An abandoned building under construction in the Bedford-Stuyvesant neighborhood of Brooklyn, New York was destroyed in February 8 blaze involving 130 firefighters — and still faces two active construction liens.
Construction liens — also commonly known as mechanics liens — are a tool used by contractors to help recover debt. In 2021, two contractors filed liens against the site, located at 394 Gates Avenue, and the property owner had faced intense scrutiny over their asset valuations and business practices — which complicates how and when these liens will get paid.
The liens were filed by Apartment Developers, LLC in November 2021, as well as Big Apple Designers in January 2021, for a total amount of $105,704.93.
The site of the fire is part of a portfolio owned by All Year Management, but the site had been vacated ever since a stop-work order was issued by New York’s Department Of Buildings in June 2021.
According to reporting by New York Times and ABC7 NY, squatters were coming in and out of the property regularly due to an unlocked fence. Neighboring businesses, who had to vacate because of the fire, had complained to the city for years about the state of the construction site. As of time of reporting, one body has been recovered from the rubble of the Gates Avenue fire.
Initially, the firm of Yoel Goldman — asset manager at All Year Management — secured a $65 million loan from TNW Capital on the strength of its portfolio of 10 properties — including the site of the construction fire — and was planning a sale of its portfolio until the end of 2020.
The development firm had missed a bond payment on one of their properties and had entered into litigation with various business partners after being accused of ongoing theft of company funds and misappropriation of substantial assets, according to an article from The Real Deal.
Ardon Wiener of Chestnut Holdings had been sounding the alarm about All Year Management’s asset valuations before the fire even happened. “We saw this happening from a mile away,” Ardon Wiener of Chestnut Holdings said in a statement.
All Year Management would be responsible for the unpaid completed work and the materials left onsite, but such a history would leave contractors with few options outside the court to settle the liens. Despite the fact that the construction site was completely destroyed, the project owner is still liable.
Additionally, Goldman’s former business partners had property in Philadelphia that received damage due to a construction fire that resulted in the deaths of two firefighters.
Site fires are a common construction risk
The circumstances of the Brooklyn fire mirror that of an apartment complex construction site in Minnesota and another in Oklahoma — each have similar problems over who’s responsible for damages. Both of the latter projects had subcontractors that used flammable materials to build or repair the buildings, and are subject to mechanics liens that the courts are having difficulty navigating.
Between 2013 and 2017 alone, there were an average of $408 million dollars in damages due to construction fires such as this one, according to the National Fire Prevention Association. This only further underlines the importance that contractors and property owners obtain business risk insurance, as without it you may not be entitled to compensation for any damages to a property under construction.
Construction fires occur so commonly because the systems and fail-safes needed to protect properties from fire damage have not been installed yet. Depending on the site itself, there could be many hazardous materials, like chemicals and equipment, that can exacerbate a fire and accelerate the damage to the site.
Because business general liability and fire insurance won’t cover the damages previously mentioned, it’s important that each contractor take photos of the construction site as its development progresses. If necessary due to delays, the contractor should also seek an extension in contract time, which is standard in most contract terms for such projects.
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