Property owners in New York have few options when it comes to challenging a mechanics lien filed against their property. Besides a few narrow circumstances, challenging or discharging a mechanics lien can only be done in a foreclosure action.
This facet of New York’s lien laws was reiterated in a recent case where the court declared that only in a foreclosure action can a claimant’s lien amount be reduced.
Discharging and challenging New York mechanics liens
Mechanics liens in New York are particularly stubborn. Once filed, they are fairly difficult to challenge. And this is an issue we’ve written about before.
Read More: Are New York Mechanics Lien Challenges Impossible? and NY Court Refuses to Cancel Lien While Parties Are in Dispute
One option for property owners in New York to challenge a presumably invalid mechanics lien claim is to file for an expedited motion under NY Lien Law §19(6).
Under this statute:
“A lien other than a lien for labor performed or materials furnished for a public improvement specified in this article may be discharged as follows:
(6) Where it appears on the face of the notice of lien that the claimant has no valid lien by reason of the character of the labor or materials furnished and for which a lien is claimed, or where for any other reason the notice of lien is invalid by reason of failure to comply with the provisions of section nine of this article, or where it appears from public records that such notice has not been filed in accordance with the provisions of section ten of this article, the owner or any other party in interest, may apply to the supreme court of this state, or to any justice thereof, or to the county judge of the county in which the notice of lien is filed, for an order summarily discharging of record the alleged lien…”
This is a powerful option for property owners to challenge a lien in a quick, and relatively cheap fashion.
However, this isn’t always the right move, as these challenges are to be made for “facial defects” which, as the court reiterated in the following case, does not include exaggerated amounts.
Owner challenges lien amount under §19(6) motion
The case in question is Pizzarotti, LLC v. FPG Maiden Lane LLC.
Project Snapshot:
- Owner: FPG Maiden Lane, LLC (FPG)
- Contractor: Pizzarotti, LLC (Pizzarotti)
FPG had hired Pizzarotti to perform construction management services for the construction of a 58-story high-rise residential building in downtown Manhattan: the infamous “leaning condo” known as One Seaport.
Structural and design issues (of which there are many) and a payment dispute arose, resulting in Pizzarotti filing a mechanics lien claim in the amount of $33,837,618.34.
In response, FPG brought an expedited action under NY Lien Law 19(6) seeking to discharge or reduce the lien amount due to alleged lien waivers executed by Pizzarotti.
Based on this evidence, coupled with the lack of sufficient support for the amount claimed by Pizzarotti, the court ordered the reduction of the lien amount from over $33 million to $3,566,357.42. Pizzarotti appealed.
Appeals court reverses decision to reduce the claim
The Appellate Division made short work of this appeal. On October 1, 2020, the court reversed the decision and ordered the lien to be reinstated in the full amount.
In the brief opinion issued, the court stated that:
“A court has no inherent power to vacate, modify, or discharge a notice of lien pursuant to Lien Law §19(6) where there is no defect on the face of the lien, and any dispute concerning the lien’s validity must await a trial.”
Since there was an issue of fact yet to be resolved — the lien waivers — the claim can’t be summarily discharged under §19(6).
These types of motions typically reserved for liens that are “facially defective.” This usually involves the failure to meet some technical aspect of the lien process — such as failing to provide all the required information, untimely filing or service of the claim, or claiming a lien for “non-lienable” work, to name a few.
Other options for NY owners to deal with mechanics liens
As stated earlier, there are a few different avenues under New York’s lien laws to dispute or otherwise respond to a lien someone feel is unjustified or exaggerated.
Bond off the claim
First and foremost, one can file a lien discharge bond (i.e. bond off the lien) under NY Lien Law §37. While this doesn’t get rid of the claim, it does free up the property title while the dispute is resolved. But that doesn’t really solve the issue itself.
Request an itemized statement
An underutilized tactic for property owners is found under §38. If the owner believes the claim is unjustified they can demand an itemized statement from the claimant. If the response is inadequate, or the claimant fails to respond, then the owner can seek an order to discharge the lien for failure to comply.
Demand to foreclose
This option (NY Lien Law §59), is typically the most effective way to challenge a lien.
The owner is essentially calling the claimant’s bluff. Once filed, the claimant must either initiate the foreclosure proceeding, or show good cause as to why the claim shouldn’t be discharged within 30 days.
Vincent Pallaci, a New York-based attorney from Kushnick Pallaci PLLC, had this to say awhile back, but still holds true to this day — and more importantly, to this case. When it comes to challenging a lien claim in NY:
“The two most common arguments are that the lien amount is incorrect or the last day of work is incorrect. In either event, the proper way to challenge a lien is (usually) not through Lien Law Section 19(6) petition but, rather, through a Lien Law Section 59 proceeding.
Lien Law Section 59 forces the lienor to foreclose within 30 days or face discharge of the lien. This gives the petitioner two lines of attack. Either the lien is not timely foreclosed upon and is discharged or it is foreclosed upon and the petitioner can raise the ‘non facial’ defects.”
Additional thoughts from a New York-based attorney, Peter Strinste with Gordon Rees Scully Mansukhani.
“Unless the lien is defective on its face, I usually advise owner clients in New York to bond the lien if there is a dire need to remove it from the land records. I recently represented an owner client in a dispute involving a high rise project with a fact pattern very close to the Pizzarotti case; anticipating the Appeals Court ruling, I attacked the lien seeking a more definite statement but avoided making a demand to foreclose our client not wanting the property to be the subject of a foreclosure suit. Ultimately, our client’s investors had no concern with the lien being of record and we litigated the underlying construction dispute in Federal Court.”