What Are Pre-Construction Management Services and Are They Lienable in New York?
The Westchester County Supreme Court has determined “pre-construction management services” are lienable, but the claimant had better be prepared to provide a clear, itemized statement of account. In coming to its decision, the Court aimed to answer, “what services are lienable.”.
In the matter of Old Post Rd. Assoc. LLC v. LRC Construction, LLC, 2018 NY Slip Op 28148 – NY: Supreme Court 2018, Old Post Road Associates, LLC petitioned to have LRC Construction, LLC’s lien invalidated. Fortunately, the lien for $250,000 remains intact.
What Constitutes “Improvement of Real Property”
Old Post Road Associates, LCC claimed LRC Construction, LLC’s (LRC) lien was invalid because the claim is based on “pre-construction management services” as opposed to “management services provided during construction.” Is it simply semantics? Not necessarily.
The court turned to New York’s mechanic’s lien statute for clarification on what is considered an improvement.
Yes, this is a long section, but I’ve intentionally included all of it to demonstrate that New York’s lien law is quite thorough with what is considered an improvement. However, to save you the time, I have highlighted the text the court relied on in bold font.
The term “improvement,” when used in this chapter, includes the demolition, erection, alteration or repair of any structure upon, connected with, or beneath the surface of, any real property and any work done upon such property or materials furnished for its permanent improvement, and shall also include any work done or materials furnished in equipping any such structure with any chandeliers, brackets or other fixtures or apparatus for supplying gas or electric light and shall also include the drawing by any architect or engineer or surveyor, of any plans or specifications or survey, which are prepared for or used in connection with such improvement and shall also include the value of materials manufactured for but not delivered to the real property, and shall also include the reasonable rental value for the period of actual use of machinery, tools and equipment and the value of compressed gases furnished for welding or cutting in connection with the demolition, erection, alteration or repair of any real property, and the value of fuel and lubricants consumed by machinery operating on the improvement, or by motor vehicles owned, operated or controlled by the owner, or a contractor or subcontractor while engaged exclusively in the transportation of materials to or from the improvement for the purposes thereof and shall also include the performance of real estate brokerage services in obtaining a lessee for a term of more than three years of all or any part of real property to be used for other than residential purposes pursuant to a written contract of brokerage employment or compensation.
Why focus on “…and shall also include the drawing by any architect or engineer or surveyor, of any plans or specifications or survey, which are prepared for or used in connection with such improvement”? In theory, architects/engineers/surveyors are providing services PRIOR to the commencement of physical construction, which may correlate to “pre-construction management services.”
Need to Support Statute? Find Some Case Law
Statute isn’t enough to assist the court with its decision; enter case law. As I read cases, I often see courts reference cases dating back 5-20 years, even 50 years. This is the first time I’ve read a case referencing a decision that is nearly 100 years old. But, with good reason – the court reviewed two cases & the conflicting decisions were:
- The 1929 Case: The lien claimant was hired as a “superintending engineer.” The claimant aided with contract procurement, which was deemed un-lienable, and supervised the demolition of the building prior to construction of new building, which was deemed lienable.
- The 1995 Case: The lien claimant applied for permits and approvals – “professional engineering and professional surveying services rendered in connection with obtaining municipal approvals for the development of an equestrian facility.” The services were deemed lienable, because the services would ultimately “enhance” the property.
There are some similarities in the services provided, aside from the obvious similarity of occurring prior to commencement of physical construction. Primarily, both cases demonstrate a party providing supervision of, or preparing for, the improvement. Ultimately, the property owners in both cases would benefit from the services provided by the claimants.
The court in LRC’s case found the 1995 case to be most applicable to LRC’s lien. In what must have been riveting petitions, answers & motions, the court asked LRC to elaborate on the services rendered. After all, “pre-construction management services” is quite broad.
What Services Were Rendered?
In this flurry of responses, LRC provided the following:
“(i) recommending the change to the structural system for the project at the Property to a system more suitable for a low rise luxury condominium; (ii) recommending changes to the design team to architects and engineers with more experience designing the type of luxury condominium product Petitioner was constructing; (iii) providing finish selections, facade recommendations and mechanical, electrical and plumbing system recommendations for the type of design required for the high end condominium marketplace; (iv) consulted with land use attorneys to prepare for and attend Petitioner’s Planning Board meetings; (v) prepare site logistics and access plans for the Property; (vi) perform a constructability review for the project at the Property (vii) attend meetings with consultants and officials to assist the approval process and, (viii) prepare construction budgets to assist in the design development process for the project at the Property.”
As you can see, there are some items on this list that may not be lienable, such as “prepare for and attend Petitioner’s Planning Board meetings.” However, as the court pointed out, much of what was provided falls under the category of engineering planning, which is, as we now know, lienable.
Could LRC Have Avoided This Debate?
It’s not often that a lien filing ends up contested in court; our research shows liens go to suit less than 1% of the time. However, one way LRC may have avoided some confusion, would have been to provide a more thorough description of materials/services provided. A thorough description may have not alleviated all confusion, but it would have provided some clarity.
As a best practice, claimants should sufficiently describe materials and services provided in all notice and lien documentation. Plus, claimants should be able to produce an itemized statement of furnishings.