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The One Two Punch Coordinating The Mechanics Liens With A Lawsuit
Practical insights from powerhouse attorney, author and speaker Bradley Bailyn.
If you are a contractor or some other professional providing work, labor, services and materials to either a public or privately owned piece of real estate, there is always the risk you won’t be fully paid by the owner, or by the contractor that has hired you as a subcontractor.
To get paid, or at least to make every effort to get paid, there are two avenues you can use, (under certain conditions and limitations); the filing of a mechanics lien, and a lawsuit.
Before we get into too much detail, be aware that you can take both actions; the filing of a mechanics lien does not preclude you from pursuing your rights at the same time, in a court having jurisdiction over the matter.
Filing a lawsuit for breach of contract is easily understood. You have to prove you had the proper licensure to perform the work, and/or provide the materials you provided, (in effect at the time you performed the work or provided the materials), you have to prove the existence of a contract, (not necessarily a written one), your compliance therewith, and you have to prove non-payment.
Of course the defendant can make whatever breach or negligence counterclaim against you he chooses, but the process itself is clear.
Normally you would have six years to sue on a breach of contract, from the time of the breach. (This is time period is called the statute of limitations; the time limit to bring your claim to court).
The requisites of a mechanics lien are far different. The time for filing is much shorter, but there are much fewer proof requirements to lawfully file the lien.
A mechanics lien is basically a piece of paper containing certain details regarding the provision of work, labor and services and/or the provision of materials to a certain piece of real property, and details regarding the unpaid amount of the claim. It is filed in the office of the clerk of the county where the property is located.
Normally, the mechanics lien will be filed prior to initiating a suit, one of the reasons being it can be, (but not always), a quick and inexpensive way to get paid.
Okay, so let’s look at some examples of when a lien can be filed, and when it can’t.
We’ll first address filing time requirements, which differ, depending upon whether the property is privately or publicly owned.
If the real property is a single family residence, the contractor must lien the job for non-payment within four months of the last day work or materials were provided for the property. If it is privately owned property that is not a single family residence, (say a multiple dwelling apartment building), that time is eight months from the last provision of work or materials.
If it is public property the lien must be filed within 30 days of the completion and acceptance of the work/provision of materials. (However it can also be filed prior to the completion of the work).
So let’s say you are a NYC licensed electrician, and you upgrade the power on a single family residence in Brooklyn. You don’t get fully paid. Within four months of the last work you did, your attorney files a mechanics lien in the county clerk’s office in Brooklyn.
Does this prove you are entitled to the money? No. What it does do is interfere with the non paying owner’s ability to sell or mortgage the property, prior to a determination as to who owes who what.
If the owner wants to sell or refinance the property, and a mechanics lien comes up on a title report, he will either have to pay it, or bond it (provide, via a bonding company sufficient funds to pay the claim if determined due), or he isn’t selling, or he isn’t refinancing.
When an owner gets notice of the lien, it will get his attention. He might pay you, or he may go to court to have the lien removed, which can require that he file that bond we mentioned above. He may do nothing and stick his head in the sand.
So how long is this lien good for against the property? One year. But, it can be extended, and in the case of a single family residence, that is going to require a court order that you must move for prior to the termination of that one year.
If it’s private property that is not a single family residence, you merely have your attorney file an extension for another year with the county clerk, so in essence that lien can be for two years running, which should be sufficient time for your lawsuit to be determined if you started it around the time of the initial filing of the lien. (Should be, not guaranteed however, depending upon what court you are in and what county you are in).
However, it is my advice that after the lien is filed and the legal requisites are complied with, you initiate a lawsuit. Now the non-paying owner has two things to worry about, you have just created a “two front war” for him.
Some attorneys may tell you that filing a lien is a waste of time. Perhaps for those attorneys it was, and perhaps for you those attorneys are a waste of time also. I believe that a duly licensed contractor or other service/material provider should enforce his rights with all of his guns loaded, (metaphorically speaking). Lien + Lawsuit = better chance of successful collection.
Now, not every contractor providing labor and services to a property is entitled to file a lien. For example, let’s say you are a landscaper, and you regularly cut the grass and weed and seed on a property. You don’t get paid. You don’t get to file a lien either, because you have not provided a permanent improvement to the property.
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Bradley R. Bailyn, Esq. , Founder
Bradley R. Bailyn, Esq., is a New York City-based attorney, author and speaker with practice area expertise in commercial real estate and bankruptcy law. Prior to founding The Bailyn Law Firm, Mr. Bailyn served as in-house counsel for multiple companies, where he advised on all legal aspects of major business and financial transactions including private equity, spin-offs, real estate, and restructuring transactions, for more than thirteen years.
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