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Home>Levelset Community>Legal Help>Can you please advise if a lien recepient has a right to go into a lawsuit against us if we did all contracted work, passed the final inspection and just want to secure final payment?

Can you please advise if a lien recepient has a right to go into a lawsuit against us if we did all contracted work, passed the final inspection and just want to secure final payment?

New YorkNotice of Intent to Lien

We recently opened an account with you guys & sent 3 notices of intent to Lien. Immediately we got response from one the apartment owners that they paid all to GC and if we are going to file lien they will sue as the same moment. Can you please advise if they have a right to go into a lawsuit against us if we did all contracted work, passed the final inspection and just want to secure final payment?

1 reply

May 1, 2019
That's a good question, and I'm sorry to hear you've had some trouble securing payment here. First, it's worth mentioning that I'm not able to provide your any legal advice - but I can provide some information that should be helpful here. It's also worth noting that, when faced with the threat of a mechanics lien, an owner or prime contractor's first reaction will typically be to challenge the validity of the claim - regardless of whether an issue is actually present. Anyway, let's look at two different (but related) ideas: (1) a sub or supplier's ability to lien when their GC is paid in full, (2) legal liability after filing a lien in New York. New York, like many other states, is what's called an "Unpaid Balance" state. That means subcontractors and suppliers hired by someone other than the owner will only be entitled to file a lien to the extent that the prime contractor wasn't paid by the property owner. So, in a situation where a property owner has paid their prime contractor in full and that prime contractor fails to pay their subs and suppliers, those unpaid subs and suppliers might not be able to successfully recover via a lien claim. More on "unpaid balance" states, here: Full Price Lien vs. Unpaid Balance. Now, regarding legal liability, it's worth noting that generally, liability for mechanics liens won't arise unless a lien has been fraudulently filed. But, as discussed in this article, there's a difference between fraud and an honest mistake. So, even if a lien claimant ultimately files a mechanics lien that's ultimately not enforceable, that lien claimant won't generally face serious liability unless there's more than some trivial or honest mistake that invalidates the claim. Looking to New York law specifically, liability for a filed lien will generally only arise when the lien is fraudulent or exaggerated. Section 39 of the New York lien statute states that liens which are willfully exaggerated are void. Further, under Section 39-a, additional liability can come into play if a lien is willfully exaggerated. But, as mentioned in part above, mistakes don't generally give rise to liability unless the lien amount was purposefully exaggerated. Further, it seems that this liability only arises when the lien claim is enforced. So, even if a claimant files a flawed lien, the question as to whether the lien was exaggerated likely wouldn't arise unless and until a filed lien is enforced. Note, of course, that regardless of whether a filed lien would result in liability, a lawsuit could be filed to challenge the filed lien and ultimately have it removed from the property - and it's possible that an owner could seek attorney fees if they're successful in doing so. Lastly, but importantly, recall that the point of a Notice of Intent to Lien is to draw the attention of the owner and the prime contractor. So, when an owner has a visceral reaction to the threat of a lien claim, that's not necessarily a bad thing. Instead, that can help put extra pressure on a contractor to make payment to the party threatening the lien. No owner wants to battle a mechanics lien in court - even if they're sure they'll win. So, by informing an owner that there's a potential lien or legal battle down the line if they can't convince their contractor to pay what's owed, a party who sends a Notice of Intent to Lien can stir the pot and put extra pressure on the nonpaying contractor. For more information about New York mechanics liens, this resource should be helpful: New York Lien & Notice Overview.
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