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By: Thomas H. Welby Gregory J. Spaun Published: December 2019

Appellate Court Confirms Right to Assert Mechanic's Lien for Certain Pre-Construction Management Services

Mechanic’s liens are a powerful tool available to any unpaid contractor “who performs labor or furnishes materials for the improvement of real property”. Because the mechanic’s lien is such a powerful tool for a contractor to use in getting paid (because it attaches to the property itself), the Lien Law provides a “counter tool” for a property owner to quickly contest the facial validity of a lien so that liens invalid on their face can be quickly discharged.

The tool of a mechanic’s lien is designed to be used by contractors who toil upon a worksite. However, in the 21st Century, not all toil involves swinging a hammer or digging a hole.

In the recent case of Matter of Old Post Road Associates, LLC v LRC Construction, LLC, an appellate court reminded us of this fact by upholding the facial validity of a mechanic’s lien asserted for pre-construction management services.

Background

In April of 2016, Old Post Road Associates investigated the possibility of developing its property at 120 Old Post Road in Rye, New York. As a part of this process, Old Post Road retained LRC Construction to perform “pre-construction management services”. Ultimately, Old Post Road terminated LRC’s services, and LRC was not retained to provide construction management services for the eventual project.

In response to not being paid for its work, LRC asserted a mechanic’s lien against the project in the amount of $250,000.00. In describing its work on the project, LRC stated that it was for “pre-construction management services”. In response, Old Post Road brought a special proceeding to discharge the lien, arguing that the lien was not valid on its face because the pre-construction services provided by LRC, which included “updating a conceptual budget for the project and attending some meetings with [Old Post Road’s] consultants to discuss construction phasing in connection with the site plan approval application”, were not within the ambit of lienable work under the Lien Law. Accordingly, Old Post Road argued that as LRC neither performed any physical construction work at the project, nor provided any materials for the project, it was not entitled to assert a mechanic’s lien.

In opposition, LRC noted that its services were comprised of “(i) recommending the change to the structural system for the project at the Property to a system more suitable for a low rise luxury condominium; (ii) recommending changes to the design team to, architects and engineers with more experience designing the type of luxury condominium product Petitioner was constructing; (iii) providing finish selections, facade recommendations and mechanical, electrical and plumbing system recommendations for the type of design required for the high end condominium marketplace; (iv) consulting with land use attorneys to prepare for and attend Petitioner’s Planning Board meetings; (v) preparing site logistics and access plans for the Property; (vi) performing a constructability review for the project at the Property (vii) attending meetings with consultants and officials to assist the approval process and, (viii) preparing construction budgets to assist in the design development process for the project at the Property”. As such, LRC argued, its work was covered by the Lien Law, and the lien was valid on its face.

Decision

The motion court denied Old Post Road’s petition to discharge the lien, citing the provision of the Lien Law that it is “to be construed liberally to secure the beneficial interests and purposes thereof”. In undertaking such liberal construction, the motion court held that at least some of the services referenced by LRC in opposition to the petition were in the nature of lienable engineering services. On appeal, the dismissal of the petition was affirmed, and the lien was allowed to stand. In affirming the dismissal of the petition, the appellate court cited to Section 3 of the Lien Law, which, in addition to listing the physical work which qualifies as lienable work, provides that lienable work also includes “the drawing by any architect or engineer or surveyor, of any plans or specifications or survey, which are prepared for or used in connection with such improvement”. Accordingly, as the work of LRC’s architects and engineers in preparing site logistics and access plans, and in undertaking a constructability review of the plans, would qualify as lienable architectural/engineering work, the lien was not subject to dismissal on its face. Rather, any questions as to the specifics of what work might be outside of the ambit of the Lien Law had to await determination in a lien foreclosure action.

Comment

While LRC was able to stave off the summary discharge of its mechanic’s lien because some of the work was able to be characterized as architectural or engineering work, it will ultimately have to prove what services were truly in the nature of architecture and engineering, as opposed to unlienable administrative work, such as pulling permits. In order to ensure the survival of a mechanic’s lien against a facial challenge—and avoid the expense of having to defend against a discharge proceeding—contractors would be well advised to familiarize themselves with Section 3 of the Lien Law so that they can determine if their services fall within its scope—and then describe such services in its lien in some detail, rather than using amorphous terms such as “pre-construction management services”.

As with liens of engineers or architects, such professionals should keep in mind that their liens for these services are valid—even if the project is ultimately never built.

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