Hat tip to our friend Vincent Pallaci of the New York Mechanics Construction Payment Blog for calling our attention to a very interesting and controversial mechanics lien decision from the appeals court in New York affecting lien extensions in his blog article: Appeals Court Reinstates Discharged (Expired) Mechanic’s Lien.
At issue in the case In the Matter of Navillus Tile, Inc. is New York’s lien extension laws, and specifically the procedure and timeframe for getting a lien claim extended.
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Part 1: What You Need To Know About New York Lien Extensions To Understand The Decision
To understand the implications of this recent decision, there’s a few things you should know about lien extensions and lien extension laws in New York.
Generally speaking, contractors and suppliers all over the country think they can just file a mechanics lien extension whenever the initial effective period expires. This is the case in only a select group of states (see Can I File An Extension To A Mechanics Lien?) Nevertheless, New York is in the select group of states that do allow mechanics lien extensions.
On projects that are not on single-family residential properties, a mechanics lien can be extended once by simply filing a lien extension document with the recorder. The process of doing this is very similar to the process of filing the underlying lien. The extension is for a period of 1 year.
If the claimant wants to extend a mechanics lien for a second time (or extend a lien on a single-family residential project for the first time), the process is more involved. Instead of simply filing a document with the recorder the claimant must actually get a judge to look at the claim and issue a court order extending the lien.
Now, a lien must be extended before it expires. That’s obvious, right?
When a filing is required to extend the mechanics lien, the law is quite clear that the filing must be made before the original lien expires. But what about when the mechanics lien extension must be granted by a judge? Must the request to the judge be filed before the original lien expires, or must the judge actually grant the application before the original expiration?
That is the white space dealt with by the recent New York appeals case.
Part 2: Controversial Decision Says Judge’s Order Extending A Mechanics Lien Can Come After The Original Lien Expires
In his blog post, Mr. Pallaci frames the issue determined In the Matter of Navillus Tile Inc. case by discussing the trial decision that refused to extend the mechanics lien because the application didn’t get to the judge for decision until after the original lien expired. Pallaci says:
[This] is what just about every other Court in New York has consistently said. Once the lien expires, no Court has the power to revive it: or so was the law until the Second Department chimed in here.
The Second Department appeals court then makes a very interesting argument, essentially holding that so long as a mechanics lien extension application is filed before the original lien expires, it may be timely if the judge doesn’t get around to it in time. How do litigants know whether it is or is not timely? They won’t, according to the decision, because this is something determined on a case-by-case basis depending on equitable circumstances. See this quote from the opinion (full text here) discussing the decision:
[S]ince the granting of the petitions nunc pro tunc is not “otherwise expressly prescribed by law, the court may extend the time fixed by [Lien Law § 17] upon such term`s as may be just and upon good cause shown, whether the application for extension is made before or after the expiration of the time fixed.
Thoughts About The New York Lien Extension Decision
Mr. Pallaci says he is “shocked” by the decision from the Second Department. I’m not as shocked, but I do recognize that it’s a departure from seemingly clear precedent. Nevertheless, in reviewing mechanics lien cases over the years, contradictory decisions and decisions that don’t make any sense aren’t quite as shocking as they used to be :).
Some closing thoughts about this case, however:
1) There is an underlying fairness here that makes me feel good. I know first hand that dealing with clerks, recorders, judges and the judicial system can be frustrating to parties and lawyers, and that there are delays outside of your control that are unfair. I’m not sure of the exact procedures in New York to get a mechanics lien claim extended, but I’d bet that sometimes these lien extension cases take longer than necessary because of uncontrollable court delays. Judge vacations. Full dockets. The list goes on.
So, when a lien claimant files a mechanics lien extension application on time but doesn’t get it heard on time, I can understand the equitable justification of letting it slide, and it’s nice that the Second Department is willing to entertain these situations. We just saw the exact opposite situation play out in Illinois, which I wrote about in “Illinois Appeals Court Denies Excuse For Late Mechanics Lien Foreclosure Action.”
2) Always Be Early, Never Be Right On Time. In the mechanics lien world you must must must get to the filing party early. Don’t wait until the last day to file your mechanics lien, don’t wait until the last day to file your lien extension and don’t wait until the last minute to file your lien foreclosure action. If you want until the last minute things can and will go wrong. Give yourself plenty of time and you won’t need to make these fringe arguments and hope for a judicial panel sympathetic to your cause.