The mechanic’s lien is the contractor’s most effective weapon in a payment dispute with an owner in connection with the improvement of privately owned real property. We often receive calls from owners claiming that a contractor improperly filed a lien against their property, and seeking a way to immediately discharge the lien. In most cases, there is no low-cost method of quickly discharging a lien.
In New York, a lien can be discharged summarily (1) by paying the lienor (contractor), who provides owner with a satisfaction of its lien to file with the court, (2) by filing a bond or making a deposit of 110% of the lien amount with the court (thereafter the lien attaches to the bond or the deposit and not the real property), (3) where the lien is procedurally defective (e.g.: the lien is not filed within eight months (or four months if the property is a single-family dwelling) from the date on which the contractor last provided materials or labor to the project; the lien is not filed in the county or counties where the project is located; the lien is lapsed due to the lienor’s failure to obtain an extension or timely commence the lien foreclosure action), and (4) where the lien is facially defective (e.g., the name of the owner is incorrect). With respect to (3) and (4), an application must be made to the court.
Owners may have proof that a lien is invalid. However, the general rule is that unless a notice of lien is defective on its face, the owner must wait until the contractor commences its lien foreclosure action before it can challenge the validity of the lien.
For example, on March 1, 2011, a contractor who worked on a commercial construction project files a notice of lien that provides on its face that the last date on which labor and materials were furnished by the contractor was January 1, 2011. Even if the owner can prove that the final day on which the contractor provided labor or material to the project was actually more than eight months prior to the date of the filing of the lien, a court still will most likely not grant the owner’s application to summarily discharge the lien before the commencement of the lien foreclosure action.
When served with mechanic’s liens, we customarily advise our owner-developer clients to immediately make a demand for an itemized statement of lien pursuant to Lien Law § 38. Pursuant to the demand, the contractor-lienor is required to specify the items of labor and materials furnished and the terms of the contract under which they were furnished. The contractor’s itemized statement can be used by the owner to verify or challenge the contractor’s claim, and may be considered by the court to determine the validity of the lien if owner is seeking to summarily discharge such lien.
Simultaneously, the owner can also serve a demand pursuant to Lien Law § 59, which compels the contractor to commence its foreclosure action within 30 days from its receipt of the demand. After the contractor commences its foreclosure action, the owner can file a counterclaim, and seek an order cancelling the lien. The drawback to demanding the commencement of a lien foreclosure action is that litigation is expensive and often takes a significant amount of time (e.g., litigants have no control over how long it takes a court to render a decision and order vacating the lien).
New York courts have recognized an exception to the general rule prohibiting summarily discharging a lien that is not defective on its face. In Camillo v. Navitsky, 396 N.Y.S.2d 585 (Sup. Ct. Putnam Co. 1977), the owner proved a defect that was not apparent in a notice of lien (i.e., the description of the liened property was erroneous) based on extrinsic statements made by a contractor in response to the owner’s demand for an itemized statement. In granting the owner’s motion for summary dismissal of the lien pursuant to Lien Law §19(6),the court stated: “Ordinarily, the only remedy to an owner who establishes a defect by extrinsic proof is to either bond the lien or to compel the lienor to commence a foreclosure action and then move for summary judgment. Such procedure, however, serves no useful purpose where, as here, there are no issues of fact concerning the existence of the defect. In such circumstances, summary discharge should be available to the owner.”