Varying Interpretations of Lien Law Section 3’s Consent Requirement

Last September, the New York Court of Appeals granted a motion for leave to appeal the Fourth Department’s decision in Ferrera v. Peaches Café LLC, 138 A.D.3d 1391, 30 N.Y.S.3d 765 (4th Dep’t 2016). In Peaches, the Fourth Department enforced a mechanic’s lien filed by a contractor who was hired by a tenant and had no direct relationship with the landlord/owner. However, if this same mechanic’s lien had been filed against real property governed by any other New York Appellate Department, the mechanic’s lien would have very likely been discharged.

Lien Law Section 3 states 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 ….”

The First, Second and Third Departments have determined that in order for a mechanic’s lien to come within Lien Law Section 3, the owner must be an affirmative factor in procuring the improvement, or else, having possession and control of the premises, assent to the improvement in the expectation that he will reap the benefit of it. See Paul Mock, Inc. v. 118 East 25th Street Realty Co., 87 A.D.2d 756, 448 N.Y.S.2d 693 (1st Dep’t 1982); Interior Bldg. Services, Inc. v. Broadway 1384 LLC, 73 A.D.3d 529, 900 N.Y.S.2d 311 (1st Dep’t 2010); Matell Contracting Co., Inc. v. Fleetwood Park Development, LLC, 111 A.D.3d 681, 974 N.Y.S.2d 573 (2d Dep’t 2013); Drapaniotis v. 36-08 33rd Street Corp., 48 A.D. 3d 736, 853 N.Y.S.2d 356 (2d Dep’t 2008; Sager v. Renwick Park & Traffic Assn., 172 A.D. 359, 159 N.Y.S. 4 (3d Dep’t 1916).

The Fourth Department, on the other hand, broadly interprets Lien Law Section 3. It has found consent even if the owner does not affirmatively consent to the improvements, and even if the Owner does not have possession or control of the premises. Unlike in the other New York Appellate Departments, direct authorization from the Owner is not required.

In Peaches, the owner of a commercial property leased space to its tenant, Peaches Café. The lease obligated Peaches Café to supply all electrical work, and Peaches Café, in turn, hired an electrical contractor to perform the work contemplated by the lease. When Peaches Café failed to pay the contractor, the contractor filed a mechanic’s lien against the property and a lien foreclosure action followed. The property owner argued that because it did not explicitly consent to the electrical work performed, the lien could not be enforced against it.

The Fourth Department, interpreting Lien Law Section 3, determined that the owner consent contemplated by the statute may be implied by a lease; it need not be directly provided to the contractor by the owner. If a lease obligates a tenant to perform certain improvements, and tenant causes said improvements to be performed pursuant to that lease, then the owner has consented to such improvements for the purpose of Lien Law Section 3. Accordingly, a contractor may properly maintain a mechanic’s lien against the owner’s property.

Given this split in the Appellate Departments, it will be interesting if the Court of Appeals overturns Peaches in favor of a unified interpretation of the consent requirement contained in Lien Law Section 3. While it is difficult to predict the outcome of any case pending in the Court of Appeals, we believe the most likely outcome is that the Fourth Department will be brought in line with the other Appellate Departments.