By: Thomas S. Tripodianos Published: May 2015

For Mechanics' Liens, the Rights Follow the Money

Question. Electrical Subcontractor claims it is owed money from Tenant and General Contractor for certain work it performed.  Can Electrical Subcontractor pursue a mechanic’s lien if Tenant, at the time the lien was filed, had paid General Contractor in full?

Answer. No.

The relevant facts are as follows. Tenant is a commercial tenant in a building located in New York City (the Property).  Tenant contracted with General Contractor to perform certain work involved in the renovation of Tenant's corporate offices on the fifth floor of the Property (the Project). General Contractor then contracted with Electrical Subcontractor to perform certain electrical work on the Project. It is undisputed that Electrical Subcontractor did not maintain a contract with Tenant for any of the work it performed. When General Contractor allegedly failed to pay Electrical Subcontractor pursuant to their contract Electrical Subcontractor filed a mechanic's lien against the Property (the Lien). Tenant posted a cash undertaking pursuant to Lien Law §20 to discharge the Lien against the Property. Electrical Subcontractor then commenced an action seeking to foreclose the Lien. Tenant now moves for an Order dismissing Electrical Subcontractor's complaint.

Pursuant to the Lien Law, a mechanic's lien is valid to the extent of the sum earned and unpaid on the contract at the time of filing the notice of lien, and any sum subsequently earned thereon.  Absent a direct contractual relationship between an owner and a subcontractor, the rights of a subcontractor are derivative of the rights of the general contractor and a subcontractor's lien must be satisfied out of funds due and owing from the owner to the general contractor at the time the lien is filed. Further, in the absence of any balance due to the general contractor from the owners, a subcontractor is required to look to the contractor that engaged its services for payment.

As an initial matter, Tenant has provided an affidavit indicating that it did make, all required payments to General Contractor for the work performed. Additionally, Tenant has provided records which demonstrate that there was no amount due and owing from Tenant to General Contractor at the time the Lien was filed. Specifically, Tenant has provided General Contractor's invoices for the work completed, receipts demonstrating wire transfers from Tenant's bank to General Contractor in payment for that work, proof that General Contractor received and acknowledged full payment from Tenant including waivers and releases of any claims based on the amounts set forth in the invoices and proof that the work performed by General Contractor was completed. Thus, as Tenant has produced documentary evidence demonstrating that no money was due to General Contractor pursuant to their contract when the Lien was filed, the complaint must be dismissed as against Tenant.

In response, Electrical Subcontractor has failed to produce evidence or an affidavit by an individual with knowledge of the facts contradicting the evidence provided by Tenant which establishes that there was no amount due and owing from Tenant to General Contractor at the time the Lien was filed.

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