Preconstruction Management Services May Be Lienable In New York
In December 2019, the Court of Appeals heard a New York property owner contest a mechanic’s lien filed by a preconstruction management services firm, because the owner claimed the services provided by firm weren’t lienable. The Court of Appeals sided with the preconstruction management services firm – let’s check out why.
April 2016, the property owner, Old Post Road Associates, LLC (Old Post) hired LRC Construction, LLC (LRC) to perform preconstruction management services. August 2017, LRC filed a mechanic’s lien for $250,000. February 2018, Old Post filed an order to have the lien discharged, claiming the lien was invalid because preconstruction management services aren’t lienable services under NY lien law.
What Are Preconstruction Management Services?
What exactly are preconstruction management services? According to the court opinion, the preconstruction management services LRC provided to Old Post included “consulting with agents of Old Post regarding, inter alia, construction phasing and the preparation of construction budgets.”
OK, I could sort of see how these may not be lienable.
But the court denied Old Post’s petition to discharge the lien, because the lien wasn’t “entirely invalid on its face.”
Uh – what – the lien has a face?
In other words, although the lienability of the services may be questionable, the lien itself reasonably complied with statute. Because the lien reasonably complied, there was no reason to summarily discharge it. It would be up to a foreclosure trial to determine whether the services provided were lienable.
As you’d imagine, Old Post filed a claim with the Court of Appeals (the case we are reviewing here). And the Appeals Court said the same thing: there’s nothing wrong with the lien and you must wait until foreclosure to determine whether the services are lienable.
However, the Court of Appeals did touch on what is lienable under NY statute:
“Lien Law § 3 provides, in pertinent part, that a contractor ‘who performs labor or furnishes materials for the improvement of real property with the consent or at the request of the owner thereof . . . shall have a lien for the principal and interest, of the value, or the agreed price, of such labor . . . or materials upon the real property improved or to be improved.’ The term ‘improvement,’ as defined in Lien Law § 2(4), ‘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 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.’”
But these aren’t services LRC provided, right? So LRC’s lien is invalid, right? Well, maybe.
It turns out, LRC submitted that it is a construction management firm which “…employed construction professionals, architects, and engineers, and that, in addition to the consulting services it rendered, LRC also prepared ‘site logistics and access plans’ for the property, and performed ‘a constructability review for the project’ at the property.”
And, if we liberally interpret statute, these services could potentially fall under the category of “improvement.”
“Since LRC would be entitled to file a mechanic’s lien if its architects and/or engineers prepared the site logistics, access plans, or constructability review, the mechanic’s lien is not invalid on its face. Accordingly, the dispute regarding the validity of the mechanic’s lien must be resolved at the lien foreclosure trial.”
You Didn’t Even Answer the Question
You’ve made it this far & we still don’t know with certainty whether preconstruction management services are lienable under NY statute. You’re right. In this case, at this moment, we have no idea whether a foreclosure trial will result in a valid or invalid lien for LRC. But we did learn something…
We learned: a lien needs to reasonably comply with statute to avoid discharge, parties should have documentation supporting the materials or services provided, the lien should be filed timely, and parties should be prepared to not always get an answer the first time around.
In this case, the claimant (LRC) took the proper steps to file its lien for unpaid services and it was prepared to provide the documentation necessary to support its claim. And, unfortunately, in many cases that wind up in court – it’s not a fast process. Litigation can take time – a lot of time – be prepared.