Kiritsis & Associates

 

The legal issues involving mechanic liens and notice of lending.

Jul 30, 2021

Kiritsis Law Group 212 922 0005

By John Kiritsis, Esq., CPA, MBA, MS, JD, LL.M

 

It should be noted that even though this case involved non New York specific law, and resolved via non New York judicial authorities, its impact can not be underscored in New York construction law controversy matters.  Perhaps one of its main lasting effects, is that it helped reaffirm the need for well planned and properly drafted construction contracts.

 

Lenders can benefit from filing a Notice of Lending to ensure a lender’s priority over liens. Since New York Court of Appeals decision in Aspro Mechanical Contracting, Inc. v. Fleet Bank, N.A. (2004), many lenders are now regularly filing Notices of Lending pursuant to Section 73 of the Lien Law along with their building loan agreements. Many have criticized this practice as abusing the intents and purposes of New York mechanic lien laws. 

 

Construction lenders are now routinely filing notices of lending on any building loan, so to avoid a charge that they participated in diversion of funds when their loans are repaid before the claims of a mechanic’s are satisfied. By filing a notice of lending, lenders avoid having to verify that existing and potential mechanic’s lienor’s and material men performing work or furnishing materials at the mortgaged property were paid first. Failure to do so runs the risk of an inference that a diversion of funds that should have been first paid to the mechanic’s lienors were allocated to the lender first.

 

Filing a Notice of Lending ensures a lender’s priority over liens.

 

After reviewing hundred of New York and New Jersey construction contracts , by far and away, one of the more common mistakes made with regards to preparing a construction contract, is lack of fundamental understanding of the laws surrounding mechanic's liens, as well as, failure to appreciate their possible legal effect on real property and projects.

 

The views expressed by this author is not legally binding nor reflective of the author per se, the author's firm, the author's employers, the author's employees or any individual and/or organization.

 

Sources and potentially useful references:

New York State Constitution

U.S. Constitution

New York State Bar Association

New York City Bar Association

New York State Court of Appeals

New York Court of Claims

New York Appellate Division Court

New York Appellate Term Court

New York Supreme Court

New York Real Property Law

Warren's NY Real Property Law

NYS Lien Laws

Section 43 New York State Lien Law

RPAPL

CPLR

New York General Obligations Law

New York City Department of Finance

Lien Law Section 3

Lien Law Section 5

New York State Appellate Departments

Lien Law Section 2.03

Real Property Law Section 339

Lien Law Section 9 (NYS)

Lien Law Section 10 (NYS)

Section 11 of New York Lien Law

Lien Law Sections 34, 39 & 59

Robert P Frink v Dudley Bierau et al, 212 NYS2d 869

Section 13 of New York Lien Law

Leonard Engineering, Inc. v. Zephyr Petroleum Corporation, 522 NYS 2d 900

Section 22 New York Affidavit Form

Monroe Sav. Bank v. First Nat'l Bank 50 App Div2d 314 -- 4th Dept 1976

Nanuet Nat'l Bank v. Ackerson Terrace, Inc. 417 N.Y. S. 2d 901

HNC Realty Co. V. Golan Heights Developers, 360 NYS2d 954

Aspro Mechanical Contracting, Inc. v. Fleet Bank, N.A. (Circa 2004)

Byrd Underground, LLC v. Anguar, LLC (332 P3d 273 Nev Adv Op 62)

Kiritsis Law Group

 

Our law firm provides comprehensive legal service solutions in the practice area of

construction law.  Below is a partial list of services that our law firm may be able to

assist you with regards to your construction law needs:

 

Construction Law Contracts

Construction Contracts

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Drafting of Construction Contracts

Negotiating Construction Contracts

Finalization of Construction Contract Agreement Documents

Redlining of Construction Contract Agreements

Construction Loan Agreements

Mechanic Lien Recordation

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Escrowing services for construction industry professionals 

Due diligence services for construction industry professionals

Construction Project Financing Agreement

Construction Contract Templates

Bid Form Templates

Construction Contract Assignments

Guarantee Agreements ancillary to construction contracts

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Construction equipment sale agreements

Construction services agreement 

Construction materials agreement

Mechanic Lien Waiver Contracts

Construction Industry Bond Payment Agreements

Tax & Accounting Compliance Services for the construction industry.

Construction contract risk assessment management 

Construction contract performance issues

Construction contract claims avoidance issues

Construction contract compliance services

Project documentation issues in construction contracts

Change and Design issues in construction contracts 

Differing site conditions and delay provisions in NYC construction contracts

Scheduling and acceleration construction contract provisions

Resolution of construction litigation/dispute related insurance claims

Employment Issue resolution services for the construction industry

Collective Bargaining Agreement for the construction industry

Environmental issues provisions for construction contracts in New York City

Creditor-debtor issues in construction law

Construction Law OSHA type violations

Key provisions in New York City construction contracts

Default provisions in New York City construction project contracts

ADR provision in construction contracts

Assignment provisions in construction contracts

Breach of contract provisions in construction contracts

Cancellation address issues in NYC construction issues

Commercial General Liability Insurance Coverage Provisions in Construction Contracts

Completion Date clauses in NYC construction contracts

Contract price provisions in NYC construction contracts

Down payment construction contract provisions and clauses

Overview of New York City construction contracts

Payment to Contractors clauses in construction project contract agreements 

Sign & Stamp; Date provisions in construction contracts

The dos and don’ts regarding the signing instructions of a construction contract

Right to cancel provision in construction contracts

Warranties provisions in construction contracts

Workers compensation insurance coverage provisions regarding construction contracts

under New York Laws

Construction contract clauses regarding work product ownership

 

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