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Construction Law Blog

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Homeowner Court Ruling Serves as a Reminder to New York Contractors

  
  
  
  

A recent ruling issued by the Supreme Court, County of Nassau, serves as a reminder to New York contractors performing residential work of the importance and necessity in having a home improvement license if you need legal action to pursue payment on the project.

In this homeowner victory, represented by The Law Offices of John Caravella, P.C. in a matter entitled Holistic Homes ,LLC v. Alan B. Greenfield and Hudson City Savings Bank, the court found unconvincing the various excuses presented in its attempt to portray itself as anything other than a home improvement contractor pursuant to the Nassau County Administrative Code.

The matter concerned work performed on the owner's property to remedy damage caused by Hurricane Sandy. When a dispute as to payment arose, the contractor filed its lien on the owner's property and commenced legal action to seek recovery on its lien.

When challenged on the status of its license, the contractor then attempted to explain that it was not on the project as a contractor, rather based on some alleged personal form, as "fraternal brother", which failed to be persuasive nor did it relieve the contractor's statutory licensing requirement. The Court was further reluctant to excuse the statutory licensing requirement when the work performed was emergency repair work as made necessary across Long Island resulting from Hurricane Sandy.

Subsequently through litigation, the contractor admitted that it was not licensed as a home improvement contractor in Nassau County.

Without having a valid Nassau County Home Improvement Contractor's License, contractor's complaint for damages was dismissed and the lien vacated.

"Thus, a contractor who does not possess a license required by local law may not enforce a home improvement contract. This is true irrespective of whether the suit sounds in breach of contract or quantum meruit (Al-Sullami v Broskie, 40 AD3d 102[2d Dept. 2007]) or a claim made in the context of a lien foreclosure (Ellis v Gold, 204 AD2 261 [2d Dept. 1994] or an arbitration. Al-Sullami v. Broskie, supra.

Not even the necessity of prompt remedial efforts needed in the immediate aftermath of Hurricane Sandy is enough for the strict requirement for a licensure to seek legal action on any claims for payment.

New York contractors are reminded of the importance to regularly ensure that their licenses, contracts, and insurance coverages are properly tailored to serve the needs of your business and project types.

In addition to litigating construction issues, this office routinely provides review and consultation services to contractors to ensure their contracts, business practices as well as their required licenses and insurance policies are in proper working order or identify areas of potential exposure which could be better managed.

Your comments and future article topic suggestions are invited in the field below.


John Caravella construction lawyerThe author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Offices of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051. 

 

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This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.

Subcontractor Challenges under the New York Lien Law

  
  
  
  

The adage that you can not get blood from a stone may have its place in the rationale of New York Lien Law. Not that you will find this term included in any of the sections of the law, but this concept of reality is reflected in the hierarchy, structure, and availability of funds in the occurrence of a construction dispute.

With the understanding that an owner should not be required to pay for the same work twice, the owner's maximum liability or financial obligation on the project is the amount owed to the general contractor, or the 'Lien Fund.' For the contractor seeking payment this is not a tremendous burden, as the contractor most likely has a contract directly with the owner, and has its monthly administration files available to establish any amounts that may be owed.

But the same can not be said for the subcontractor, who typically will not have a contract directly with the owner, nor does it have access to all of the contract administration between owner and contractor. Being further down the chain of construction and without direct contact to the owner causes additional challenges to the subcontractor or supplier in seeking to enforce their New York lien rights.

  • Challenge 1:  Must be a 'Lien Fund' of available funds to claim against

Of the money due and owing to the contractor by the owner, there must be some portion still available to satisfy the claims of any subcontractor or supplier. The New York Lien Law definition of Lien Fund is available here

"[The] critical issue is whether there are funds due and owing from the owner to the general contractor." DiVeronica Bros. Inc. v. Basset, 213 A.D.2d 936

 

  • Challenge 2:  Burden of proving existence of Lien Fund belongs to subcontractor

It falls on the subcontractor, or any party seeking to enforce their lien, to prove that money was due, or thereafter became due, from the owner to the contractor at the time the lien is filed, the lien would be void as there is no fund to which the lien can attach.

A 2011 decision of the New York Appellate Court confirms the uphill burden placed on those down-chain from the owner. For a subcontractor in New York seeking to enforce its lien, establishing that there remained a balance owing is insufficient to establish a lien fund. JMP Plumbing and Heating Corp. v. 317 East 34th Street, LLC, 89 A.D.3d 593, 933 N.Y.S.2d 252 (1st Dep't 2011).

"A subcontractor's lien can only be satisfied out of funds 'due and owing from the owner to the general contractor.....[Subcontractor(s) bear] the initial burden of showing that funds were, in fact, due and owing.'

A subcontractor's failure or inability to prove the amount due and owing to the general contractor can be a bar to the subcontractor's ability to collect on its lien. The existence of a remaining balance due subcontractor does not establish that the owner is obligated to pay those funds, especially where the owner may also be asserting a claim against the general contractor.

Each subsequent tier of contractors, subcontractors, and suppliers has its own 'Lien Fund' available for recovery of its claims (and only to the extent a 'Lien Fund' exists). A Lien can only attach to the funds owed to the party directly above the claiming party. Philan Dept. of Borden Co. v. Foster-Lipkins Corp.

For the New York Subcontractor, you must not only have a Lien Fund available for you to claim against, but you also have to be able to establish those amounts as Due and Owing as beyond just an open balance. Additional research is required to confirm that the owner has no valid reasons for any non payment to the contractor.

Your comments and future article topic suggestions are invited in the field below.

John Caravella construction lawyerThe author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

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This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.

Homeowner Challenges to New York Mechanic's Liens

  
  
  
  

 

When a private improvement lien is filed in New York, the entire body of the New York Lien Law is imported which establishes the rules for filing, enforcing (or foreclosing the lien) and for challenging or discharging the lien. There may often be defenses to the lien for the property owner as outlined below.  For those seeking to file a valid lien, the below serves as a reminder of common issues to avoid.

law books1Often in the construction context a homeowner may find a lien filed against their property by a contractor hired to perform work on the property. Also it is common for the homeowner to have complaints about or criticisms of the work performed. For the homeowner who finds their property with a lien, and unsatisfactory work performed, it is possible to seek relief from the court. “A lien will be vacated where the court finds the work was not substantially completed or is below industry standards.” New Day Builders v. SJC Realty 219 A.D.2d 623, 631 N.Y.S.2d 707, N.Y.A.D. 2 Dept., September 18, 1995 (NO. 93-06390).

The time provided for a party to lien a property for being unpaid for work performed is also limited under the New York Lien Law and strict compliance with all requirements is required for a lien to be valid and enforceable. For work performed on a single family dwelling the time allowed for a lien to be filed is 4 months from the date of last work NY Lien Law § 10. This time limit, however, can be unclear if there was a termination or an abandonment of the job by the contractor, or when the contractor returns for repairs or warranty work after completion.

“Where a contract has been abandoned (by the contractor), the date to file runs from the date of abandonment” Locke v. Goode 174 N.Y.S.2d 435. Any work done after abandonment will not extend the time allowed to file a lien. Likewise it follows that any repair or warranty call-backs on a completed project would also not extend the time available to the contractor for the filing of a lien. Nelson v. Schrank 75 N.Y.S.2d 761.

The homeowner often will not have direct dealings or agreements with subcontractors supplied by their contractor and can find their property liened by a subcontractor due to the contractor’s failure to pay the subcontractors. “If, before a lien is filed, the owner has paid the contractor, but the contractor has failed to pay the subcontractor, the subcontractor’s remedy is to look to the contractor [for payment]” Central Valley Concrete 310 N.Y.S.2d 925. “[An] owner’s liability to subcontractors is strictly limited to the amount of the lien fund, that amount owed to the general contractor.” NY Lien Law § 4.

The extensive requirements of the New York Lien Law is a large body of law, and is too broad to be condensed into this article, but the above considerations are commonly encountered in New York construction and serve to answer some common lien challenges.

Additional information may also be found in the blog article Pitfalls in Extending Mechanics Liens on Residential Properties.

 

John Caravella, construction attorneyThe author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (631) 608-1346.


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This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.

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