New York Commercial and Construction Lawyer Blog
The New York Lien Law provides broad categories for the type of work, labor, or services for which a contractor can file a mechanic’s lien if it is not paid. Owner’s typically argue that a contractor, construction manager, or design professional which perform preconstruction services cannot file a mechanic’s lien if it is unpaid. Not surprisingly, contractors, construction managers, and design professionals take the opposing position. Courts have continued to grapple with this issue. The Second Department recently adopted a nuanced opinion, finding that certain preconstruction services were lienable, but others were not. This blog also updates a previous posting of ours (September 27, 2018), where we discussed the lower court opinion which is now the subject of this appeal.
In Old Post Road Associates, LLC v. LRC Construction, LLC, 177 A.D.3d 658 (2d Dept. 2019), a construction manager, LRC Construction, LLC (“LRC”), filed a mechanic’s lien based upon the preconstruction services it had performed. The owner (“Old Post Road”) moved to dismiss the lien pursuant to Lien Law Section 19(6) because it alleged the services in question did not permit a lien, and thus the lien contained a “facial defect.” Lien Law Sections 2(4) and 3 state, in substance, that a lien may only be filed if the work, labor or services were for “demolition, erection, alteration or repair of any structure” which constitutes a “permanent improvement” upon the property in question. Drawings, plans, or specifications prepared by an architect, engineer, or designer can also qualify in certain instances.
Old Post Road argued in support of its application that LRC’s lien included a claim for services such as consulting for construction phasing and the preparation of budgets. Various cases support the conclusion that those services are not lienable. (see, e.g., Goldberger-Raabin, Inc. v 74 Second Ave. Corp., 252 N.Y. 336, 341-342 (1929).
In opposition, LRC alleged that it performed additional services which could be lienable such as “site logistics and access plans” and a “constructability review of the project. See Chas. H. Sells, Inc. v. Chance Hills Joint Venture, 163 Misc. 2d 814, 815, 622 N.Y.S.2d 422 (Sup. Ct. Westchester Co. 1995). Relying on these allegations, the Second Department held that LRC’s lien that incorporated those services was proper and did not contain a “facial defect.” Accordingly, any dispute regarding the validity of the lien would have to be resolved at a subsequent lien foreclosure trial.
What types of preconstruction services qualify as lienable will most likely continue to be a point of contention, especially as the construction boom slows down and projects more often come to a halt before there is a shovel in the ground. Furthermore, the Old Post Road opinion highlights the difficulties in having a mechanic’s lien summarily dismissed without engaging in time consuming and often expensive motion practice.