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By: Frank Gramarossa Published: October 2020

Pre-construction Services - Lienable, or Not?

Many contractors and other construction professionals are unaware of precisely what the New York State Lien Law provides regarding the types of services for which a mechanic’s lien may be filed. Of course, contractors who perform labor or furnish materials for the improvement of a property are afforded the right to file a lien for any unpaid balances due for such labor or materials. But what about pre-construction services? What if you are providing consulting services to a property owner or developer prior to the proverbial shovels hitting the ground? This issue was analyzed by the Appellate Division, Second Department in the case of Old Post Road Associates, LLC v. LRC Construction, LLC (177 AD3d 658 [2d Dept 2019]).

In Old Post Road, the petitioner was Old Post Road Associates, an owner looking to summarily discharge a mechanic’s lien filed by the respondent, LRC Construction. LRC was hired to do perform pre-construction management services, but was not retained to provide construction management services once the project began.LRC filed a mechanic’s lien on the property, alleging that it was owed approximately $250,000 for unpaid pre-construction management services. Old Post Road Associates filed a petition to summarily discharge the mechanic’s lien, alleging the mechanic’s lien was invalid on its face because the pre-construction services provided could not form the basis of a mechanic’s lien, as a matter of law.The lower court, Supreme Court, Westchester County, denied Old Post Road's petition, concluding that absent clear case law precluding mechanic's liens for all of the work described by LRC, the mechanic's lien was “not entirely invalid on its face.” Old Post Road appealed the decision to the Appellate Division, Second Department.

The Appellate Division upheld the lower court’s ruling, holding that absent clear case law precluding mechanic’s liens for all of the services provided by LRC, the lien could not be adjudged to be invalid on its face, and thus could not be summarily discharged.  In support of its petition, Old Post Road relied on Section 19(6) of the Lien Law, which states, in relevant part, that a lien may be summarily discharged “where it appears from the face of the notice of lien that the claimant has no valid lien by reason of the character of the labor or materials furnished and for which a lien is claimed, ... the owner or any other party in interest, may apply ... for an order summarily discharging of record the alleged lien.” Thus, to be summarily discharged, the notice of lien must be completely invalid on its face. When there is no defect on the face of a notice of mechanic’s lien, any dispute regarding the validity of the lien must be decided at the lien foreclosure trial.

The Court analyzed Lien Law § 3, which provides, in pertinent part, that a contractor “who performs labor or furnishes materials for the improvement of real property with the consent or at the request of the owner thereof ... shall have a lien for the principal and interest, of the value, or the agreed price, of such labor ... or materials upon the real property improved or to be improved.”  The term “improvement” is defined by Lien Law § 2(4), and “includes the demolition, erection, alteration or repair of any structure upon, connected with, or beneath the surface of, any real property and any work done upon such property or materials furnished for its permanent improvement, ... and shall also include 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.”

In support of the petition, Old Post Road did cite to some case law which would preclude certain services from forming the basis of a mechanic’s lien (i.e., preparing construction budgets).  However, the appellate court found that some of the services provided by LRC, such as “preparing site logistics and access plans” and performing a “constructability review for the project”, could properly form the basis of a lien. In doing so, the court compared those services to the drawing of architectural plans or specifications, which could form the basis of a valid mechanic’s lien.  Therefore, the court held the lien was not wholly invalid on its face, and the case was remanded to the trial court where the dispute regarding the validity of the mechanic’s lien would have to be resolved at the lien foreclosure trial. 

Many contractors and construction managers are unaware of the particulars of the lien law, and more specifically the varied types of services which may properly form the basis of the lien law.  It is important to know and understand your rights prior, during, and after providing services for a construction project, whatever the nature of those services may be.   The failure to properly understand these rights can compromise one’s ability to preserve and enforce those rights, and prejudice one’s ability to be compensated for services properly rendered.  Reliable legal advice from experienced construction counsel can help contractors and construction professionals understand, preserve, and enforce their rights, and guide them through the legal process to achieve the most optimal results. 

 

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