The Divide in Interpretations of Lien Law Section 3’s Consent Requirement Continues

As I previously noted in my post titled “Varying Interpretations of Lien Law Section 3’s Consent Requirement,” last year 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). The appeal was argued during the week of October 16, 2018, but the Court of Appeals has not yet issued a decision.

Lien Law Section 3 provides 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 … upon the real property improved.” In the underlying Peaches case, the Fourth Department compared First, Second and Third Department decisions concerning Lien Law Section 3’s consent requirement, all of which found, at various times, “that a lien under Lien Law Section 3 is valid only when the property owner directly authorizes the contractor to undertake the relevant improvements.” Peaches, 30 N.Y.S.3d at 768 (emphasis added). The Fourth Department, however, concluded that “consent” should be broadly interpreted because the decisions of its sister departments could not be “squared” with Jones v. Menke, 168 N.Y. 61 (1901) or McNulty Bros. v. Offerman et al., 221 N.Y. 98 (1917), two Court of Appeals cases which have not been “overturned or disavowed.” Id. at 767-8.

In both Jones and McNulty, the Court of Appeals found, generally, that contractual obligations requiring a tenant to make certain improvements to the premises satisfied the consent requirement of Lien Law Section 3.  Id. at 676. As a result, the lien claims in those cases were permitted against the underlying owner’s property. Id. Accordingly, in Peaches, the Fourth Department determined that the owner’s consent could be implied by the terms of the subject lease, even though the owner did not provide direct consent to the contractor.

The Fourth Department reaffirmed this position earlier this year in Murnane Bldg. Contrs., LLC v. Cameron Hill Constr., LLC, 159 A.D.3d 1602, 73 N.Y.S.3d 848 (4th Dep’t 2018), by again broadly interpreting the Lien Law Section 3 consent requirement. In Murnane Bldg., defendant owner, Syracuse University (the “University”), argued that a mechanic’s lien should be vacated because it did not consent to the improvements within the meaning of the Lien Law. The University relied upon a clause contained in its ground lease with general contractor, defendant Cameron Hill, that explicitly stated that it did not consent to any work done on the project. The Court rejected this argument, finding instead that the very purpose of the ground lease was to construct a building wherein the University would obtain the benefit of the construction. The Court also found that the University was aware that Plaintiff would perform work on the project and that it agreed that such entity was an acceptable subcontractor. As a result of these inconsistencies, the Fourth Department found that the defendants consented to the Plaintiff work on the property, and thus ordered the Plaintiff’s mechanic’s lien to be reinstated.

It will be interesting to see how the Court of Appeals decides the Peaches case, especially because the Fourth Department continues to interpret Lien Law Section 3’s consent requirement broadly, in line with its interpretation of century-old Court of Appeals Cases, whereas the First, Second and Third Departments continue to construe the consent requirement more narrowly, finding that direct authorization is necessary.