In a recent New York case, an interesting question arose as to the type of pre-construction services for which a construction professional can file a lien. Generally speaking, if you perform work and you are not paid for labor or services utilized “for the improvement of real property” you are permitted to file a mechanic’s lien. A mechanic’s lien is a powerful tool to secure payment, but is equally fraught with perils if not carefully prepared. In the pre-construction context, you can file a lien for certain services even if a project never proceeds to completion. However, determining what type of services you can lien for is often tricky. An improper description of your work or services provided can result in the lien being challenged and, ultimately, dismissed.
In The Matter of the Application of Old Post Road Associates, LLC, 2018 WL 2209500 (Sup Ct, Westchester County, 2018), petitioner, Old Post Road Associates, LLC (“Old Post Road Associates”), sought to summarily discharge a lien filed by LRC Construction, LLC (“LRC”), pursuant to Lien Law § 19(6). LRC, in its lien, claimed it provided “pre-construction management services” for the owner, Old Post Road Associates. The owner did not dispute that it engaged LRC to perform certain “pre-construction management services” in connection with a planned construction project on its property. LRC claimed the services it performed included updating the project budget, attending meetings with consultants to discuss construction phasing and reviewing documents in connection with the site plan approval. Old Post Road Associates argued that LRC provided these services “gratis” in the hope of being retained as the project construction manager. LRC disagreed, claiming that it provided these services for eleven (11) months until it was terminated, and it should be compensated. Obviously, LRC was not retained as the project construction manager, and both parties unsuccessfully attempted to negotiate a settlement. LRC then filed a mechanic’s lien for the services in the amount of $225,000, and Old Post Road Associates filed a petition to discharge the lien.
Supreme Court acknowledged that little guidance exists as to what type of work falls within and outside the category of “improvements” for which a lien can be filed. Analyzing an almost one-hundred-year-old case, the Court noted that the Lien Law does not cover services associated with procurement of subcontractors and “applying for permits and approvals”, as that type of work is not “the work of improving property”. Old Post Road Associates argued that the description of labor and services in the lien did not provide the basis to file a lien and, thus, the lien should be discharged. LRC countered that the Lien Law is subject to a liberal construction in favor of contractors. The Court ultimately concluded that LRC’s description in the lien for “pre-construction management services” does not automatically render the lien defective. Interestingly, the Court permitted LRC to submit an affidavit further describing the services it provided for the Project and found that the more detailed description in the affidavit was sufficient to permit the lien to stand—although some of the described work may be non-lienable.
Although LRC was able to dodge dismissal, the case should serve as a warning against filing a lien that contains any description of services which do not fall under the Lien Law. All mechanic’s liens filed in New York must contain a concise statement describing the work, labor or services that were provided for the benefit of a construction project. It is important to remember that the stakes are high because even one mistake can render your lien fatally defective. For pre-construction services, make sure the services you provided are allowable under the Lien Law, and be very specific as to the services performed. Often, being overly detailed, rather than using generalizations, can help avoid an early challenge to the lien and, as discussed above, can even result in the lien surviving an attempt at dismissal.