New York Commercial and Construction Lawyer Blog
Not all work performed at or related to a construction project can form the basis of a mechanic’s lien. Rather, one can only lien for work performed or materials furnished on a privately owned project for the “improvement of real property” as set forth in Lien Law § 3. Generally speaking, only work which contributes to a “permanent improvement” of the property in question is lienable (Lien Law § 2(4)). Sometimes, however, work is performed even before any activities actually commence on a construction site, and the issue arises whether that work is lienable in any circumstances. That matter was recently addressed by Justice Terry J. Ruderman of the Westchester Supreme Court in Matter of Old Post Road Associates, LLC, 60 Misc. 3d 391, 77 N.Y.S.3d 283 (Sup. Ct. Westchester Co. 2018).
In Old Post Road, LRC Construction LLC (“LRC”) performed pre-construction management services for a planned project in Rye, New York. Among other things, LRC updated the budget for the project and attended meetings to discuss phasing in connection with a site plan approval application. LRC was eventually terminated and filed a mechanic’s lien for $250,000. Thereafter, Old Post Road Associates LLC (“Owner”) commenced a special proceeding to summarily discharge the mechanic’s lien pursuant to Lien Law § 19 because the work in question was allegedly not lienable.
Pursuant to Lien Law § 19, a lien may only be dismissed if “it appears from the face” of the lien that it is invalid. Owner here alleged it met this standard in its special proceeding because LRC’s lien merely alleged it performed “pre-construction management services.”
The court noted that it could find no case which explicitly discussed whether pre-construction management services were lienable but that courts must consider the “nature of the services in order to address the validity of the challenged lien” (Old Post Road). Accordingly, for guidance, it examined more general cases which discussed what services were lienable.
The court found four prior cases to be especially helpful. In Goldberger-Raabin, Inc. v. 74 Second Avenue Corp., 252 N.Y. 336, 338 (1929) the Court of Appeals found that “aiding or assisting in procuring subcontracts or subcontractors” was not lienable, because it did not add to the improvement of the property in question. However, “superintending” the demolition of the old building and the construction of the new building was lienable. This is also consistent with more recent case law holding that “supervision” of construction work is lienable.
The Old Post Road Court noted that the Westchester County Supreme Court ruling in Chas H. Sells v. Chance Hills, 163 Misc. 2d 814, 622. N.Y.S.2d 422 (Sup. Ct. Westchester County 1995) allowed a contractor to lien for certain kinds of pre-construction services. While procuring of bids was not lienable, professional engineering and surveying was lienable even though no physical work was performed.
On the other hand, in 8th Avenue Recoveries Corp. v. III Stellar 8 Owner, LLC, 42 Misc. 3d 1212 (A) (Sup. Ct. Kings Co. 2014), the court found that “supervision” of work was not lienable if it had occurred after the construction had ceased. If the property was no longer being improved no lien could properly be filed.
Finally, in Henry & John Associates v. Demilo Construction Corp., 137 Misc. 2d 354, 520 N.Y.S.2d 340 (Sup. Ct. Queens Co. 1987), the lien in question referenced the services performed as “management and supervision of obtaining new building permits for recommencement of construction.” The owner argued the lien should be vacated because the description of the services on the lien itself was insufficient and defective. In opposition to the petition to discharge the lien, the lienor expanded its description to include supervision of “actual construction” such as demolition, erection and alteration of the building in question. Relying on this more expansive explanation, the court denied the petition to discharge.
The Old Post Road court, like the court in Henry & John Associates, looked beyond the four corners of the lien. The affidavit opposing the application to discharge the lien detailed that the services performed by LRC included procuring bids, recommending various design changes, making recommendations to mechanical systems, preparing site logistic plans and performing a constructability review. The LRC employees who performed these tasks were construction professionals, architects and engineers. The Old Post Road court found that some of these services, such as procuring of bids, were not lienable. However, relying on Chris H. Sells, the court held that other services, such as property site logistics, access plans and a constructability review, were lienable. Accordingly, summary discharge of the lien based on a facial invalidity was denied.
The issues raised and discussed in Old Post Road are by no means clear cut. Even the services the court found to be lienable could be questioned because they go beyond supervision of actual physical construction and do not constitute the preparing of plans, specifications or surveys by an engineer or architect (See Lien Law §2(4)). On the other hand, the Lien Law is to be “liberally construed” to protect the rights of those entitled to its benefits (Lien Law §23). The issue of what constitutes lienable services in the pre-construction context will continue to be an open question and subject to dispute until the appellate courts issue more definitive rulings. A notice of appeal has been filed in Old Post Road, and if the appeal goes forward, this would be an opportunity for the Second Department to opine on these issues.