Every state has different laws, requirements, and regulation pertaining to public and private construction jobs. How you file your mechanics lien and where you file it can greatly be affected by whether your work project is public or private. Filing the right lien pertaining to your construction project is extremely important, as Metro Woodworking, Inc. (Metro) learned the hard way.

Case Background

The action arose out of a construction and improvement project on a hotel and retail complex in New York City. Site 25 (the job site) is owned by the public entity Battery Park City Authority (BPCA). Site 25 was leased out to two subsidiaries of BPCA and then subleased to GS Site 25. On March 2, 2011, the general contractor, Hunter Roberts Construction Group LLC (Hunter Roberts) subcontracted with Metro to perform millwork on Site 25. On April 16, 2012, the subcontract was terminated, and Metro responded by filing a notice of a mechanics lien against the premises three days later. The notice listed GS Site 25 as the private owner of the premises. The lien claim was eventually vacated because of this fact. Metro then sought to renew/reargue the issue.

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Court’s Decision

In Metro Woodworking Inc. v. Hunter Roberts Constr. Group, LLC, 2015 NY Slip Op 50110(U), the New York Supreme Court denied Metro’s argument to renew the issue of the mechanics lien and modify the lien. Metro first argued that the lien was valid, which was immediately denied by the Court. GS Site 25 was a subleasor and not a private owner of the property. The Court stated

As the defendants correctly argue, a mechanic’s lien on a leasehold interest cannot be filed against real property owned by a public entity in fee simple (Matter of Paerdegat Boat & Racquet Club v Zarrelli, 57 NY2d 966, 443 N.E.2d 477, 457 N.Y.S.2d 229 [1982]). Therefore, the Notice filed against the real property on Site 25 is not valid, and this Court properly vacated it on the prior motion.

Metro then attempted to salvage what was left by trying to argue that the Court should give them leave to amend or modify the Notice pursuant to NY Lien Law §12-a. Unfortunately, the Court determined that an amendment or modification of the lien would still rendered it invalid because the lien was filed with the clerk as a private lien. Modification of the Notice would still have a private lien against a public entity, despite the name change. What Metro was truly asking for was a transformation of the mechanics lien, which is not provided for by NY Lien Law.

Takeaway

Due diligence and research is very important when filing notices and mechanics liens. If this notice was filed as a public lien rather than private, Metro would likely have been able to amend and exercise its lien rights. However, as this case points out, a mistake in project type will not be remedied or forgiven by courts in NY. You must know if the project you are working on is public or private and file the lien properly. This decision, while understandable, may create some confusion and the result in the extinguishment of otherwise “good” liens on projects where the ultimate owner (public or private entity) is in dispute. With the rise in popularity of P3 projects, sometimes the proper remedy – whether a mechanics lien, a bond claim, a lien on funds, or something else – is difficult to determine. When this is coupled with the potential difficulty in finding the real owner of the property at issue even without complicated project types, the prospect of filing a valid lien in NY can be daunting. While an amendment may later be allowed if the wrong owner was listed, in fact some lien requirements only require the owner to be listed to the best of the claimants knowledge, or to the extent known, the right type of lien is a prerequisite to that modification. It’s important to understand the requirements of your state to save yourself from the financial exposure of having an otherwise good claim invalidated.

Summary
New York Courts Decide A Mechanics Lien Cannot Be Modified From Private To Public
Article Name
New York Courts Decide A Mechanics Lien Cannot Be Modified From Private To Public
Description
New York Courts will allow for the modification of a notice and mechanics lien, but when the wrong lien is filed, transformation is not allowed by law.
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zlien
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