In New York, a Mechanic’s Lien Discharged by a Payment Bond is Still a Lien
In New York, on private commercial projects, a mechanic’s lien must either be extended or enforced within one year from the date the lien was filed. But, what happens if a payment bond is substituted for the lien? According to one recent court opinion, lien deadlines still apply.
Mechanic’s Lien Guide for Private Commercial Projects in New York
Generally, in New York, there is no preliminary notice required, though serving a non-statutory notice is recommended.
The mechanic’s lien deadline varies based on project type: commercial or residential. For commercial projects, claimants should file the lien within 8 months from last furnishing materials or services. The lien should be served upon the owner, the prime contractor, and the debtor, within 5 days before or 30 days after filing the lien. And, proof of service should be filed with the County Clerk within 35 days after the lien is filed.
Words of caution: New York is an unpaid balance lien state and the lien is enforceable only for the unpaid portion of the contract, either what is owed by the owner or what is owed to your customer. File the lien as early as possible to ensure funds are still available.
If you remain unpaid after filing the lien, file suit to enforce the lien within 1 year from the date the lien was filed, or, within the same time period, file an extension of lien.
Let’s review the above case. First, here’s a quick look at the relevant parties:
– Lien Claimant (plaintiff): EZ Runer Construction Corp. (EZ)
– Property Owner (defendant): Blue Nirvana, LLC (Blue)
– Surety (defendant): Suretec Insurance Company (Suretec)
EZ furnished & installed plumbing to the real property owned by Blue. When Blue failed to pay, EZ filed a mechanic’s lien on October 1, 2014, in the amount of $14,712.43.
In July 2015, Blue filed a payment bond, with Suretec as the surety, to discharge EZ’s lien. Once the bond was filed, EZ’s lien was no longer against the property, but was instead against the bond.
Per New York statute, EZ had until October 1, 2015 to file a lien extension or to proceed with suit to enforce their lien, otherwise their lien would be extinguished.
“No lien specified in this article shall be a lien for a longer period than one year after the notice of lien has been filed… or unless an extension to such lien… is filed with the county clerk of the county in which the notice of lien is filed within one year from the filing of the original notice of lien…” – New York § 17
Unfortunately, EZ failed to file an extension or to proceed with suit by the October 1, 2015 deadline. Blue petitioned the court to extinguish EZ’s lien because EZ failed to comply with statute, and the court sided with Blue.
Lien Statute Applies, even if Bond is Filed?
Yes, in New York, even if a bond is filed to discharge the lien, deadlines remain the same.
“The claimant in order to perfect his claim shall within the time prescribed in this chapter for the filing of a notice of lien, file a notice of claim in the office of the clerk of the county where such bond is filed. “- § 37 (5) Bond to discharge all liens.
Another example where the statute does not vary is New Jersey. In New Jersey, when a lien is bonded off, the deadlines associated with suit to enforce the claim do not change. Whether a claimant is enforcing a lien or a claim against the bond, the deadline for enforcement remains within 1 year from last furnishing materials or services.
There are some states where statutory guidelines shift when a bond is filed to prevent or discharge a lien. For example, in Texas, if a lien is bonded off, the deadline for suit to enforce the claim varies, depending upon when the bond was recorded:
53. Stat. Sec. 53.208. ACTION ON BOND.
(a) A claimant may sue the principal and surety on the bond…
(d) If the bond is recorded at the time the lien is filed, the claimant must sue on the bond within one year following perfection of his claim. If the bond is not recorded at the time the lien is filed, the claimant must sue on the bond within two years following perfection of his claim.
In situations where a bond or other security is substituted for a lien on real property, carefully review the state’s statute.
It’s a Warning
New York statute is concise and appears to leave little room for interpretation; perhaps a blessing and a curse for those furnishing to commercial construction projects. It is imperative that would-be claimants be familiar with and follow the statutory requirements as prescribed.