Don’t file fraudulent liens. Many states have laws handling fraudulent mechanics liens, and sometimes criminal liability is on the table. While small errors and mistakes can invalidate a lien claim, they do not typically rise to the level of fraud. However, when a lien contains an exaggerated amount, a claimant may become liable. Courts look down upon overstated liens, but how and when does a court make the determination that a lien amount is overestimated? A recent case helps us understand what happens under New York lien law.
Overestimating a New York Lien
Overestimating a New York lien won’t automatically put you in hot water, but New York lien law does have some legislation to be wary of. In New York, a lien that is willfully exaggerated is void. The claimant will also lose the right to file another lien for the same claim. What’s more, if a court finds that the lien has been willfully exaggerated, the claimant will be liable for the damages of the owner or contractor.
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Determining if a New York Lien is Exaggerated
A recent New York lien case, Rivera v. Department of Housing and Development, discusses procedure for exaggerated lien claims.
Most of the facts in this case are irrelevant, especially since the lien claim was for relocation expenses. In New York, lien claims for certain relocation expenses, such as the ones in this case, are governed by the state’s mechanics lien laws.
A claimant filed a lien for relocation expenses. The expenses were actually incurred and they were the type of expenses that could be included in a New York lien. However, according to the property owner, the lien claim was invalid on its face because the amounts included in the lien were exaggerated.
The court found that “An allegedly unreasonable amount of claimed expenses does not render a notice of lien facially invalid.” According to the court, the determination of whether amounts are proper must occur during a foreclosure trial. A dispute about whether the underlying expenses were lienable or had actually been incurred may have proper at this time, but arguing over the amount would have to wait.
Takeaway
This is an interesting outcome, but it does make sense. The claimant had good cause to file a lien claim, though the amount may have been questionable. Regardless of the dollar amount, a foreclosure trial would occur before the lien could be enforced. Thus, the owner will still have the opportunity to raise the issue. Plus, if the court finds that the amount has been willfully exaggerated, the lien will be void and the owner will receive damages. Since an owner still has the opportunity to dispute the amount, and because protections are in place to ward off improperly filed liens, property owners should not be frightened by this result.
Think a New York lien may be in your future? Check out our New York Construction Payment Resources. Not in New York? Select your state.
