New York Commercial and Construction Lawyer Blog
The meaning of “permanent improvement” under the Lien Law was at the heart of the decision in Matter of 134-136 West Houston, LLC v New York City Land Surveyor P.C., 58 Misc.3d 1228 (A), 2018 WL 1279175 (Table), 2018 N.Y. Slip Op. 50304(U)(Sup. Ct. N.Y. Co. 2018), in which the court grappled with the issue of whether vibration monitoring services provided by a surveyor to a building owner could provide the basis for a mechanic’s lien. The building’s owner sought to discharge the lien on the grounds that the work was not covered by the Lien Law.
The Supreme Court (Justice Carmen Victoria St. George) concluded that neither the installation and monitoring work, nor the rental value of the monitors themselves, were covered by the Lien Law, primarily because the monitors did not produce a permanent improvement of the property.
The lienor in Matter of 134-136 West Houston filed its lien after it was not paid for placing vibration monitors on the owner’s building and on that of a neighbor, and remotely monitoring the equipment during the owner’s construction work.
Section 3 of the Lien Law allows a lien to be filed based on the value of labor or materials used for the improvement of real property:
A . . . materialman . . .who performs labor or furnishes materials for the improvement of real property . . . 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 and upon such improvement . . .
The Lien Law further provides that the rental value of equipment that is used during construction of a permanent improvement on the property can be the basis for a lien. The definition of “improvement” in Lien Law Section 2(4) states:
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 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 . . .
Emphasis added.
In a 1917 case the New York Court of Appeals explained the significance of the term “permanent improvement”:
The words “permanent improvement,” as used in section 2 of the Lien Law, are intended to differentiate the labor and materials which are consumed in or constitute the . . . improvement as distinguished from the labor or materials which enter into and become part of the plant of the contractor owned and used by him in the performance of his work.
The labor and materials that enter into and become a part of the improvement required by a contract or are necessarily and exclusively used, not as tools and equipment, but in the performance of the particular contract, are labor and materials within the meaning of the statute.
Church E. Gates & Co. v. Stevens Constr. Co., 220 N.Y.38 (1917)(emphasis added).
The court in Matter of 134-136 West Houston, while not citing Church E. Gates, relied on a relatively recent case that summarized Gates along with more modern case law, 270 Greenwich Street Associates LLC v Patrol and Guard Enterprises, Inc., 2010 N.Y.Slip Op., 31667(U), 2010 WL 2754092 (Sup. Ct. N.Y. Co. 2010). In 270 Greenwich the court held that:
[A] contractor’s services, even if necessary to carry out a construction project, are lienable only if they directly produce a ‘permanent improvement’ in underlying real property.
In 270 Greenwich, the court determined that security guard services required by code in order for construction to proceed were not lienable because they “did not directly permanently improve the Property.” Id.
The court in Matter of 134-136 West Houston concluded that, as with the security guards in 270 Greenwich, the vibration monitoring services provided by the lienor in this case, although necessary, were not lienable because they were “not permanent and did not permanently improve the property.” (*2) Moreover, the equipment and monitoring provided by lienor, “though valuable, did not directly relate to the performance of the contract or increase its value.” (*1)
Thus, the court agreed with the owner that the lien should be discharged because “the lienor is not the type of worker, and the [monitoring] systems are not the type of equipment, covered by the Lien Law.” (*1).
Matter of 134-136 West Houston confirms that the protection of the Lien Law extends to labor, material, and even the value of rented equipment, but only so long as they are used for construction activities that contribute to a permanent improvement of the real property in issue.