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NYCHA Construction Contracts Are Traps For The Unwary

Public owners often utilize notice of claims and contractual notices to bar otherwise valid claims for relief. The New York City Housing Authority (“NYCHA”)is no different, and requires any potential claimant to be especially vigilant in preserving rights to monetary damages. The First Department recently upheld NYCHA’s assertion of these defenses and sustained the dismissal of a complaint by a surety acting in place of a contractor. Colonial Surety Co., v. New York City Housing Authority, 182 A.D.3d 517, 120 N.Y.S.3d 772 (1st Dep’t 2020).

The NYCHA contract under review stipulated that notices of claim be filed within twenty (20) days of accrual.. The Court here found, consistent with prior caselaw, that the claim had accrued when the NYCHA had informed claimant in writing that it intended to substantially decrease its scope of work. Unfortunately, claimant here did not file its notice of claim until two and one half years later, and after the underlying project had been substantially complete.

Plaintiff’s claims were also barred because the NYCHA had found that Plaintiff had defaulted in its contractual obligations. Pursuant to the NYCHA contract, in those circumstances Plaintiff could not properly maintain a plenary action for monetary damages. Instead it was required to commence an Article 78 proceeding, which imposes a far higher burden of proof on a claimant.

The Colonial decision serves as a reminder that public owners like the NYCHA have various tools at their disposal to dismiss a contractor’s claims. Any potential claimant must pay special attention to relevant contractual and statutory provisions or risk having their claims thrown out because of a technical defect.

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