By: Thomas S. Tripodianos Published: March 2016

Dismissal of Mechanics' Lien Filed in Excess of Amount Owed

Question.        If a subcontractor files a mechanics’ lien greatly in excess of any amount it is owed can the Contractor have the lien dismissed?

Answer. Yes.

Contractor entered into a contract with Construction Manager to provide millwork on a renovation project for Tenant. Contractor and Subcontractor thereafter entered into a subcontract for installation of the millwork in the amount of $117,500. The parties later revised that amount upward to $165,958 to reflect the installation of doors and frames, and then, when Contractor realized that that work was already part of the Subcontractor’s contract, it revised that amount downward to $141,729, giving the Subcontractor credit for half of the prior $48,458.00 upward modification. A dispute then arose between the parties regarding the amount due to Subcontractor, with Contractor contending that Subcontractor performed defective and incomplete work. Subcontractor prematurely abandoned the project in July and in September, filed a mechanic’s lien against the property in the amount of $271,004.05. Contractor paid two other contractors $137,228.50 to repair and complete the work performed by Subcontractor.

Contractor seeks to declare that the mechanic’s lien is void or invalid and pursuant to Lien Law § 39 to discharge the mechanics lien as willfully exaggerated.

It is well settled that a lienor who willfully exaggerates a lien risks the court declaring the entire lien void. Lien Law § 39 provides, in pertinent part:

“In any action or proceeding to enforce a mechanic’s lien upon a private or public improvement or in which the validity of the lien is an issue, if the court shall find that a lienor has wilfully exaggerated the amount for which he claims a lien as stated in his notice of lien, his lien shall be declared to be void and no recovery shall be had thereon. No such lienor shall have a right to file any other or further lien for the same claim.”

A determination of willful exaggeration of a mechanic’s lien requires proof that the lienor deliberately and intentionally exaggerated the lien amount.  While the fact that a lien may contain improper charges alone does not establish a willful exaggeration.  Cost and expense mark-ups by a subcontractor or a discrepancy between the lien amount and agreed contract price may provide such proof. Further, where the evidence conclusively establishes that the amount of the lien was willfully exaggerated, summary disposition is warranted.

Contractor’s proof conclusively establishes that Subcontractor deliberately and intentionally, and thus willfully, exaggerated the lien amount, possibly as retaliation. It submits proof that Subcontractor abandoned the job and filed the lien soon after it complained about Subcontractor’ work, and that the lien amount greatly exceeded the highest possible contract price with all change orders, by approximately 130%. Contractor submits invoices from Subcontractor totaling $165,958, plus overtime and change order tickets in the amount of $70,971.75, for a total of $236,929.75. Contractor also submits proof that it disputed those amounts and paid Subcontractor $120,000 by wire transfers before the lien was filed. Thus, using the highest contract price and assuming full performance under the contract, Subcontractor would be owed only $116,929.75, which is $154,074.30 less than its $271,004.05 lien. Such a discrepancy cannot be said to be mere inaccuracy, mistake or inadvertence. Subcontractor has proffered no proof or argument to the contrary.

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