Every time we discuss public works on the blog, we mention that mechanics liens are not available on public projects. We typically go on to say that that surety bond claims stand in their place. However, sometimes there’s another option. In New York, public improvement liens are available. A recent case takes a look at the deadlines for those New York public improvement liens.
We’ve actually discussed New York public improvement liens before. Check out this story about modifying a New York mechanics lien from private to public.
Deadline for New York Public Improvement Liens
Before talking deadlines, we should probably discuss public improvement liens. The phrase “public property cannot be liened” has been echoed on the blog for years, so the title “public improvement lien” seems problematic. But it isn’t!
A mechanics lien creates a charge against a property. New York public improvement liens create a lien on funds. Specifically, payment to the general contractor will be withheld. When such a lien is properly foreclosed, the awarding authority will withhold 1.5 times the amount of the lien from the general contractor’s pay. These liens do not replace payment and performance bonds, but when those bonds are not required on a project they serve as a fine alternative.
Let’s put that information to action. In County Wide Flooring v. Town of Huntington and Wenger Construction, a New York court determined when exactly the clock starts ticking on lien claims.
County Wide Flooring (“Flooring”) was a subcontractor hired by Wenger, the general contractor, to perform work on a project for the Town of Huntington. Flooring and Wenger’s relationship deteriorated during the project, and eventually Flooring was terminated by Wenger. Unpaid, Flooring sued and filed a public improvement lien on the property. The town terminated its contract with Wenger a few months after the lien was filed, and no one was brought in to complete the project.
Flooring had timely filed its lien but failed to enforce the lien until over two years later. By the time Flooring attempted to perfect the lien, the deadline to enforce had passed. Wenger raised the issue and the action was dismissed.
Undeterred, Flooring filed another lien. Wenger protested, claiming the issue had already had its day in court. Wenger also argued that the time to file a claim had elapsed.
First, the court noted that there is no reason, under New York law, that a second lien could not be filed as long as the deadline to file had not passed. The court explained that a second lien may be necessary to cure an irregularity, to reassert a lien that was not timely enforced, or to assert a lien for additional amounts not included in a prior lien.
Next, the court explained that the deadline to file a lien claim is 30 days after the improvement is “completed and accepted.” Because the project was never actually completed or accepted, there was still time to file a lien. Wenger argued that the time to file a lien should have been 30 days following Wenger’s termination (over 3 years earlier).
The court disagreed. The court found that because the contract between the town and Wenger had formal requirements for acceptance, those specifications must be followed. Because there were specific provisions for acceptance, the subcontractor was entitled to rely on the provisions in deciding when to file their lien.
We have seen a similar issue involving (seemingly) never-ending lien liability with Louisiana lien rights.
Lien deadlines can be a nightmare to maneuver. What’s more, courts are certainly not known for their lien-iency regarding mechanics lien laws. However, this decision is very friendly to subcontractors and suppliers. The court gave no indication that the lien deadline would ever expire under these facts. Plus, the ability to refile a lien should not be taken for granted. This decision could be appealed, though. The case technically came from the New York Supreme Court, but that’s actually what the state has named its trial courts.