Saturday, November 14, 2009

MECHANIC'S LIEN - A NOTE TO CONTRACTORS AND OTHER SMALL BUSINESS OWNERS

A recent consultation revealed that a licensed contractor had not been paid for work performed on a residential home over two years ago. Contractors and residential owners should be aware of the New York Lien Law:

"New York law permits "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..." N.Y. Lien Law §3. "Notice of lien may be filed at anytime during the progress of the work and the furnishing of the materials, or, within eight months after the completion of the contract, or the final performance of the work, or the final furnishing of the materials, dating from the last item of work performed or materials furnished; provided, however, that where the improvement is related to real property improved or to be improved with a single family dwelling, the notice of lien may be filed at any time during the progress of the work and the furnishing of the materials, or, within four months after the completion of the contract, or the final performance of the work, or the final furnishing of the materials, dating from the last item of work performed or materials furnished. N.Y. Lien Law §10. Within five days before or thirty days after filing the notice of lien, the lienor shall serve a copy of such notice upon the owner, if a natural person, (a) by delivering the same to him personally, or if the owner cannot be found, to his agent or attorney, or (b) by leaving it at his last known place of residence in the city or town in which the real property or some part thereof is situated, with a person of suitable age and discretion, or (c) by registered or certified mail addressed to his last known place of residence, or (d) if such owner has no such residence in such city or town, or cannot be found, and he has no agent or attorney, by affixing a copy thereof conspicuously on such property, between the hours of nine o'clock in the forenoon and four o'clock in the afternoon; if the owner be a corporation, said service shall be made (i) by delivering such copy to and leaving the same with the president, vice-president, secretary or clerk to the corporation, the cashier, treasurer or a director or managing agent thereof, personally, within the state, or (ii) if such officer cannot be found within the state by affixing a copy thereof conspicuously on such property between the hours of nine o'clock in the forenoon and four o'clock in the afternoon, or (iii) by registered or certified mail addressed to its last known place of business. Failure to file proof of such a service with the county clerk within thirty-five days after the notice of lien is filed shall terminate the notice as a lien." N.Y. Lien Law §10. Any lien created under New York law shall be a lien for a period longer than one year after the notice of lien has been filed, unless within that time an action is commenced to foreclose the lien, ...." or the appropriate steps are taken to request that the court grant an extension. N.Y. Lien Law §17."

Unfortunately for the contractor and fortunately for the home owner, in the matter before me, the contractor never filed a lien. The residential owner refinanced a new mortgage after the work was completed (which would not have been possible if a lien was filed and foreclosed on). Now the contractor can only sue the owner for the monies due and, if successful, will be a judgment creditor but, to enforce the judgment against the house, upon a sale, can only be paid after the mortgage holder. The construction contract also had no provision for late charges or collection of attorney fees. I point this out as a reminder to small business owners: CONSULT AN ATTORNEY ON MAJOR JOBS AND DON'T DRAFT YOUR OWN CONTRACTS!

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