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If ownership of a construction job has already paid the GC in full for the project, then one cannot lien the property.

New YorkRight to Lien

My firm is a materials supplier for large construction projects. I have been told that if the property ownership has paid their GC in full for the project, if an electrician owes us for materials and we lien the property then my firm's lien would be deemed invalid. IS this true?

4 replies

Feb 18, 2020

Whether or not a mechanics lien can force an owner to "pay twice" (and attempt their own recovery from a GC) is set forth by state statute, and is the determining factor with respect to whether a state is a "full price" lien state, or an "unpaid balance" lien state. New York is an "unpaid balance" lien state. According to New York’s Construction Lien Law, § 4, "If labor is performed for, or materials furnished to, a contractor or subcontractor for an improvement, the lien shall not be for a sum greater than the sum earned and unpaid on the contract at the time of filing the notice of lien, and any sum subsequently earned thereon. In no case shall the owner be liable to pay by reason of all liens created pursuant to this article a sum greater than the value or agreed price of the labor and materials remaining unpaid, at the time of filing notices of such liens . . ." [emphasis added] Accordingly, if the property owner has paid the GC in full pursuant to the contract for work, a valid lien cannot be filed after that payment. If a lien is filed prior to final payment to the GC, however, this prohibition does not apply.

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Feb 18, 2020

Thanks for your answer Nate. But how are we, down the line suppliers/subs, supposed to know if Ownership paid in full for a project?

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Apr 2, 2021

In New York, if a subcontractor has filed a mechanic's lien, it can serve the owner with a demand for a verified trustee's statement pursuant to N.Y. Lien Law § 76.

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Apr 6, 2021

The lien would not be invalid, per se, but if it turns out there is no "lien fund" then there will be no recovery. However, if there is no lien fund because your upstream contractor was paid, but payments did not flow down to you, there may be an issue relating to a diversion of statutory trust funds. You will want to serve a Demand for Verified Statement of Trust, as was suggested above, to see what happened to the money.

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