While mechanics liens can provide valuable protection for parties who furnish labor and/or materials to construction projects, the claimant must qualify to file a valid mechanics lien before the protections can work to his or her benefit. In many states, having a license to perform the work at issue is a prerequisite to filing a valid mechanics lien, and lacking a proper license (or neglecting to provide licensing information on the lien claim) can result in an invalid lien, and no security rights. One such state in which a license is required to file a valid mechanics lien is New York, and a recent case provides a clear reminder of that fact.
New York Law: Licensing and Mechanics Liens
New York has strict licensing requirements to qualify for mechanics lien protection. If the claimant needs to have a license to perform the work at issue, the claimant must have that license, and be authorized to do business in New York, in order to claim a lien.
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These requirements trickle downstream, but a GC’s failure to be licensed can dissolve the rights of those below him, even if the parties below have their required licenses. If a general contractor on a residential home improvement project does not have a home improvement contractor’s license, his subcontractors are also prohibited form bringing a lien against the property. Further, if the general lacks a home improvement contractor’s license (even if the job is not entirely residential in nature) the contractor is not allowed a lien on the property and is forbidden form filing a breach of contract action.
That last, very strict, provision was recently examined in the recent New York case RAPID DRY INC. v. Zwick.
The Recent Case
In Rapid Dry, after a discussion of certain repairs made to a home after Superstorm Sandy, the court noted that
it is well settled that licensing statutes are to be strictly construed, and that an unlicensed contractor forfeits the right to recover damages based either on breach of contract or on quantum meruit as well as the right to foreclose on a mechanic’s lien.
Given the fact that the plaintiff Rapid Dry never presented the court with any proof that it was a licensed home improvement contractor, the court dismissed its $25,000 complaint. While the details in this case seem to point to this being a fair result, (despite the fact that work was performed for which Rapid Dry will not be paid) it’s worth noting that the “fairness” or the result is, as a practical matter, of no consequence to a particular decision based on this requirement. A contractor could have the best of intentions, and do everything else correctly, and still remain unpaid with no ability to recover if that contractor didn’t hold the required license.