in the mail. Most New Yorkers have likely never seen or heard of this document. Unlike lawsuits, liens are relatively obscure and do not garner much media attention. What exactly is a lien, and what does it mean for you?
A lien is a document that gets publicly filed with a New York county clerk’s office. A lien becomes a cloud on a homeowner’s title, meaning that the title is subject to the contractor’s stated financial interest in it. This is true whether the property is an apartment (common in New York City) or a suburban home.
Practically speaking, this means that a contractor or subcontractor filed the document in the clerk’s office of the county where your home is located. (Note that New York state has 62 counties, and the only “correct” county is the one in the county where the property is.)
If the contractor puts a lien on your home in the amount of $3,000, anyone who buys your property would buy it subject to owing the contractor that $3,000. This will make it difficult for you to sell the property (or to refinance it through a bank or other institutional lender), since no one would want to take property subject to this third-party claim. Contractors therefore use liens as a means of incentivizing property owners like you to pay whatever they claim they are owed.
You may wonder what a lien looks like, if your contractor has threatened to file one. A mechanic’s lien is a short document, generally just a few pages long. A model form for a mechanic’s lien is freely available on the New York State Bar Association’s website.
Basically, the form will list your name and contact information, the contractor’s name and contact information, the name of any general contractor involved (if a subcontractor or supplier is filing the lien), the amount of money allegedly due to the lienor, and a description of the lienor’s labor or materials provided to the property. New York requires that the form be “verified,” which means that it must include the notarized signature of the contractor filing the lien.
Imagine that you thought someone owed you money. You probably would not sue immediately, but would instead try to get the payment without resorting to lawyers and courts. Most contractors will approach problems in the same way. Rather than simply filing a lien on your property out of nowhere, they ordinarily start by making repeated requests for payment.
Only if these requests are ignored or rejected will they be provoked into filing a lien or a lawsuit. In other words, when a payment dispute arises, think about the big picture; the best way to fight a lien filing is to avoid the lien altogether.
Simply put, this requires you to negotiate with a contractor prior to the filing. If your contractor asserts that he or she is owed an extra sum of money, do not just ignore the phone calls or invoices. This might be viewed as a sign of disrespect, as well as a sign that you have no intention of paying a dime. While you might think that this tough stance will convince your contractor to simply go away, the contractor is just as likely to dig in and cause legal trouble for you, either through a lien or a lawsuit (or both).
You and the New York contractor may have a good faith disagreement about whether certain work was part of his contract, or about the quality of that work. Rather than ignoring the issue, have a frank discussion about it, or consider going to mediation.
In mediation, a third-party neutral (often an attorney or individual with experience in the construction industry) can help you and your New York contractor negotiate a fair settlement. In both negotiation and mediation, you should be open to clever settlement strategies. Rather than paying a lump sum, perhaps payments could be made over time. Rather than a monetary settlement, maybe you could offer the contractor a public endorsement or reference. Rather than fighting in court, you could offer the contractor discounted payment in exchange for a limited scope of ongoing work.
In short, although New York law gives you remedies with which to fight a lien once it's filed, you are likely to save both time and money if you find a way to settle the payment dispute with the contractor. This does not mean you need to give into all of the contractor’s demands, but it does mean that you should keep in mind the costs of legal action to fight a lien. It is likely in both your and the contractor’s interests for the payment dispute to be resolved quickly, without the need for attorneys.
If a lien is filed on your New York home, you may find it useful to actually understand the state’s laws governing liens. Liens are controlled by the New York Lien Law. You can read the full law online, although you will find that the legislative language, written in the 1920s, is incredibly dense.
Like with most states’ lien statutes, New York’s lien law contains many rules and exceptions, which depend on the type of property involved and the work performed. Nevertheless, there are some broad, important concepts that may be helpful to understand.
Be aware that New York permits a wide range of different types of entities to file liens on private property. The statute provides: “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.
This language is a bit dense, but essentially, anyone who has an agreement to improve property with you directly, or an agreement with another contractor that has such an agreement with you, can file a lien if he or she is left unpaid.
Once the lien is filed with the county clerk, the lienor must serve a copy of the lien on the owner (you) within 30 days. New York does not require the lienor to use a formal process server, like a lawsuit; they can simply mail it by Return Receipt Mail through the U.S. Post Office. If they are a subcontractor, they must serve both the owner of the property and the general contractor.
As discussed above, a mechanic’s lien can create problems for New York homeowners. There are several strategies to get the lien removed. The first, as mentioned, is to negotiate a resolution with your contractor. There are a couple other options.
A second option is to obtain what is known as a “lien bond” through a surety company. The bond essentially guarantees payment to the contractor in the amount of the lien, if the contractor is successful on his or her legal claims, but also removes the lien from your property record.
Third, you can petition a court (specifically, the New York State Supreme Court in your county) to remove the lien. Your grounds for removing the lien could include that the contractor never did the work that the lien claims, or that the work was already compensated.
You can also attack legal deficiencies in the lien. One of the single most common legal deficiencies in a New York lien is that it is filed too late. 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 the lienor provided labor or materials.
Moreover, the lienor must file a lawsuit to enforce the lien within one year of its filing, or else the lien “expires.” In other words, if they merely file a lien and then let it sit on the property docket, it will become null and void after one year.
In many cases, busy contractors, subcontractors, and suppliers blow past this deadline without realizing it. Consequently, you should be conscious of the contractor’s “last date.” If the lien filing is untimely, you can file a petition with your county’s New York State Supreme Court for the lien to be stricken from the property docket.
Very few contractors are excited about the idea of prolonged, expensive litigation. Filing a lien, and then hiring a lawyer to file a lawsuit based on the lien (within the one-year deadline!) is a costly and time-consuming process. Most contractors would prefer to settle the dispute quickly and move to other construction projects.
But if there is no hope of coming to a reasonable middle ground between your position and the contractor’s, New York law gives you a number of legal tools with which to remove a lien from your property record.